Sequana narrows Q3 loss to €21M, compared with loss of €45M a year ago, helped by lower overhead due to closures of Arjowiggins' plants in Dalum, Denmark, and Witcel, Argentina; sales down 8% year-over-year, to €837M
October 30, 2013
– ACTIVITY FOR THIRD-QUARTER
2013 Amid a declining graphic coated paper market that shrank by 6% in Western Europe over the third quarter, the Group’s sales in the third quarter were hit by persistently sluggish demand for printing papers, particularly over the first two months of summer, and by sharp downward pressure on selling prices. Antalis’ non-paper businesses (Packaging and Visual Communications) and Arjowiggins’ specialty activities held firm however. Sales came in at €837 million, down 8.0% or 4.0% at constant exchange rates. In volume terms, the decline in sales slowed over the quarter as compared to the first two quarters of the year. Sequana benefited from the fall in overheads resulting from the closure of Arjowiggins plants Dalum and Witcel in 2012 and the planned closure of the Ivybridge plant in early 2014, along with the restructuring of logistics operations at Antalis. Prices for pulp, chemical products and energy remained high. EBITDA was €24 million for the third quarter, or 2.9% of sales, up €3 million, or 16.5% compared to third-quarter 2012.
RESULTS FOR THE NINE MONTHS TO 30 SEPTEMBER
Consolidated sales for the first nine months of 2013 dropped 8.7% year-on-year to €2,635 million (down 6.5% at constant exchange rates). This decline reflects the combined impact of the fall in printing paper volumes, strong downward pressure on selling prices, and a deterioration in the product mix. EBITDA totalled €83 million, down 17.4% from €100 million in the first nine months of 2012, giving an EBITDA margin of 3.1%, a slight 0.4 point drop on 2012. Recurring operating income was €24 million (including a €4.5 million gain arising on changes to pension plans) compared with €45 million for the yearearlier period.
In view of non-recurring restructuring costs (€31 million), finance costs and taxes, the Group generated a net attributable loss of €58 million, compared to a net loss of €54 million in the first nine months of 2012.
Demand for printing papers should remain weak in the fourth quarter and the downward pressure on selling prices will therefore increase. Arjowiggins’ specialty markets should enjoy robust activity – particularly banknote paper which has a full order book for the rest of the year with an improvement in the product mix as compared to the first half. Antalis should benefit from the economic upturn in certain industrial segments in the Packaging business and also from the consolidation of Xerox’s office paper business as from 1 November.
Sequana estimates that full-year sales based on a comparable scope of consolidation will be down on 2012, although the decline should be slightly less than in the first half.
The cost of pulp, energy and chemical products should remain high in the fourth quarter, albeit lower than in 2012. In the current market environment, Arjowiggins will continue reducing its cost base, particularly in the US where an ambitious cost cutting programme was launched in US Coated in the third quarter. Before the end of the year, Arjowiggins will also consider any additional measures it may need to take, particularly in view of future trends in demand.
Antalis will continue strictly managing its margins and reducing its overheads, particularly its supply chain operations in Europe where a warehousing restructuring programme is in progress. The consolidation of Xerox’s Western European office paper business in the fourth quarter will unlock synergies and will boost Antalis’ earnings as from 2014.
Printing paper volumes in Europe continued to decline in the third quarter. However, Antalis was able to maintain selling prices for its stock business. The company’s commitment to protecting margins and managing customer credit risk exacerbated the downturn in demand. Business in Latin America (except Brazil) and in the Packaging and Visual Communications sectors fared better. Third-quarter sales came in at €592 million, down 8.5% on third-quarter 2012, or 4.7% at constant exchange rates.
Nine-month sales totalled €1,851 million, down 8.1%, or 5.9% at constant exchange rates, chiefly reflecting the impact of lower volumes.
After receiving the approval of the competition authorities and having completed the relevant employee consultation procedures, at end-September Antalis signed a definitive agreement with Xerox to acquire its office paper distribution business in Western Europe. This business will be consolidated on 1 November.
Third-quarter sales came in at €312 million, down 7.0% (or -3.7% at constant exchange rates) compared to the same period in 2012.
Amid strong downward pressure on selling prices for printing paper, the third quarter saw volumes decline further, albeit not as sharply as in the first half of 2013, and the product mix continue to deteriorate, particularly in the fine paper segment. In contrast, specialty businesses (laminated, transfer and casting paper and paper used in the healthcare segment) along with recycled pulp, performed well. The banknote paper business (Security division) enjoyed robust activity after the summer, helping to partly absorb the phasing issues that had affected business in the first half of the year.
Nine-month sales totalled €973 million, down 9.9%, or 8.1% at constant exchange rates.
Industry Intelligence editor's note: In an omitted table, the company reported a Q3 loss of €21 million. For the same period a year ago, the company reported a loss of €45 million.