Press Release
ZNOJMO (May 30, 2007) - Pegas Nonwovens SA showed again a y/y increase of revenues in 1Q 2007. This has affected positively the after-tax profit showed as EBITDA after exchange rates and interest rates swap implications.
The revenues for the first three months reached the level of 31.3 mil. EUR, representing the best quarterly result in the history of the company. The revenues of the company have been positively influenced by high sales of nonwoven textile. EBITDA, adjusted by exchange rate change implications and revaluation of interest rate swaps reached nearly 11 mil. EUR, representing the highest ever quarter results level throughout the existence of the company.
„We increased the sales in the first three quarters of 2007, while keeping the low cost level at the same time, “said Miloš Bogdan, the CEO of Pegas Nonwovens s.r.o. and member of the Board of Directors of Pegas Nonwovens SA. „The total revenues of the company increased y/y by 6.1 % with EBITDA increased by 3.3 %,“ specified Miloš Bogdan.
Pegas Nonwovens plans to expand its production capacities in the second quarter of this year, in connection with launch of the new state-of-art production line. „The installation of the new production line is proceeding in accordance with the approved time schedule and the line will be launched as planned, “ said Miloš Bogdan. „In addition to other projects based on our growth strategy, I would like to mention the planned project of the ninth production line. We intend to apply for an investment incentive for this investment in the next few days“, added M. Bogdan.
ANNEX
Pegas Nonwovens SA:
Preliminary non-audited financial results for 1Q 2007
ZNOJMO (May 30, 2007) - PEGAS NONWOVENS SA announces its preliminary non-audited consolidated financial results for the fiscal period of 1Q 2007 prepared under IFRS standards.
Overview of Financial Results
Revenues Euro 31.3 million (+6.1%)
Operating costs without depreciation and amortization Euro 20.5 million (+ 7.6%)
EBITDA Euro 8.1 million (-43.2%)
Adjusted EBITDA Euro 10.9 million (+3.3%), adjusted EBITDA margin 34.7%
Foreign Exchange related loss including hedging Euro 2.8 million
Depreciation and amortization Euro 3.0 million (-0.9%)
Profit from operations (EBIT) Euro 5.1 million (-54.8%)
Adjusted profit from operations (EBIT) Euro 7.8 million (+ 5.0%)
Finance costs Euro 2.2 million (-44.5%)
Net Profit Euro 2.9 million (-54.5%)
Adjusted Net Profit before non-cash FX changes and IRS adjustments Euro 5.5 million (+64.1%)
Net Debt Euro 115.4 million (-36.4%)
Capital Expenditure into tangible assets Euro 3.6 million (+267.3%) – CAPEX/Revenues 11.5%
No. of employees 330 (+3.8%)
Production in tonnes net of scrap 13,757 (+4.1%)
Consolidated Financial Results
Revenues, Costs and EBITDA
Consolidated revenues (revenues from sales of products) reached Euro 31.3 million in the first quarter 2007, up by 6.1 % yoy. The key drivers of this growth were higher sales on the back of higher production.
Total consolidated operating costs excluding depreciation and amortization and after exclusion of realized and unrealized FX changes including hedging, went up by 7.6% yoy to Euro 20.5 million. The main reasons were higher volumes and also an increase in electricity prices.
Adjusted EBITDA amounted to Euro 10.9 million, up by 3.3 % yoy, which confirmed that the Company’s strong operating performance has continued from previous periods. Adjusted EBITDA margin in the first quarter of 2007 was 34.7%, down by 0.9% in comparison with the same period in 2006. This decline in percentage margins was a direct result of higher operating costs.
Operating costs
Total raw materials and consumables used in 2007 amounted to Euro 19.1 million, a 6.3% increase on the first quarter 2007.
Total staff costs amounted to Euro 1.3 million in the first quarter 2007, a 10.1% yoy increase. However, total staff costs, denominated in Czech korunas, went up by only 7.9% yoy. The total number of employees at March 31st, 2007 was 330, up by 3.8 % yoy.
Other net operating income / (expense) amounted to Euro (2.7) million in the first quarter 2007 and mainly represented both realized and unrealized FX changes related to balance sheet re-calculations and a mark-to-market revaluation of interest rate swaps at March 31st, 2007. These FX changes had no cash impact on the Company.
Depreciation and amortization
Consolidated depreciation and amortization reached Euro3.0 million in the first quarter 2007, down by 0.9% yoy.
Profit from Operations
Adjusted profit from operations (EBIT) amounted to Euro 7.8 million, up by 5.0% when compared with the same period in 2006.
Finance Costs
Finance costs related to the debt servicing amounted Euro 2.2 million in the first quarter 2007, a significant decrease of 44.5% when compared with the first quarter 2006. This substantial decrease was related to the repayments of the most expensive debt in the course of 2006. The Company will focus on minimizing its finance costs even further in the upcoming periods.
