Braas Monier Building : in Q2 2016 with positive earnings development in an uneven environment

Corporate News

03.08.2016, Luxembourg

• Strong performance in selected markets such as Germany, Poland and South-Eastern Europe as well as first-time inclusion of newly acquired businesses mostly compensating for negative exchange rate effects and more challenging geographies
• Q2 2016 revenues of EUR 329.0 million down 1.8% (like-for-like -1.0%)
• Operating EBITDA growth of 2.4% to EUR 61.9 million in Q2 2016 (like-for-like 2.2%), Operating EBITDA margin improved by 0.8 percentage points to 18.8%
• Strong future cash flow profile further enhanced sizeably by successful refinancing in June
• Bolt-on M&A strategy continued with acquisitions in South Africa and the Netherlands
• Full-year revenues expected to grow by around 1% on a like-for-like basis, additionally around 3% growth stemming from recent acquisitions

Luxembourg, 3 August 2016. Braas Monier today published its results for the first half year and the second quarter 2016. 'Braas Monier has shown a solid operational, financial and strategic performance since the start of the year,' summarised Pierre-Marie De Leener, CEO and Chairman of the Board of Directors of Braas Monier Building Group. 'We have strengthened our Operating EBITDA, executed three further value-accretive acquisitions and with the very successful refinancing, we reduced our cash interest charge by more than EUR 10 million on an annualised basis. However, harsh weather conditions in wide parts of continental Europe in June and increased uncertainty around the UK referendum have not allowed for achieving our full revenue potential during the second quarter.'

Revenue development dampened by weak June
Revenues decreased in the second quarter 2016 by 1.8% or EUR 5.9 million to EUR 329.0 million (Q2 2015: EUR 334.9 million). Negative foreign exchange effects during the period amounted to EUR -10.8 million, stemming predominantly from a strengthening of the Euro against the South African Rand, the British Pound and the Malaysian Ringgit. The first-time inclusion in full of acquisitions such as Technicrete in South Africa (consolidated as of June 2016), J.A. Plastindustri in Denmark (consolidated as of January 2016), Ceprano Coperture in Italy (consolidated as of December 2015) and Golden Clay Industries in Malaysia (consolidated as of October 2015), had a positive effect on revenues in the second quarter of 2016 of EUR 8.1 million or 2.4%.
On a like-for-like basis, excluding these effects, revenues were 1.0% below the previous year's level due to lower volumes, particularly in Italy, China and Malaysia. From April to May 2016 European tile volumes grew on a like-for-like basis, continuing the positive trend of the first quarter (+3.5%), but declined in June, resulting in a marginal negative like-for-like development for the second quarter as a whole. While volumes in Asia & Africa still decreased in the second quarter of 2016, all countries showed an improving trend compared to the first three months of 2016, resulting in higher growth rates in South Africa and significantly less reductions in Malaysia. Average selling prices were slightly positive in the second quarter 2016.

The components business showed a solid performance in the first half year 2016 and a particularly strong performance in Germany. The KPI for European Components, which measures the amount of component revenues per square metre roof tiles sold, reached EUR 2.37 per square metre in the six months of 2016, exceeding the level of last year's period by 1.3%.

Revenues of the Chimneys & Energy Systems business were stable at previous year's level in the second quarter (Q2 2016: EUR 44.2 million vs. Q2 2015: EUR 44.0 million) with a flat volume and positive pricing development being offset by negative currency effects. On a like-for-like basis, revenues increased by 2.6% in the second quarter 2016.

Operating EBITDA increase backed by lower energy costs and strict cost management
Operating EBITDA increased in the period from April to June 2016 by 2.4% (like-for-like 2.2%) to EUR 61.9 million (Q2 2015: EUR 60.5 million). The Operating EBITDA margin rose by 0.8 percentage points to 18.8% (Q1 2015: 18.1%). Currency effects in the second quarter 2016 of EUR -1.6 million were compensated by the Operating EBITDA contribution of EUR 1.7 million from the recently acquired businesses.

The effect of lower volumes on Operating EBITDA was moderate during the second quarter of 2016, average selling prices showed a slightly positive development. Lower energy costs helped to improve the variable cost base, in particular in Germany and France. Improvements in fixed costs were especially realised in geographies with a challenging market environment, such as Italy and Asia & Africa.

The Net financial result in the second quarter 2016 amounted to EUR -38.3 million. The change of EUR -27.8 million compared to the second quarter 2015 (EUR -10.5 million) was driven by one-time costs related to the refinancing in June 2016, in particular the full amortisation effect stemming from transaction cost in relation with the former financing (EUR -15.0 million) and the close out of the interest rate swaps (EUR -14.3 million).

Applying a consolidated effective tax rate for the Group of 33.7% (Q2 2015: 32.2%), the Net income for the period amounted to EUR -11.0 million for the first half 2016 (H1 2015: EUR 9.7 million) and to EUR 1.6 million in the second quarter 2016 (Q2 2015: EUR 17.0 million). Divided by the number of shares outstanding at 30 June 2016 (39,166,667), the Net income per share for the second quarter 2016 amounted to EUR 0.04 (Q2 2015: EUR 0.43) and to EUR -0.28 for the first half 2016 (H1 2015: EUR 0.25).

