Press release Paris, July 25, First-half 2008 results demonstrate the pertinence of the Group s strategic shift towards specialised distribution

Transcription

1 Press release Paris, July 25, 2008 First-half 2008 results demonstrate the pertinence of the Group s strategic shift towards specialised distribution The impact of the abrupt deterioration in market conditions was brought under control in first-half 2008 Sequana sales flat at constant exchange rates vs. H pro-forma (Antalis -2.2 %, Arjowiggins +4.6 %) Antalis: recurring operating income increased by 27% and the operating margin rose to 3.0% from 2.3% Arjowiggins: operating margin declined to 1.5% from 3.5% of the sales Consolidated net debt at 869 million, all bank covenants met at June 30. Confirmation of the target to reduce net debt at December 31, 2008 Outlook: Antalis s recurring operating income to significantly improve in 2008; Arjowiggins s recurring operating income around same level in H2 vs. H Expected impacts from cross-functional restructuring announced on June 5: 35 million in savings and synergies as of the year Industrial optimisation actions are also under consideration that would generate at least 20 million in additional savings during 2009 ; disposal of the Security activity being considered The Board of Directors of Sequana, chaired by Tiberto Ruy Brandolini d'adda, met in Paris on July 24, 2008 and has examined and approved the financial statements for first-half Consolidated Income Statement ( millions, except for EPS) H H pro-forma* H reported Sales 2,628 2,734 2,068 EBITDA** EBITDA margin (%) 3.7% 4.2 % 4.4 % Recurring operating income Operating margin (%) 2.2% 2.5% 2.5% Recurring net income*** Recurring diluted EPS ( ) Net income - group share Diluted EPS ( ) Weighted average number of shares after dilution 49,025,584 49,213,997 49,213,997 (*) These results include the activities of Dalum Papir A/S and the Map Merchant Group since January 1, Greenfield, acquired in 2008, is not included in the pro-forma 2007 results. (**) EBITDA: Recurring operating income before depreciation (***) Recurring net income: Recurring operating income after net finance income and recurring income taxes Page 1 / 9

2 Consolidated sales were 2,628 million in first-half 2008, a flat performance compared to the pro-forma H figure at constant exchange rates. Including the negative currency effect of 103 million, reported sales declined by 3.9%. EBITDA was 98 million, down 14% compared to the year-earlier period. Recurring operating income was 58 million, down 15% compared to the pro-forma H figure of 68 million, with an operating margin of 2.2%. Recurring net income rose 33% to 40 million, compared to 30 million in the year-earlier period. Net income (group share) was 21 million and diluted EPS was The non-recurring charge of 19 million the difference between recurring net income and net income (group share) mainly reflects restructuring charges for the two subsidiaries. Consolidated net debt was 869 million at June 30, 2008, compared to 771 million at December 31, The change in debt is mainly due to a total of 40 million in acquisitions (Greenfield, a tracing paper plant in China, and Map and Dalum price adjustments); a 14 million fine for the decorative paper division; a 35 million dividend payout and restructuring charges, which were partially offset by the improvement in working capital requirements. Pascal Lebard, Chief Executive Officer of Sequana, stated: "Benefiting from its strong positioning in specialised distribution, Sequana successfully reduced the impact of the sudden deterioration in the market environment in the first half of Benefiting from its leading positions in Europe and its presence in fast-growing regions, Antalis reported strong earnings growth. Arjowiggins reduced the impact of external cost inflation and negative currency fluctuations by raising prices in certain segments in the second quarter and through additional cost reductions. Arjowiggins new organisation, which we announced on June 5 th, is designed to respond to current market conditions and to improve the group's operating performance and efficiency. Cross-functional support services will be scaled back soon and are expected to generate about 35 million savings as of We are also considering an industrial optimmisation plan that would generate at least 20 million in additional savings in the loss-making activities, mainly the carbonless and thin papers activities. We will strive to minimise the impact of restructuring on employment while maintaining key competencies." Breakdown of sales by subsidiary ( millions) H H pro-forma H reported Antalis 1,713 1,808 1,179 Arjowiggins 1,043 1, Other activities Eliminations (137) (130) (114) Total 2,628 2,734 2,068 COMMENTS ON SUBSIDIARIES Antalis Key figures m H H pro-forma* H reported % change (pro-forma) % change (reported) Gross sales 1,713 1,808 1,179 (5)% 45% EBITDA % 66% EBITDA margin (%) 3.7% 3.0% 3.2% Recurring operating income % 100% Operating margin (%) 3.0% 2.3% 2.2 % Capital employed ROCE 11.6% 9.2% 9.8% +2.4 pts +1.8 pt (*) These results include the activities of the Map Merchant Group since January 1, Page 2 / 9

