Pfleiderer cannot escape effects of financial crisis in first half of 2009 – revenue and earnings both down – talks with banks making progress
- Revenue down by 24.5 percent to 692.4 million euros in the first six months of 2009
- EBITDA decreases by 33.8 percent to 79.1 million euros; EBITDA margin of 11.4 percent due to falling raw-material costs, cost-cutting actions and positive one-time effects
- Business volumes still declining in Western Europe and Eastern Europe; positive earnings in North America
- Successful refinancing highly likely; time of concrete result cannot be predicted
Neumarkt, August 24, 2009 – With the presentation of its half-year figures, MDAX-listed Pfleiderer AG (ISIN DE 0006764749) has confirmed that it was unable to fulfill the financial covenants agreed upon with its creditor banks. The company already indicated this possibility in the middle of June. The first half of 2009 was significantly affected by the recession both on the revenue side and on the earnings side. Unit sales and prices achieved were both lower than in the first half of last year. Revenue fell by 24.5 percent compared with the prior-year period to 692.4 million euros. The effects of currency translation reduced revenue by 38.9 million euros or four percent. In regional terms, the strongest drop in revenue was of 39.4 percent in Eastern Europe, while the Pfleiderer Group posted revenue growth of 0.5 percent in North America. The share of revenue generated outside Germany was 71.5 percent, compared with 71.9 percent in the first half of 2008.
Despite the sharp drop in revenue, the Pfleiderer Group was able to increase its gross margin compared with the prior-year period from 25.7 percent to 26.2 percent, thanks to lower raw-material prices, efficiency improvements and consistent cost reductions. An additional factor affecting the gross margin was the release of provisions in an amount of 10.0 million euros. Lower business volumes led to significant under-utilization of the plants’ capacities. This impact was dampened by reducing working hours to offset overtime on employees’ work accounts and by reducing the use of temporary workers, as well as by the flexible application of short-time work in various plants, depending on the order situation.
As a result of the cost cutting actions, selling expenses decreased compared with the prior-year period by 16.0 percent to 100.4 million euros, and administrative costs were reduced by 9.4 percent compared with the prior-year period to 59.6 million euros. First-half EBITDA fell to 79.1 million euros, compared with 119.5 million euros in the prior-year period. The resulting EBITDA margin for the first half of this year was 11.4 percent. EBIT fell to 22.6 million euros, from 54.8 million euros in the first half of last year. Depreciation and amortization totaled 56.5 million euros; this figure includes impairment charges of 4.0 million euros.
The net financial expense of 26.3 million euros represents an improvement of 5.5 million euros compared with the first half of 2008. This was due on the one hand to generally lower market interest rates, which reduced the interest expense from 27.4 million euros to 23.0 million euros, and on the other hand to a lower miscellaneous financial expense of 4.1 million euros. The latter resulted from non-operating charges of 1.9 million euros from the mark-to-market valuation on the balance sheet date of financial positions denominated in foreign currencies, as well as charges of 2.4 million euros from forward exchange transactions and interest-rate hedges. In the prior-year period, the miscellaneous items under net financial result amounted to an expense of 7.9 million euros.
The result of continuing operations before taxes thus amounted to a loss of 3.7 million euros, compared with a profit of 22.9 million euros for the first half of 2008. Due mainly to the capitalization of tax-loss carryovers at Pergo, a Pfleiderer subsidiary, there was a tax gain of 7.9 million euros. The profit for the period amounted to 3.7 million euros, compared with 16.3 million euros in the prior-year period.
After deducting profit attributable to minority interest and the hybrid bondholders, a loss of 2.8 million euros is attributable to the shareholders of Pfleiderer AG, compared with a profit of 5.3 million euros in the first half of last year. A liability will be formed for the suspended interest payment to hybrid bondholders because they are entitled to the subsequent payment of that interest. The diluted and basic loss per share for the first half of this year amounts to 6 euro cents, compared with earnings per share of 10 euro cents for the first half of last year.
“Our half-year results are a reflection of the global financial and economic crisis. We are adjusting to this situation with strict cost management as well as innovative product solutions. Our approach has been affirmed by numerous prizes and awards, but also by actual contracts concluded with renowned customers. With regard to the talks we are holding with our banks, we are confident that we will bring them to a successful conclusion in the coming months and will thus secure the Group’s long-term financing. This also includes talks with KfW,” stated Hans H. Overdiek, CEO of Pfleiderer AG, upon the announcement of the half-year figures.
Business in Western Europe impacted by falling demand in the domestic market
In the Western Europe region, the Pfleiderer Group posted a revenue decline of 28.4 percent to 369.3 million euros. All sales sectors and regions are meanwhile affected by the decline, including the German domestic market, which had previously been relatively stable. The fall in prices of standard products is continuing, whereas prices of higher-value processed products have been largely maintained. Unit sales of laminate flooring continued to fall in Western Europe. In order to boost sales in the respective markets, Pergo set up flooring competence centers in Berlin, Paris, Zürich and Barcelona in the second quarter. EBIT in Western Europe fell from 63.7 million euros to 11.7 million euros. Strict cost management and substantial savings in full-year 2009 were already decided upon and initiated in January. The structural measures that resulted are intended to adjust the cost position to the ongoing weak demand. The negative market development will be counteracted by capacity reductions through short-time work, savings, a workforce reduction of approximately 200 persons, and sales-boosting innovations.
