SEQUANA : First-half-2017 results

Press release

Boulogne-Billancourt, 13 September 2017



 

Slight improvement in pro forma operating performance in the first-half of 2017

Given the changes to Arjowiggins' reporting structure in 2017 and in 2016, the operating results are commented on a restated data basis without the contribution of Arjowiggins Security BV and Arjowiggins Healthcare, sold in July 2017 and in June 2016, respectively.

 

- Pro forma sales of €1,444 million, down 2.8% (down 1.0% at constant exchange rates) on H1 2016 at a constant reporting structure for Arjowiggins

- Pro forma EBITDA up 3.2% to €58 million; pro forma EBITDA margin up 0.2 points to 4.0%

Antalis: EBITDA up 2.1% to €43 million and EBITDA margin up by 0.3 points to 3.6%, thanks notably to an enhanced gross margin rate in Packaging and Visual Communication

Arjowiggins: Pro forma EBITDA down slightly by 2.8% to €21 million; pro forma EBITDA margin stable at 6.3%, mainly reflecting the decline in fine paper volumes and higher raw material prices towards the end of the period

- Sales and EBITDA as reported came in at €1,459 million (down 5.2%) and €49 million (down 10.5%), respectively

- Net profit of €3 million

- Net debt stands at €342 million; the financial leverage ratio was 3.38

Antalis: €34 million reduction in net debt to €269 million

Arjowiggins: €8 million increase in net debt to €41 million

Sequana's Board of Directors' meeting in Boulogne-Billancourt on 12 September 2017 examined and approved the financial statements for H1 2017.

Condensed analytical income statement

 (€ millions)

 except for per share data
H1 2017

pro forma⁽¹⁾
H1 2016

pro forma⁽²⁾
Change

 
H1 2017

reported
H1 2016

reported
Change

 


 Sales
1,444.0
1,485.4
- 2.8%
1,459.2
1,538.5
- 5.2%


 EBITDA⁽³⁾
57.7
55.9
+3.2%
49.2
55.0
- 10.5%


 EBITDA margin (as % of sales)
4.0%
3.8%
+0.2 points
3.4%
3.6%
-0.2 points


 Current operating income
41.2 ⁽⁴⁾
35.3
+16.8%
33.8 ⁽⁴⁾
33.8
-


 Current operating margin

 (as % of sales)
2.9%
2.4%
+0.5 points
2.3%
2.2%
+0.1 point


 Net income (loss) attributable

to owners
-
-
-
2.7
(28.7)
NA


 Diluted earnings (loss) per share (€)
-
-
-
0.04
(0.44)
 


 Average number of shares after dilution
 
 
 
64,904,303
64,965,141
 

(1) H1 2017 pro forma data exclude the contribution of Arjowiggins Security BV (and its VHP banknote paper mill) which was sold in July 2017.

(2) H1 2016 pro forma figures also exclude this contribution as well as that of Arjowiggins Healthcare which was sold in June 2016.

(3) Recurring operating income before depreciation and amortisation and excluding movements in provisions.

(4) Includes a €2.3 million gain arising on a change to a pension plan carried on Antalis' books.

Pro forma consolidated sales were €1,444 million for the period, down 2.8% (and down 1.0% at constant exchange rates) on H1 2016 at a constant reporting structure for Arjowiggins. This decrease mainly reflects the decline in printing paper volumes on the production and distribution sides of the business, partially offset by resilient performances in Antalis' Packaging and Visual Communication businesses and in Arjowiggins' specialty businesses. The acquisitions completed by Antalis in late 2016 added €13 million to H1 2017 sales. The negative forex impact (mainly attributable to sterling), which essentially affected Antalis, amounted to €27 million.

Pro forma EBITDA rose by 3.2% to €58 million, compared to €56 million in H1 2016 at a constant reporting structure for Arjowiggins. Pro forma EBITDA margin rose by 0.2 points to 4.0%. The decline in printing paper volumes and unfavourable forex impact were offset by the higher gross margin rate and lower overheads for Antalis, and by the improved product mix in Arjowiggins' Graphic division.