3 Antalis reported sales of 1,713 million, down 5.3% compared to the pro-forma H figure and a 2.2% decline at constant exchange rates. The negative currency effect was 55 million in the first half, mainly due to Sterling. EBITDA was 63 million, up 15% compared to the year-earlier period. Recurring operating income rose by 27% to 52 million, and the operating margin improved to 3.0% from 2.3%. In a flat European market in volume terms, Antalis managed to increase margins thanks to a successful integration of Map activities, a better product mix, tight management of fixed costs, its ability to pass on price increases and an efficient purchasing policy. Despite tough market conditions in the UK, France and Spain, Antalis benefited from its broad geographic coverage, including robust markets like Switzerland, Russia, the Baltic countries and Latin America. It also benefited from its stronger position in industrial packaging, a segment with higher margins, notably in Germany. The integration of Map activities is on track in each of the 13 countries concerned, and some impact of improvements in purchasing terms could already be seen in first-half Other key events: In March 2008, Antalis completed the sale of Premier Paper Group Ltd, one of Map's two UK subsidiaries, to the UK group Beswick Paper. M-real and Antalis also reached an agreement on the amount of the price adjustment for Map. Antalis will pay 9 million in H out of the 17 million held since 31 October 2007, thereby reducing the estimated cash outlay in 2008 by 8 million. Arjowiggins Key figures m H H pro-forma* H Reported % change (pro-forma) % change (reported) Gross sales 1,043 1, (0.3)% 5.0% EBITDA (38)% (34)% EBITDA margin (%) 4.4% 7.1% 7.0% Recurring operating income (57)% (54)% Operating margin (%) 1.5% 3.5% 3.5% Capital employed ROCE 4.3% 8.4% 8.1% (4.1) pts (3.8) pts (*) These results include the activities of Dalum Papir A/S since January 1, Greenfield, acquired in 2008, is not included in the pro-forma 2007 results. Arjowiggins reported sales of 1,043 million, in line with its pro-forma H performance and a 4.6% increase at constant exchange rates. The negative currency effect was 48 million in the first half, mainly due to the dollar and the Sterling. EBITDA declined 35% to 44 million. Recurring operating income was 16 million with an operating margin of 1.5%. In the first half 2008, currency fluctuations had a negative impact of 28 million on recurring operating income, which was entirely offset by the 30 million impact of price increases in certain segments that were passed from the second quarter on. Arjowiggins s results were also hit by 35 million in higher energy and raw materials costs, which were only partially offset by 26 million in reduction of fixed costs. In January 2008, Arjowiggins completed the acquisition of Greenfield SAS, the European leader in FSC-certified recycled paper pulp. Greenfield would have contributed sales of 27 million in the first half of Consequently, Arjowiggins sales would have declined 2.8% at comparable perimeter compared to the year-earlier period, and increased by 1.7% at constant exchange rates. From an operational loss of 2 million in the first half of 2007, the activity of Greenfield released an operating profit of 2 million in the first half of 2008, as a consequence of price increases passed since the beginning of the year. Page 3 / 9