Income tax
In the first quarter 2007, income tax represented a positive amount of Euro 13 thousand, compared to the income tax expense of Euro 757 thousands in the same period last year.
Net Profit and Adjusted Net Profit
Reported net profit in the first quarter 2007 amounted to Euro 2.9 million, down by 54.5% yoy, primarily due to changes in the Czech koruna/ Euro foreign exchange rate and its impact on the P&L due to the balance sheet recalculation. These foreign exchange adjustments had no cash impact on the Company.
Adjusted net profit in the first quarter 2007 amounted to Euro 5.5 million, an increase of 64.1% yoy. Adjusted net profit is calculated as reported net profit excluding the impact of non cash FX changes as of March 31, 2007 and mark-to-market revaluation of interest rate swap, including the impact on income tax expense. Adjusted net profit is showing the actual operating performance of the Company.
CAPEX and Investments
In the first quarter of 2007, total consolidated capital expenditure amounted to Euro 3.6 million, a 267.3% increase on the same period in 2006. Higher capital expenditure is related to the payments for the construction of the new eighth production line project. Such an increase in CAPEX in 2007 was anticipated and planned. CAPEX to Revenues ratio was therefore 11.5% in the first quarter 2007.
Cash and Indebtedness
Cash and cash equivalents reached Euro 20.9 million as of March 31st. 2007, down by 28.0% when compared with the same period last year. Total amount of the consolidated financial debt (both short-term and long-term) at March 31st, 2007 was Euro 136.3 million, a 35.3% reduction compared with March 31st, 2006. Net debt at 31st March, 2007 was therefore Euro 115.4 million, a 36.4% reduction compared with March 31st, 2006.
First quarter 2007 – Overview of business performance
The main business of Pegas Nonwovens SA group is the production of nonwoven textiles for the European disposable hygiene products market and final products such as babies’ diapers and feminine hygiene and adult incontinence products.
The total production output (net of scrap) reached 13,757 tonnes in the first quarter 2007, up by 4.1% when compared with the same period in 2006. As in the 2006, the company managed to increase its production owing to a better utilization and higher efficiencies in the production process without the installation of new capacities. The increase in production resulted subsequently in higher revenues.
Revenues from sales of nonwoven textiles for the hygiene industry were 86.8% of total revenues in the first quarter 2007. This was similar to the proportion of revenues from sales to the hygiene industry in the same period in 2006 which was 88.0%.
Revenues from sales of standard textiles for hygiene products reached Euro 21.1 million, an increase of 5.8% in comparison with the same period in 2006. The proportion of revenues from sales of commodity textiles for the hygiene industry represented a 67.2% share on total revenues, almost unchanged from 67.4% in the same period in 2006.
Revenues from sales of specialty products, where the company focuses most, were Euro 6.13 million, up by 0.8% compared with the first quarter 2006. The proportion of specialties sales within total sales in the first quarter 2007 amounted to 19.6%. This development was anticipated by the company since some of the one-off orders for specialties from other territories, which contributed to the sales increased last year, were replaced, as planned, by a local production according to the agreement with the customers.
Revenues from sales of non-hygiene products (for construction, agriculture and medicine) amounted to Euro 4.2 million in the first quarter 2007, an increase of 16.6% over the first quarter 2006.
In terms of geographical distribution, the Company confirmed its strong and growing position in its core European market. Sales to Western Europe amounted to Euro 17.5 million in the first quarter 2007, up by 36.6% more than in the same period last year. The revenues from sales to CEE and Russia reached Euro 8.9 million, up by 5.6% yoy. The revenues from sales to other territories amounted to Euro 4.9 million, down by 40.7% yoy due to the one-off orders from other territories last year which were not repeated and this was fully planned and anticipated by the Company.
New 8th production line
The Company is delighted with the progress in constructing and installing the new eighth production line. The project continues on budget and on time. First commercial production is now expected in October 2007. Management is confident that all the extra capacity of the line (which represents a 28% increase for the Company) will be sold out in 2008.
New 9th production line
The Company has started work on its new 9th production line with an application to be made to the Czech government regarding investment incentives. This new line could enter service as early as 2009, a more specific timing to be yet decided.
2007 Outlook
In 2007, the main priorities for PEGAS NONWOVENS SA remain:
· To provide an excellent service to our customers according the contractual agreements in terms of quality and logistics,
· To maintain further high standards of production efficiency and its further improvements,
· To bring on new production line on time in the fourth quarter of 2007 and create conditions of its full utilization as of January 1st, 2008
· To move forward with technical development projects related to the development of materials with unique specification compared to the market and with a potential to become specialty products which will prove attractive to customers, for example the nonwoven elastics;
· To develop conditions for a further growth of the Company through additional increase of production capacity thanks to the installation of the 9th production line. This project includes among others the aim to obtain investment incentives related to the investment.