Cham Paper's full-year 2013 swings to net profit of 400,000 Swiss francs from net loss of 1.2M francs, as Italian sites boost profitability; net turnover down 17.3% year-over-year, to 231.3M francs due to paper machines in Cham being shut down

CHAM, Switzerland , March 20, 2014 (press release) – Release of an ad hoc announcement pursuant to Art. 53 KR

  • Further momentous milestones in the transformation programme reached - Strong demand for all strategically-important product groups - Italian mills on the rise, Carmignano benefits from adaption of the product range
  • Balance sheet bolstered, Group free of net debt; dividend of CHF 3.00 distributed
  • Papieri project progressing on schedule

The 2013 business year has seen the Cham Paper Group reach further momentous milestones that form part of the company's comprehensive transformation programme, which began in 2011. The transfer of the company's key product groups from Cham to Italy has been successful, and the relevant processes have now been embedded. Both Italian sites have made substantial progress in terms of their profitability and competitiveness, and have come to form a stable industrial backbone for the Group. In Cham, CPG has been focussing on the development and manufacture of refined niche applications since Q2 of the year under review. Also, planning is on schedule for the widely-supported conversion of the industrial site at Cham into a new neighbourhood, and the project is now taking shape.

As a result of the paper machines in Cham being taken out of service at the end of June 2012 and March 2013, net turnover fell as expected by 17.3% to CHF 231.3m (CHF 279.7m). Sales volumes were down by 19%, with 151,000 tonnes (187,000 tonnes) of speciality paper sold. In the strategically-important product groups, however, sales continued to rise. Despite the challenging transfer and associated costs and outlays, operating profits in Italy proved rather promising. The sale of the Italian sites that was announced in the summer and cancelled in November had a one-off negative effect, resulting in associated costs of approximately CHF 1.5m. EBIT for the 2013 business year amounted to CHF 3.2m (the same as the previous year) and net profit totalled CHF 0.4m (up from -1.2m in the preceding year). Free cash flow in the year under review achieved CHF 16.7m (CHF 8.1m in the previous year). The Group reduced net debt by a further CHF 21.6m, meaning that the Group is now free of net debt and has cash reserves of CHF 53.4m.

Carmignano benefits from adaptation of the product range, Condino continues to grow

The two production sites, in Carmignano and Condino, developed in 2013 as anticipated. Recorded sales were over 11.3% higher than in the previous year, despite the extensive tests with Innerliner papers in Carmignano that initially tied up considerable resources and capacities. Following the successful relocation, the site was able to sustainably optimise its product mix during the subsequent months. In Condino, demand for our chief product, Glassine, increased again to reach a good level.

Strong demand for strategically-important product groups and a full development pipeline

Consumer Goods: Following the successful transfer of Tobacco Papers to Carmignano, we have been working on a range of innovative Innerliners for this segment. The 'Innerliner Leaf' can be composted and at the same time is extremely suitable for the new drying systems on our coating machines. What is more, the Labelcar product series, used to produce beer labels for example, received certification for metallisation during the year under review. It is increasingly common for wet-strengthened labels to be metallised, generating strong market growth in this segment. Our Development division is also working flat out to convert a proportion of the papers for the Flexible Packaging segment to lower grammage.

Industrial Release: Sales in the Glassine product group increased dramatically once again. The strongest growth was in Glassine tape. Manufactured in Condino, this product takes the form of high-quality papers used to produce adhesive tapes. Condino is well placed to build further on our success in this segment. The focus of our market strategy will also increasingly lie upon specialities in the field of Process Liners. The Cham Paper Group not only manufactures Silicone Base Papers, but also siliconises it itself. Applications range from packaging for adhesive products to process liners used in the manufacture of a variety of plastic materials. A full development pipeline has been put in place for this segment. In addition to sophisticated base papers for the coating plant in Cham, papers coated on a single side for reflective signs and labels, in particular for car registration plates, are developed here.

Digital Imaging: We successfully continued our growth trajectory in Digital Imaging. Transjet Sportsline - used for digital sublimation printing on sports textiles - experienced a particularly strong increase in sales. The development of two new products has been completed, expanding the product range in Transfer Printing: Transjet Boost for the new high-speed inkjet printers and Transjet ECO for the new markets in Asia and South America. The next stage of development, achieving lower grammage for the fashion industry, is already underway. The Graphics sector has also welcomed a new product to market: Promoprint is the first matt inkjet paper of a new product family, developed especially for high-speed inkjet printers. Further products with a glossy finish are under development.

Barnamic: The market launch of Barnamic continued to be a high priority for the Group. Used as a stand-alone packaging solution or as a part of composite material, these barrier papers are suitable for a variety of food and non-food applications. Projects with selected key clients were pursued further, enabling considerable quantities to be sold for the first time in Q4. Now it is a case of bringing the scale-up phase to a successful conclusion and clearing the way for the roll-out of Barnamic in serial production. In the meantime, the development team is working relentlessly to develop the Barnamic product portfolio. The focus, in addition to introducing new products, is to use 100% natural, sustainable raw materials.