4 NEW ORGANIZATION On June 5, 2008, Sequana adopted a new organisation to improve the group's operating performance and efficiency by favouring Arjowiggins sales and strengthening Antalis' European leadership in specialised distribution. Under the current market environment, Sequana wanted each of its subsidiaries to have access to new growth opportunities while benefiting more directly from each others strengths: Arjowiggins from Antalis' commercial strengths and Antalis from the quality of Arjowiggins' product lines. The Group is to strengthen relations between its two subsidiaries through the following actions: Arjowiggins' creative and thin paper activities would be ultimately integrated within Antalis in order to generate commercial and logistical synergies and to facilitate the constant adaptation of products to market. Arjowiggins and Antalis plan to sign a commercial agreement regarding coated paper and recycled coated paper activities in Europe. This agreement would enable Arjowiggins to benefit from Antalis' expertise in marketing and sales, while continuing to develop business with other partners. Pre-tax cost savings and synergies are estimated at about 35 million as of the year 2009, notably through the consolidation of Arjowiggins transversal support functions, primarily central functions such as purchasing, R&D, finance and the logistics and supply chain. This would reduce Arjowiggins headcount by 250 to 300 positions, mainly in France and the UK. The cash impact of restructuring is estimated at about 40 million, most of which will be paid in A provision will be made for these restructuring charges in Industrial optimisation actions are also under consideration to turn around ailing businesses, mainly carbonless and thin papers, which could generate savings of at least 20 million during In addition, the disposal of the Security segment, which produces banknotes and security documents such as the passports, is being considered. Key figures for the new divisions are provided in Appendix 1. OUTLOOK For the year 2008, Antalis expects its recurring operating income to significantly improve, taking into account the implementation of synergies related to the acquisition of Map activities (purchasing and the first impact of cost synergies). For the second half of 2008, Arjowiggins expects its recurring operating income to be around the same level as in the first half, given the continuing degradation of the market environment. The market environment has deteriorated constantly since the beginning of the year, and it looks like the second half will remain tough. Given these uncertainties, a more cautious approach is taken for the shortterm prospects of the production activities. Looking beyond 2008, the pertinence of our strategic shift into specialised distribution should generate substantial savings and a significant improvement in margins as of WEBCAST An audio webcast will be held at 10:30 a.m. at the following address: In French: In English: Page 4 / 9

5 UPCOMING EVENTS/ANNOUNCEMENTS Third-quarter 2008 sales October 29, 2008 Full-year 2008 results March 2009 About Sequana Sequana (NYSE Euronext Paris: VOR) is a diversified paper group active in paper manufacturing and distribution, with two 100%-owned subsidiaries: Antalis: the European leader in the distribution of paper and industrial packaging products, with more than 7,900 employees operating in 44 countries, Arjowiggins: world leader in creative and technical papers, with 7,700 employees operating in 82 countries. Sequana reported pro-forma sales of 5.4 billion in Sequana Pascal Bantegnie +33 (0) contact@sequanacapital.fr * * * * * * * * * Image Sept Claire Doligez Priscille Reneaume +33(0) cdoligez@image7.fr Page 5 / 9

6 APPENDIX 1: KEY FIGURES BY DIVISION OF ARJOWIGGINS (NEW ORGANISATION) Key figures by division for H (new organisation) ( millions) Creative papers Thin papers Graphics Europe US Coated Security Industrial solutions Sales EBITDA 21 (11) (1) EBITDA margin (%) 10.8% (11.1) % 3.4% 2.9% 16.9% (0.6)% Recurring operating income 16 (13) (6) Operating margin (%) 8.2% (13.1)% 0.3% 0.7% 13.1% (3.9)% Cash flow from op. activities 11 (12) Capital employed ROCE 23.2% (32.2)% 0.4% 5.2% 34.2% (8.1)% Key figures by division for pro-forma H (new organisation) ( millions) Creative papers Thin papers Graphics Europe US Coated Security Industrial solutions Sales EBITDA 28 (2) EBITDA margin 14.1% (1.6)% 6.3% 4.0% 15,2% 3.2% Recurring operating income 22 (6) Operating margin (%) 11.1% (5.0)% 2.6% 0.7% 10.2% 0.0% Cash flow from op. activities 19 (10) (17) Capital employed ROCE 30.0% (15.6%) 5.8% 1.7% 26.4% (0.4)% (*) These results include the activities of Dalum Papir A/S since January 1, 2007 (impact solely on Graphic Europe). Greenfield, acquired in 2008, is not included in the pro-forma 2007 results. Page 6 / 9