Pro forma current operating income grew by 16.8% to €41 million versus €35 million for H1 2016 at a constant reporting structure for Arjowiggins. It includes a €2 million gain arising on a change to a pension plan carried on Antalis' books. The current operating margin came in 0.5 points higher at 2.9% of sales.

Sequana recorded net non-recurring expenses of €13 million in the first six months of the year, mainly for costs related to the Antalis IPO and refinancing, and for restructuring costs. Proceeds from disposals (sale & leaseback operations reported by Antalis) amounted to €6 million.

After deducting net finance costs and taxes, net profit attributable to owners was €3 million for the period, compared with a net loss of €29 million for the six months to 30 June 2016.

Consolidated net debt stood at €342 million at end-June 2017, €6 million less than at 30 June 2016. The financial leverage ratio was 3.38.

A limited review is currently being performed on the consolidated financial statements. The Statutory Auditor's report will be issued once procedures have been completed (by the end of September). 

Significant events of the period

Sequana exited from the safeguard procedure (procédure de sauvegarde) on 12 June 2017 when the Commercial Court adopted its safeguard plan, thus putting an end to the procedure. 

Antalis International was listed on the stock exchange on 12 June 2017 following the distribution of 18.3% of Antalis shares to Sequana shareholders on the basis of one Antalis International share for five Sequana shares. Following completion of this operation, Sequana owns 81.7% of Antalis' capital; the remainder is held by Bpifrance Participations (2.8%) and in free float (15.5%).

In late June, Antalis initiated the process of refinancing its credit facilities which are secured through 31 December 2018, and launched an issue of high-yield notes that was subsequently withdrawn due to market conditions. The Group is actively looking at various different refinancing solutions.

On 31 July, Arjowiggins Security completed the sale of Arjowiggins Security BV and its Dutch VHP banknote paper mill to Oberthur Fiduciaire for a gross amount of €22 million (plus earn-out subject to certain performance conditions). Arjowiggins Security BV reported negative EBITDA of €8.5 million for H1 2017, €3.1 million for H1 2016, and €9.6 million for FY 2016. At the same time, a process to divest the rest of the Security division (i.e., Banknote business in France) has been initiated.

As regards the litigation with BAT, Sequana lodged an appeal at the end of March against the decision of the High Court of Justice in London handed down on 10 February 2017 and hearings will begin in early June 2018.

Outlook

In light of first-half 2017 performances and the full-year outlook, Antalis' should report a low single-digit decrease in sales (excluding acquisitions and at constant exchange rates) compared with the sales achieved for FY 2016 and its EBITDA margin should come in at between 3.4% and 3.8%.

In the second-half of the year, Arjowiggins' business should remain at similar levels to those reported in H1 2017, however performances will be impacted by higher raw material prices, partially offset by higher selling prices.

A presentation of first-half 2017 results is available on the Sequana website at www.sequana.com.

 

About Sequana

Sequana (Euronext Paris: SEQ) is a major player in the paper industry, boasting leading positions in each of its two businesses:

Antalis: European leader in the distribution of paper and packaging products with around 5,600 employees based in 43 countries.

Arjowiggins : global producer of recycled and specialty papers with around 2,800 employees.

Sequana reported sales of €3 billion in 2016 and employed some 8,500 people worldwide.

Appendices

1. Analysis by business

Breakdown of sales by business

 (€ millions)
H1 2017

pro forma⁽¹⁾
H1 2016

pro forma ⁽²⁾
 

Change

 

 
H1 2017

reported
 

H1 2016

reported
Change

 


 Antalis
1,205.2
1,256.4
- 4.1%
1,205.2
1,256.4
- 4.1%


 Arjowiggins
326.1
332.7
- 2.0%
341.3
385.8
- 11.5%


 Eliminations and other
(87.3)
(103.7)
NA
(87.3)
(103.7)
NA


 Total
1,444.0
1,485.4
- 2.8%
1,459.2
1,538.5
- 5.2%

(1) H1 2017 pro forma data exclude the contribution of Arjowiggins Security BV (and its VHP banknote paper mill) which was sold in July 2017

(2) H1 2016 pro forma figures also exclude this contribution as well as that of Arjowiggins Healthcare which was sold in June 2016.