Eastern Europe hit hard by the financial crisis
In Eastern Europe, the Pfleiderer Group’s revenue declined by 39.4 percent to 124.9 million euros. Exchange-rate effects accounted for 42.1 million euros or 21 percentage points of the decrease. The other factors responsible for the revenue decline were falling demand from the furniture industry due to the serious effects of the financial market crisis in this emerging region and the sharp fall in prices. Poland and Russia are affected by this development, whereby the situation in Russia is more difficult. During the reporting period, MDF was the least affected by the negative trend, but still resulted in falling revenue. EBIT for the Eastern Europe region amounted to 2.0 million euros in the first half of 2009, compared with 12.0 million euros in the prior-year period.
North America achieves positive earnings in the second quarter
In its North American sales markets, the Pfleiderer Group increased its revenue in the first half of the year by 0.5 percent compared with the prior-year period to 211.5 million euros. This growth was primarily achieved in the flooring segment, in which Pergo further increased its share of a shrinking market. Total unit sales of panels declined, but at a lower rate than the market average. A little growth was achieved with MDF and HDF, but unit sales of raw particleboard decreased. EBIT for the first half of 2009 amounted to 8.8 million euros, compared with an EBIT loss of 13.2 million euros in the prior-year period. The earnings turnaround seemed to be achieved in the second quarter, in which revenue increased by a significant 7.5 percent compared with Q2 008 to 107.0 million euros, despite the ongoing recession. Second-quarter EBIT amounted to plus 2.8 million euros, compared with minus 14.3 million euros in the second quarter of last year. In the fourth quarter of this year, the new MDF plant in Moncure, USA will go into operation on schedule, and will further improve the cost position in North America.
Low earnings lead to higher debt
In the first half of the year, there was a net cash outflow from operating activities of 54.0 million euros, compared with a net cash inflow of 35.5 million euros in the prior-year period. This negative cash flow was partially due to the reduction in EBIT of 32.2 million euros as well as the change in current liabilities. The latter primarily reflects a decrease in trade liabilities of 57.6 million euros. The Group’s net debt increased compared with the end of 2008 from 635.5 million euros to 797.5 million euros, whereby the ratio of net debt to equity (gearing) rose to 114.5 percent.
As a result of the declining markets, Pfleiderer also reduced its capital expenditure including advance payments made. In the first half of 2009, it fell compared with the prior-year period by 12.8 percent to 61.8 million euros. 10.4 million euros was accounted for by the Western Europe region. 32.8 million euros was invested in North America, mainly for the development of the MDF plant in Moncure. Investment of 17.3 million euros in Eastern Europe includes the expenditure for the development of the MDF plant in Novgorod, Russia; no date can yet be set for when that plant will go into operation.
Pfleiderer’s first-half interim report and additional information can be found on the Group’s website at www.pfleiderer.com (Investor Relations)
Key figures for the Pfleiderer Group as of June 30, 2009
| In millions of euros | Jan. 1 – June 30, 2009 | Jan. 1 – June 30, 2008 | April 1 - June 30, 2009 | April 1 - June 30, 2008 |
|---|---|---|---|---|
| Revenue | 692.4 | 916.9 | 334.5 | 449.1 |
| * International share (in percent) | 71.5 | 71.9 | 72.5 | 71.7 |
| EBITDA | 79.1 | 119.5 | 26.4 | 59.1 |
| * EBITDA margin (in percent) | 11.4 | 13.0 | 7.9 | 13.2 |
| EBIT | 22.6 | 54.8 | -0.4 | 22.6 |
| EBT from continuing operations | -3.7 | 22.9 | -10.4 | 8.5 |
| Profit for the period | 3.7 | 16.3 | 0.2 | 5.4 |
| Net profit | -2.8 | 5.3 | -2.9 | 0.0 |
| Earnings per share - basic (in euros) | -0.06 | 0.10 | -0.06 | 0.00 |
| Earnings per share - diluted (in euros) | -0.06 | 0.10 | -0.06 | 0.00 |
| Number of employees at end of period | 5,620 | 5,861 | 5,620 | 5,861 |
| * Germany | 2,485 | 2,573 | 2,485 | 2,573 |
| * Outside Germany | 3,135 | 3,288 | 3,135 | 3,288 |
| Average number of shares outstanding – basic | 50,682,642 | 50,953,244 | 50,682,642 | 50,953,244 |
| In millions of euros | June 30, 2009 | Dec. 31, 2008 | Change in % |
|---|---|---|---|
| Total assets | 1,936.0 | 1,887.5 | 2.6 |
| Equity | 696.2 | 710.9 | -2,1 |
| Equity ratio (in percent) | 36.0 | 37.7 | -4.5 |
| Net debt | 797.5 | 635.5 | 25.5 |
Contact persons:
PFLEIDERER AG, Neumarkt
Fabian Schiffer
Vice President Corporate Communciation
Tel.: + 49 (0)9181 / 28 - 8491
Fax: + 49 (0)9181 / 28 - 606
E-Mail: fabian.schiffer@pfleiderer.com
Lothar Sindel
Vice President Investor Relations
Tel.: + 49 (0)9181 - 28-8491
Fax: + 49 (0)9181 - 28-606
E-Mail: lothar.sindel@pfleiderer.com