Sequana widens Q3 loss to €44M from €30M in year-ago period, reports sales down 4% to €909M, citing economic conditions accelerating decline in volumes, lower-than-forecast sales of printing and writing papers across Europe, North America
October 26, 2012
– Improved operating performance in third-quarter 2012 in a sharply deteriorating economic environment:
- Sales down 4% to €909 million
- EBITDA up 17.7% to €21 million Nine months to 30 September 2012:
- Sales down 2.4% to €2,886 million
- EBITDA down 4.5% to €100 million versus €105 million at 30 September 2011; EBITDA margin stable at 3.5%
ACTIVITY FOR THIRD-QUARTER 2012
The worsening economic conditions during the summer accelerated the fall in volumes and dragged down Group sales, with lower-than-forecast sales of printing and writing papers across Europe and in North America. The drop in demand noted in August gathered pace in September in both the distribution and production businesses, putting strong pressure on selling prices. Nevertheless, Arjowiggins’ specialty businesses (Security and Medical/Hospital segments) and Antalis’ non-paper businesses (Packaging and Visual Communications) held up well.
Sales were down by 4% to €909 million (down 7.1% at constant exchange rates). The positive impact of the fall in raw material prices over the period – albeit by less than forecast – and a tight rein on costs helped offset the drop in volumes and the downward pressure on selling prices. Third-quarter EBITDA came in at €21 million, or 2.3% of sales, up €3 million on the same period in 2011.
Following the capital increase carried out on 9 July 2012 which helped to bolster the Group’s financial structure, Sequana implemented a number of strategic decisions in September:
- Arjowiggins brought its production capacity into line with market demand for printing and writing papers. It shut down one plant in Argentina in September and is in the process of closing two others in Denmark and the UK. These capacity reduction measures are being carried out in accordance with the planned timeline and with the restructuring expenditure initially budgeted for. Of the €23 million in restructuring expenses booked in the third quarter, around €8 million will be disbursed in the last quarter of 2012 and most of the balance in 2013. The Group’s restructuring plan will generate €17 million in full-year net cost savings, mostly from 2013 on.
- Continued expansion of Antalis in fast-growing market segments and in emerging economies with the acquisition of two packaging product distributors in Chile and the Czech Republic for an enterprise value of €17 million.
RESULTS FOR THE NINE MONTHS TO 30 SEPTEMBER
Consolidated sales for the first nine months of 2012 dropped 2.4% year-on-year to €2,886 million (down 4.4% at constant exchange rates).
EBITDA totalled €100 million, against €105 million for the first nine months of 2011 (down 4.5%), giving a stable EBITDA margin representing 3.5% of sales. Recurring operating income was €47 million compared to €71 million at end-September 2011 (which included a €17 million gain related to a pension fund with no impact on EBITDA).
The Group generated a recurring net loss of €4 million for the period. After net non-recurring expenditure representing €47 million (mainly business restructuring costs), the net loss attributable to owners for the period was €51 million, compared to net income of €6 million for the same period in 2011.
The economic crisis in Europe should continue to hit corporate marketing and communication budgets and squeeze demand for printing and writing papers in the fourth quarter of 2012. These market conditions will make it difficult to implement the price increases decided upon before the summer. Given the drop in printing and writing paper volumes and slower growth in Antalis’ non-paper businesses, Sequana considers that its full-year sales factoring in the positive impacts of changes in exchange rates and in the scope of consolidation will be slightly down on 2011.
In the last three months of the year, Arjowiggins should continue to benefit from the favourable impact of lower raw material prices, the reduction in its overheads and resilient performances in its specialty businesses (Security and Medical/Hospital segments).
Antalis should reap the rewards of logistics and commercial restructuring measures implemented in 2012 and benefit from continued growth in emerging countries and non-paper businesses – albeit at lower-than-forecast rates.
In light of the market conditions anticipated for the end of the year, Sequana estimates that its full-year EBITDA margin should come in close to the lower limit of 3.6% forecast in June 2012.
Sequana (NYSE Euronext Paris: SEQ), is a major player in the paper industry, boasting leading positions in each of its two businesses:
Antalis: European leader in the distribution of paper and packaging products, with around 6,000 employees based in 44 countries.
Arjowiggins: World leader in creative and technical papers, with more than 5,200 employees. Sequana reported sales of €3.9 billion in 2011 and employed some 11,000 people worldwide.
Sequana Third Quarter Financial Results