 

Antalis

Key figures

 (€ millions)
H1 2017
H1 2016
Change


 Sales
1,205.2
1,256.4
- 4.1%


 EBITDA
42.8
41.9
+2.1%


 EBITDA margin (as % of sales)
3.6%
3.3%
+0.3 points


 Current operating income
34.4 ⁽¹⁾
29.7
+15.8%


Current operating margin (as % of sales)
2.9%
2.4%
+0.5 points

(1) Includes a €2.3 million gain on changes to pension plans.

Sales were down by 4.1% on H1 2016 to €1,205 million (down 2.1% at constant exchange rates). The acquisitions completed in late 2016 added €13 million to H1 2017 sales. The unfavourable forex impact on sales amounted to €25 million (mainly attributable to sterling).

The Main European Geographies generated sales of €611 million, down 6.5% year-on year (down 1.2% at constant exchange rates), principally due to the depreciation in sterling. UK & Ireland reported sales of €314 million (down 10.0%), Germany & Austria €158 million (down 0.3%) and France €139 million (down 4.7%).

Sales for the Rest of Europe declined by 3.5% year-on-year to €482 million (down 3.7% at constant exchange rates).

Sales for the Rest of the World grew by 8.0% in H1 2017 to €113 million, thanks to a favourable forex impact (down 0.2% at constant exchange rates).

The Papers sector reported sales of €848 million, a decrease of 5.9% on H1 2016.

The Packaging and Visual Communication sectors reported sales of €246 million (up 0.9%) and €111 million (up 0.3%), respectively. The combined gross margin of these two sectors increased by 3.5% and they now contribute 34% of Antalis' consolidated gross margin (+2 points).

EBITDA grew by 2.1% to €43 million. Antalis benefited from an enhanced product mix and lower overheads in the logistics domain, which absorbed the impact of lower volumes in Papers. The unfavourable FX impact on Antalis' H1 EBITDA amounted to €1 million (mainly attributable to sterling).

Current operating income rose 15.8% to €34 million and included a €2 million gain arising on a change to a Swiss pension plan. The current operating margin rose by 0.5 points to 2.9%.

Thanks to efficient working capital management, Antalis reduced its debt by €34 million: from €303 million at 30 June 2016 to €269 million at 30 June 2017.

In late June, Antalis initiated the process of refinancing its credit facilities which are secured through 31 December 2018, and launched an issue of high-yield notes that was subsequently withdrawn due to market conditions.

Antalis complied with all bank covenants concerning its syndicated credit facilities at 30 June 2017:

Net debt / EBITDA = 3.00 (≤ 3.30)

Current operating income/net interest expense = 4.61 (≥ 2.35)



 

Arjowiggins

Key figures

 (€ millions)
H1 2017

pro forma⁽¹⁾
H1 2016

pro forma⁽²⁾
 

Change
H1 2017

reported
H1 2016

reported
Change


 Sales
326.1
332.7
- 2.0%
341.3
385.8
- 11.5%


 EBITDA
20.5
21.1
-2.8%
12.0
20.2
- 40.6%


 EBITDA margin

 (as % of sales)
6.3%
6.3%
-
3.5%
5.2%
-1.7 points


 Current operating income
12.4
13.0
-4.4%
5.0
11.5
NA


 Current operating margin

 (as % of sales)
3.8%
3.9%
-0.1 point
1.5%
3.0%
-1.5 points

(1) H1 2017 pro forma data exclude the contribution of Arjowiggins Security BV (and its VHP banknote paper mill) which was sold in July 2017.