Restructuring frees up more resources and bolsters the balance sheet The restructuring of the Cham Paper Group also freed up some financial resources in the 2013 business year. Thanks to the further reduction of net working capital by 26.2% and stringent cost controls, we were able to achieve a free cash flow of CHF 16.7m. Furthermore, 35,000 shares from the Group's own stock were placed with investors at market prices by year-end, meaning that the company accrued an additional CHF 7.7m. Despite paying out dividends worth CHF 2.1m in May 2013, the Group was able to reduce its net debt by a further CHF 21.6m. The Group is now free of net debt and has cash reserves of CHF 53.4m. Our equity ratio rose from 40.7% in 2012 to 46.3% by the end of 2013.

Strengthening the social partnership in Italy

The sale of the Italian paper mills in Carmignano and Condino to the Delfort Group, announced on 15 July 2013, collapsed after talks concerning future contractual conditions between the buyer and the Italian employees' representation in Carmignano proved unsuccessful. At the end of November, the local factory management came to an economically viable and progressive consensus with the employees. The new agreement, which was approved by the General Assembly of Employees, enables a significant expansion of the flexibility of the site in terms of its operating hours, especially on weekends, while retaining the current remuneration models. The agreement was reached as a result of the strong desire of all parties to see the successful restructuring of the Cham Paper Group secure a significantly improved market position of the plant in Carmignano in the long term. Consequently, both sites in Italy remain under the ownership of the Cham Paper Group. Thanks to the comprehensive restructuring of the Cham Paper Group in the last two years, they are well positioned.

Continued streamlining of management

In the wake of the completion of the Group's comprehensive transformation, it was found that the management structure could be further streamlined, and the Executive Committee was disbanded at the end of November 2013. The three site managers at Carmignano, Condino and Cham now report directly to the delegate of the Board of Directors, Urs Ziegler. At a Group level, Urs Ziegler will continue to be assisted by Luis Mata, Head of Finance & Controlling, and Franziska Stöckli, Head of Corporate Services.

Papieri site: vision set out and urban development study commissioned The Cham Paper Group and the Commune of Cham are currently working together on the conversion of the factory site once it is vacated. The most important Cham stakeholder groups and local communities have been involved in the collaborative planning process. In the first half of the year, the vision and the guidelines derived for the new district were set out, which were fully approved with public involvement. Since October 2013, four qualified architectural firms have been carrying out an urban development study, and the initial results look promising. The final outcome will be presented in Q2 2014, forming the basis for the subsequent production of the plans. Voters in Cham are then expected to decide in the first half of 2015 on the rezoning necessary to carry out the project.

The costs of the development and planning process of the Papieri site will largely be covered until 2015 by income from temporary leasing and the operations of Cham Paper Solutions. A number of new tenants have moved onto the Cham site in the last 18 months, in view of the high demand for offices, storage space and parking.

Proposals to the General Assembly

By concentrating base paper production in Italy, we have freed up financial resources, which the Board of Directors has utilised to reduce liabilities to banks and wants to return to shareholders. The Board therefore recommends a dividend of CHF 3.00 per share in the form of a tax-friendly return of capital.

Outlook

The Board of Directors is confident about the continued profitable growth at the sites in Italy. The small, but highly innovative, unit in Cham still has to prove its worth in the market. Sales must increase substantially if we are to become sustainably profitable by 2015. Until then, we will continue production on the existing site, and subsequently the equipment must be moved to a new location.

We want to thank our employees for their considerable efforts, which have been and continue to be indispensable in successfully completing the transformation of the Cham Paper Group. Our thanks go to our clients, partners and suppliers too for their close collaboration. As for our esteemed shareholders, we would like to thank you for the confidence you have placed in us.

Information and Explaination of the Issuer to this News:

A media and analyst conference will take place in the SIX Convention Point in Zurich today, 20 March 2014, at 9:00.

The complete annual report (in German) is available on our website in the Investor Relations section (see 'Financial Reports') or directly under the following link:
http://ir.champaper.ch/cgi-bin/show.ssp?id=310&companyName=champaper&langu age=German.

For information, please contact

Media and IR Office of Cham Paper Group Holding AG c/o Dynamics Group, Edwin van der Geest / Philippe Blangey E-mail: media@cham-group.com / investor@cham-group.com Phone: +41 43 268 32 32

Securities no. / ISIN / ticker symbol: registered shares of Cham Paper Group Holding AG 193 185 / CH0001931853 / CPGN

Cham Paper Group

The Cham Paper Group is a leading manufacturer of coated specialty papers. It generates added value for its customers by providing finishing-based functional capabilities. Founded in 1657, the company develops and manufactures specialty papers at its three locations in Switzerland and Italy for use in Consumer Goods, Industrial Release and Digital Imaging applications. Consumer Goods encompasses papers for flexible packaging and base papers for label printing in the food, non-food, tobacco, beverage and pharmaceutical industries. In the Industrial Release segment, the Cham Paper Group supplies silicone-base papers for release liners used in graphical applications and for adhesive tapes and labels. The company also supplies base papers for process liners used in industrial casting and laminating process applications. Facestock papers for the self-adhesive industry round off the range. Apart from large-format inkjet papers for indoor and outdoor applications, the Digital Imaging segment also includes sublimation papers for digital textile printing. The Cham Paper Group has benefited from the trend for sustainable products and is well established in the market thanks to its technological innovative prowess. It is listed as an independent company on the SIX Swiss Exchange (ticker symbol: CPGN).

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.