ERGIS S.A. Press release
Warsaw, 5 November 2014
THE ERGIS GROUP AFTER THREE QUARTERS OF 2014: GOOD FINANCIAL RESULTS DESPITE UNFAVOURABLE MARKET CIRCUMSTANCES IN THE THIRD QUARTER
The ERGIS Group, the leader of plastics processing in the Central and Eastern Europe, generated revenue of PLN 505.3 million after three quarters of 2014 (a decrease of 2.8% compared to the previous year), operating profit of PLN 26.6 million (an increase of 13.8% compared to the result after three quarters of 2013) and net profit of PLN 17.7 million (an increase of 92.3% compared to the same period of the previous year).
The Group achieved good operating results in spite of the fact that the third quarter of 2014 saw unfavourable market circumstances, including above all limited exports of food products to Ukraine and Russia, which affected the Group's customers, and at the same time, resulted in lower demand for food packaging and stronger price competition on the EU market. Therefore, the Company's results for the third quarter itself were lower as compared to the same period of the previous year.
At present, the Group is implementing an investment programme with a value exceeding PLN 20 million, which consists in acquiring and launching another line for flexographic print at Flexergis in Nowy Sącz and another line for the production of PET tapes at ERGIS S.A. Oława Plant.
FINANCIAL RESULTS - DETAILS
Financial results of the ERGIS Group after third quarter 2014 are presented in the table below:
PLN '000 PLN | Q3 2014 | Q3 2013 | Change | Q1-Q3 2014 | Q1-Q3 2013 | Change |
Revenue | 169,579 | 181,699 | -6.7% | 505,299 | 520,058 | -2.8% |
Operating profit | 7,612, | 10,955 | -30.5% | 26,567 | 23,349 | +13.8% |
Gross profit | 6,196 | 10,497 | -41.0% | 22,100 | 13,041 | +69.5% |
EBITDA | 13,346 | 16,416 | -18.7% | 43,588 | 39,388 | +10.7% |
Unrealised foreign exchange differences | 167 | 1,157 | -85.6% | 351 | -2,044 | - |
Net profit | 5,299 | 7,680 | -31.0% | 17,661 | 9,186 | +92.3% |
The third quarter of 2014 saw the accumulation of major unfavourable circumstances in the packaging film industry, which had its peak in September. The German and French markets witnessed a sharp decrease of margins on rigid packaging films, which caused that the global margin on sales of rigid packaging films achieved by the Company was almost 30% lower in comparison to the same period of the previous year with the comparable level of sales. It was to a large extent due to limited exports of food products to Ukraine and Russia, which affected the Group's customers, and at the same time, resulted in lower demand for food packaging and stronger price competition on the EU market. As a result of the above, the Company's results for the third quarter itself were lower as compared to the same period of the previous year.
Similarly, the third quarter brought unsatisfactory results in terms of sales of and margins on stretch films. However, increased sales of nanoErgis caused that the global amount of margin in this segment was PLN 1 million higher than in the third quarter of 2013.
Gross profit and net profit generated in the third quarter of 2014 were lower as compared to the third quarter of 2013. However, in cumulative terms, both of the above figures are significantly higher than in the previous year, i.e. by 69.5% and 92.3%, respectively.
The Group's revenue for the third quarter was lower by 6.7% in relation to the same period of the previous year. In cumulative terms, the decrease after three quarters of 2014 accounted for 2.8%.
Decrease in the industrial packaging group primarily concerned stretch film (by 11% in terms of value as compared to nine months of 2013) and is a result of a change in the sales structure, i.e. replacing the traditional stretch film with nanoErgis film and slower-than-expected acquisition of new customers for this film type. The decrease in the PVC soft film group concerns insulating films and is to a certain extent due to high sales volume resulting from the execution of a one-off contract in 2013. The increase in the "other sales" group refers to compounds. A reason for this growth is that the Company comes back to the sales volumes of this product type achieved in earlier periods.
INVESTMENT PLANS
On 4 September 2014, the Company's Supervisory Board approved an additional investment programme, the implementation of which started at the turn of the third and fourth quarter of 2014. The programme covers the following components:
- the investment in the new line for flexographic print in Flexergis in Nowy Sącz with a value of PLN 8.5 million; the launch of the new line is scheduled for the turn of the first and second half of 2015;
- the investment in the new line for the production of PET tapes in ERGIS S.A. Oława Plant with the value of PLN 12 million. The production on the new line is also to be launched at the turn of the first and second half of 2015.
"We close this year's period of three quarters with good operating results.However, we look to the future with great caution, given a range of unfavourable market circumstances which occurred in the third quarter of 2014 and continue to affect our current business.Our customers from Western Europe are increasingly influenced by lower sales caused by the complex situation behind the eastern border of the EU," says Tadeusz Nowicki, the President of the Management Board of ERGIS S.A.
"Another investment programme with a value of more than PLN 20 million which is currently at place will contribute to further growth of financial results of the ERGIS Group. The programme consists in investing in a new line for flexographic print at Flexergis in Nowy Sącz and a new line for the production of PET tapes in ERGIS S.A. Oława Plant. Production on both lines is to be launched at the turn of the first and second half of the next year," adds Tadeusz Nowicki.
ADDITIONAL INFORMATION
The ERGIS Group is the leader in plastics processing in the Central and Eastern Europe. Out of its six manufacturing plants, four are situated in Poland and two in Germany. The Group's profile includes manufacturing of packaging for food (films and PVC and PET-based barrier laminates, printed multilayer laminates) and industrial packaging (LLDPE stretch films and PET films). Moreover, ERGIS is a manufacturer of films for packaging pharmaceuticals, hydro-insulating films and PVC compounds. In 2013, the Group's revenue exceeded PLN 673 million.
Additional information is also available at www.ergis.eu
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