(2) H1 2016 pro forma figures also exclude this contribution as well as that of Arjowiggins Healthcare which was sold in June 2016.

Arjowiggins' pro forma consolidated sales were €326 million for the period, down 2.0% (and down 0.9% at constant exchange rates) on H1 2016 like-for-like, mainly attributable to the decline in fine paper volumes and deterioration in the division's product mix. The other specialty businesses held up well, particularly the laminated segment.

Pro forma EBITDA was down 2.8% to €21 million when compared to H1 2016 on a like-for-like basis. The decline in fine paper volumes and higher raw material prices (pulp, cotton) were partially offset by an enhanced product mix, particularly in the Graphic division specialty businesses. The pro forma EBITDA margin remained stable at 6.3%.

Pro forma current operating income came in 4.4% down year-on-year at €12 million on a like-for-like basis. The pro forma current operating margin was 0.1 point down at 3.8%.

Arjowiggins' net debt stood at €41 million at 30 June 2017 versus €33 million at end-June 2016.

In late June 2017, Arjowiggins sold the Charavines site to Fregata Hygiène. This operation has no impact on either Arjowiggins' results or financial position.

At the end of July 2017, Arjowiggins Security completed the sale of its subsidiary, Arjowiggins Security BV, covering its VHP banknote paper mill in Apeldoorn (Netherlands) for a gross amount of €22 million (plus earn-out subject to certain performance conditions).

Key pro forma figures by division for first-half 2017 ⁽¹⁾

 (€ millions)
Creative Papers
Graphic
Security


 Sales
106.1
168.4
51.6


 EBITDA
12.5
7.6
0.4


 EBITDA margin (as % of sales)
11.8%
4.5%
0.8%


 Current operating income
9.6
4.6
(1.8)


 Current operating margin

(as % of sales)
9.0%
2.7%
(3.5%)

(1) H1 2017 pro forma data exclude the contribution of Arjowiggins Security BV (and its VHP banknote paper mill) which was sold in July 2017.

Key pro forma figures by division for first-half 2016 ⁽²⁾

 (€ millions)
Creative Papers
Graphic
Security


 Sales
116.1
168.5
48.1


 EBITDA
17.0
5.5
(1.4)


 EBITDA margin (as % of sales)
14.6%
3.3%
(2.9%)


 Current operating income
14.0
2.0
(3.0)


 Current operating margin

(as % of sales)
12.1%
1.2%
(6.2%)

(2) H1 2016 pro forma figures also exclude this contribution as well as that of Arjowiggins Healthcare which was sold in June 2016.

2017 Interim consolidated financial statements

Interim consolidated statement of financial position

Assets

(€ millions)
30.06.2017
31.12.2016


Non-current assets
 
 


Goodwill
301.1
304.7


Other intangible assets
43.0
48.6


Property, plant and equipment
124.4
134.7


Non-current financial assets
5.3
4.3


Deferred tax assets
6.4
8.7


Other non-current assets
160.0
172.0


Total non-current assets
640.2
673.0


Current assets
 
 


Inventories
309.3
305.3


Trade receivables
439.0
445.2


Other receivables
133.7
117.4


Current financial assets
11.3
8.9


Cash and cash equivalents
99.2
162.6


Total current assets
992.5
1,039.4


Assets held for sale
33.1
22.5


TOTAL ASSETS
1,665.8
1,734.9

Equity and liabilities

(€ millions)
30.06.2017
31.12.2016


Equity
 
 


Share capital
65.2
65.2


Additional paid-in capital
109.0
163.2


Cumulative translation adjustment
(110.7)
(94.3)


Retained earnings and other consolidated reserves
257.8
255.5


Shareholders' equity
321.3
389.6


Non-controlling interests
54.7
0.6


TOTAL EQUITY
376.0
390.2


Non-current liabilities
 
 