Successful refinancing further improves attractive cash flow profile
In June 2016 we successfully refinanced and reduced our external debt including the issuance of EUR 435.0 million Senior Secured Notes with a coupon of 3.00% per annum and a new Revolving Credit Facility of EUR 200.0 million. The proceeds, together with available cash, were foremost used to redeem in full the EUR 315.0 million Senior Secured Floating Rate Notes due 2020, to fully repay the Term Loan B of EUR 200.0 million and to pay-down the amount drawn under the old Revolving Credit Facility (EUR 15.0 million). Thanks to the successful refinancing, we expect that our cash interest charge was reduced by more than EUR 10 million on an annualised basis. Based on current management expectations, down-payments of the currently drawn Revolving Credit Facility during the second half of 2016 will lead to an expected gross deleveraging of approx. EUR 80 million at year-end.

Consistent bolt-on M&A strategy continued
In May 2016, Braas Monier acquired a concrete tile plant in South Africa, operating under the brand name of Technicrete. Through the acquisition of the plant, Coverland South Africa takes an active step to consolidate the local market and gains additional potential for selling roofing components to a wider customer base. It also complements its regional footprint, enabling the company to better service the northern part of South Africa at lower transport costs.

In July 2016, Braas Monier acquired Ontop B.V., a well-established European manufacturer of stainless steel flue systems, with end-product applications ranging from industrial bakery ovens, diesel and gas engines, boilers, fire places and stoves. Ontop, headquartered in Middelburg, the Netherlands, serves the European market with one production location each in the Netherlands and Poland as well as a distribution centre in Germany and a sales office in France.

Following the acquisition of J.A. Plastindustri in January, we have now successfully executed three bolt-on acquisitions this year and the seventh within the last 19 months. We believe that our disciplined M&A strategy supports our ability to generate profitable growth and to further increase the value of our business.

Launch of new concrete tile with 'Aerlox' technology
Based on our extensive experience, know-how and long-term R&D efforts, we have achieved an innovation, which we expect to be highly attractive to the markets: 'Aerlox', a concrete tile, up to 40% lighter than a traditional one, but with similar technical properties such as high strength, long-term aesthetics and frost resistance. Roofers strongly benefit from the lower weight of the tile as they have to carry and move significantly less weight per day. Working with the new tile with 'Aerlox' technology will thus be less tiring over the day, enabling the roofer to lay the tiles faster. Other building materials such as metal and fibre cement are typically used on houses with a light building and roof structure, thus being unable to carry the weight of standard tiles. Here the light tile with 'Aerlox' technology enables the entry into an additional market segment that had been out of reach for tile makers in the past. We have introduced the new tile with 'Aerlox' technology in the Danish market in March 2016. Depending on experience and feedback gathered in this first market, we would consider further market entries in 2017.

Industry experience in the Board of Directors strengthened
With the election of Emmanuelle Picard and Christopher Davies as Non-Executive Directors at the Annual General Meeting in May 2016, Braas Monier further strengthens the industry experience in its Board of Directors. Emmanuelle Picard serves as General Manager for the Industrial Fabrics Europe at Adfors, a subsidiary of Saint-Gobain with operations in Spain, the Netherlands, the Czech Republic and Poland. Christopher Davies was employed at SIG plc from 1994 to 2013, serving for the last five years as Group CEO.

Positive outlook for 2016 adjusted
In 2016, we continued to invest in profitable growth. Our product innovations have the potential to further enrich our product mix and we continue to actively search for and evaluate further potential M&A targets to strengthen our operations, consolidate markets and thereby profit further from a future market recovery. Compared to the beginning of the year, overall volume growth expectations are dampened by uncertainties following the UK referendum, a weak development of the Italian market as well as a slower stabilisation in Malaysia and further strong declines in China. Those effects are expected to be only partially offset by a better market development in Germany, Poland and South-Eastern Europe in particular.

Based on these assumptions, Braas Monier expects like-for-like revenues to increase by around 1%. Average selling prices are expected to increase slightly to cover increasing input costs. On top, the first-time inclusion in full of acquisitions in Malaysia, Italy, Denmark, South Africa and the Netherlands is expected to generate of around 3% of revenue growth and approximately 4% in Operating EBITDA growth.

'Our strong components business provides a reliable platform for future growth and real innovations further enrich our product mix. Together with effective sales and marketing activities in all our countries, we are confident to provide value-adding products and services for our customers, allowing us to grow faster than the markets. Earnings are expected to benefit from our high operating leverage and our strict cost discipline', said Pierre-Marie De Leener, CEO and Chairman of the Board of Directors of Braas Monier Building Group. 'We believe that the solid performance of Braas Monier gives evidence to our ability to achieve these goals - even in tough markets.'

Key financial figures

About Braas Monier
Braas Monier Building Group is a leading manufacturer and supplier of pitched roof products in Europe, parts of Asia and South Africa. The Group covers all steps of the manufacturing process, offering a comprehensive range of concrete and clay tiles for pitched roofs and is one of the few suppliers to also manufacture and sell complementary roofing components designed to cover various functional aspects of pitched roof construction. The portfolio also includes ceramic and steel chimneys and energy system solutions. Braas Monier had operations in 36 countries and 118 production facilities and employed 7,707 people as at 30 June 2016. The Company is headquartered in Luxembourg.

Contact
Achim Schreck
Director Group Communications / Investor Relations
Braas Monier Building Group

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