7 APPENDIX 2: CONSOLIDATED FINANCIAL STATEMENTS (IFRS) Consolidated income statement ( millions) H H Sales 2,628 2,068 Other operating income 27 7 Purchases consumed and change in inventories (1,843) (1,363) Personnel expenses (395) (336) External expenses (291) (250) Taxes other than income taxes (16) (17) Depreciation and amortization (43) (46) Allowances to provisions 3 5 Other operating expenses (12) (17) Recurring EBIT Other operating income and expenses (26) 57 Operating income Income from cash and cash equivalents 2 Cost of gross debt (26) (15) Other finance income and expenses (1) 17 Net financial income (expense) (27) 4 Income taxes 15 (21) Net income of consolidated companies Share of earnings of associates Net income of continuing operations Net income of discontinued operations 5 Net income - Total NET INCOME -- GROUP SHARE Net income attributable to minority interests (1) Earnings per share - Weighted average number of shares outstanding 49,296,355 49,072,952 - Average number of shares retained after dilution 49,025,584 49,213,997 Earnings per share Earnings per share on continuing operations Earnings per share on discontinued operations Earnings per share Diluted earnings per share Earnings per share on continuing operations - diluted Earnings per share on discontinued operations - diluted Earnings per share - diluted Page 7 / 9

8 Consolidated balance sheet ASSETS ( millions) June 30, 2008 December 31, 2007 Non-current assets Goodwill Other intangible assets Property, plant and equipment Investments in associates 3 3 Non-current financial assets Deferred tax assets Other non-current assets TOTAL NON-CURRENT ASSETS 1,676 1,726 Current assets Inventories Trade receivables 999 1,024 Other receivables Current financial assets Cash and cash equivalents TOTAL CURRENT ASSETS 2,110 2,132 Assets held for sale 53 4 TOTAL ASSETS 3,839 3,862 EQUITY AND LIABILITIES ( millions) June 30, 2008 December 31, 2007 Equity Share capital Additional paid-in capital Cumulative translation adjustment (104) (64) Retained earnings and other consolidated reserves 1,159 1,030 Net income attributable to shareholders SHAREHOLDERS' EQUITY 1,245 1,277 Minority interests 9 10 TOTAL EQUITY 1,254 1,287 Non-current liabilities Provisions Debt Deferred tax liabilities Other non-current liabilities 12 9 TOTAL NON-CURRENT LIABILITIES 1,225 1,128 Current liabilities Provisions Debt Trade payables Other payables TOTAL CURRENT LIABILITIES 1,360 1,447 TOTAL EQUITY AND LIABILITIES 3,839 3,862 Page 8 / 9

9 Consolidated cash flow statement ( millions) H H Cash flows from operating activities Net income - Total Elimination of non-cash and non-operating income and expenses: +/- Depreciation, amortisation and allowances to provisions (except on current assets), net 2 (20) +/- Capital gains and losses on disposals (1) (34) +/- Other non-cash income and expenses (3) (2) +/- Income tax expense and income (including deferred taxes) (15) 21 Gross cash flow from operating activities Dividends received from non-group companies (6) (3) - Taxes paid (12) (30) - Change in operating working capital 45 (88) +/- Change in loans and guarantee deposits 3 4 CASH FLOWS FROM OPERATING ACTIVITIES 33 (56) Cash flows from investing activities - Expenditure on acquisitions of property, plant & equipment and intangible assets (41) (40) + Proceeds from disposals of property, plant & equipment and intangible assets Expenditure on acquisitions of financial assets (2) + Proceeds from disposal of financial assets /- Impact of changes in scope of consolidation (33) (36) +/- Impact of operations held for sale 56 +/- Other flows related to investment activities (2) (30) CASH FLOWS FROM INVESTING ACTIVITIES (70) 17 Cash flows from financing activities Dividends paid to parent company shareholders (35) (29) Dividends received from associates and non-group companies 6 3 +/- Buybacks and disposals of treasury shares (3) + Cash received on new borrowings Reimbursement of borrowings (53) (100) +/- Change in marketable securities with maturities greater than three months (1) 25 - Net interest paid 4 +/- Other flows related to financing activities 7 (1) CASH FLOWS FROM FINANCING ACTIVITIES 57 (87) Effects of fluctuations in exchange rates (5) (1) CHANGE IN NET CASH AND CASH EQUIVALENTS 15 (127) Net cash and cash equivalents at start of year Net cash and cash equivalents at end of year INCREASE (DECREASE) IN NET CASH AND CASH EQUIVALENTS 15 (127) Analysis of net cash and cash equivalents at end of year Cash and cash equivalents Current bank borrowings and bank overdrafts (30) (56) NET CASH AND CASH EQUIVALENTS AT END OF YEAR Page 9 / 9