Provisions
109.7
123.1


Long-term debt
239.7
281.9


Deferred tax liabilities
0.6
0.7


Other non-current liabilities
8.9
10.9


Total non-current liabilities
358.9
416.6


Current liabilities
 
 


Provisions
23.6
34.4


Short-term debt
201.5
195.5


Trade payables
477.5
494.5


Other payables
214.6
195.1


Total current liabilities
917.2
919.5


Liabilities related to assets held for sale
13.7
8.6


TOTAL EQUITY AND LIABILITIES
1,665.8
1,734.9

Interim consolidated income statement

(€ millions)
H1 2017
H1 2016


Sales
1,459.2
1,538.5


Purchases consumed and change in inventories
(1,022.0)
(1,067.8)


Personnel expenses
(231.0)
(251.2)


External expenses
(158.7)
(179.0)


Taxes other than income taxes
(7.1)
(9.0)


Depreciation and amortisation
(15.6)
(18.2)


Net (additions to) reversals of provisions
0.2
(3.0)


Other recurring income (expense) from operations
8.8
23.5


Current operating income
33.8
33.8


Other operating income
6.7
2.1


Other operating expenses
(20.1)
(47.6)


Other operating income and expenses, net
(13.4)
(45.5)


Operating income (loss)
20.4
(11.7)


Cost of net debt
(16.4)
(15.1)


Other financial income and expenses, net
4.3
(3.3)


Net financial income (expense)
(12.1)
(18.4)


Income tax benefit (expense)
(5.5)
1.4


NET INCOME (LOSS)
2.8
(28.7)


Attributable to:
 
 


 - Sequana shareholders
2.7
(28.7)


 - Non-controlling interests
0.1
?


 
 
 


Earnings per share
 
 


 - Weighted average number of shares outstanding
64,904,303
64,965,141


 - Diluted number of shares
64,904,303
64,965,141


Basic earnings (loss) per share (in €)
 
 


 - Consolidated earnings (loss) per share
0.04
(0.44)


Diluted earnings (loss) per share (in €)
 
 


 - Consolidated diluted earnings (loss) per share
0.04
(0.44)

Interim consolidated statement of cash flows

 
For the six months ended, 30 June


(€ millions)
2017
2016


Cash flows from operating activities
 
 


Operating income (loss)
20.4
(11.7)


Elimination of non-cash and non-operating income and expenses:
 
 


Depreciation, amortisation and provisions (except on current assets), net
3.3
12.1


Disposal gains and losses
(6.1)
2.2


Other non-cash items
?
?


Gross operating cash flow
17.6
2.6


Income taxes paid
(2.7)
(1.4)


Change in operating working capital
(22.7)
(97.7)


Change in loans and guarantee deposits
(4.3)
(2.8)


Net cash used in operating activities (i)
(12.1)
(99.3)


Cash flows from investing activities
 
 


Expenditure on acquisitions of property, plant and equipment and intangible assets
(11.3)
(18.9)


Proceeds from disposals of property, plant and equipment and intangible assets
12.0
1.6


Proceeds from disposals of financial assets
?
?


Impact of changes in scope of consolidation
(3.4)
25.0


Net cash from (used in) investing activities (ii)
(2.7)
7.7


Cash flows from financing activities
 
 


Net change in borrowings and debt
(30.0)
21.9


Net interest paid 
(16.3)
(16.4)


Net cash from (used in) financing activities (iii)
(46.3)
5.5


Effects of fluctuations in foreign exchange rates (iv)
(2.5)
(2.6)


CHANGE IN CASH AND CASH EQUIVALENTS (i+ii+iii+iv)
(63.6)
(88.7)


Net cash and cash equivalents at start of period
159.8
204.3


Net cash and cash equivalents at end of period
96.2
115.6


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(63.6)
(88.7)


Analysis of net cash and cash equivalents at end of period
 
 


Cash and cash equivalents
99.2
120.2


Short-term bank borrowings and overdrafts
(3.0)
(4.6)


Net cash and cash equivalents at end of period
96.2
115.6

Source: Actusnews