Ergis

Press Release

29 October 2009, 11:10

ERGIS GROUP AFTER THREE QUARTERS OF 2009: RECORD BREAKING FINANCIAL RESULTS AND PLANNED BOND ISSUE

The ERGIS Group achieved record breaking financial results after three quarters of 2009. The Group's gross result on sale increased up to PLN 84.2 million, i.e. it was by 22.2% higher than in the previous year. The operating profit increased by 130.2% to PLN 32.9 million and the net profit amounted to PLN 18.1 million, i.e. it was by 111.3% higher than the year before. The sales revenue of the ERGIS Group after three quarters of this year amounted to PLN 419.7 million.

Currently the Group prepares to acquire approximately PLN 30 million for refinancing a loan contracted for the acquisition of shares in MKF-Folien GmbH and Schimanski GmbH.

Key events:

- The third quarter of 2009 was very successful for the ERGIS Group. The Group’s revenue increased by 5.3% in comparison with the third quarter of 2008. The operating profit in the third quarter of 2009 amounted to PLN 8.8 million, with PLN 4.3 million in the parallel period in 2008; and the net profit increased to PLN 10.2 million, with PLN 0.3 million in the previous year. A significant increase in profitability was achieved due to a reduction of the Group’s operating costs, an improvement in productivity and maintaining a high level of export from the Group’s Polish plants.

- After three quarters of 2009 the Group generated PLN 32.9 million of the operating profit, in comparison to PLN 14.3 million in the parallel period of the previous year, which means an increase by 130.2%. The operating profit margin ratio increased from 3.3% to 7.8%.

- The gross profit on sales after three quarters of 2009 amounted to PLN 84.2 million, in comparison to PLN 68.9 million in the same period of 2008.

- The ERGIS Group systematically implements the strategy of decreasing operating costs - above all by taking advantage of synergy which became possible due the take-over of the German companies. As a result of the undertaken actions, the overall costs were decreased by 12.9% in comparison with the three quarters of 2008.

- The Group prepares to obtain approximately PLN 30 million for refinancing a loan contracted for the acquisition of shares in MKF-Folien GmbH and Schimanski GmbH.  

FINANCIAL RESULTS – DETAILS

Financial results of the ERGIS Group after three quarters of 2009 are presented in the table below:

PLN '000

Q1-Q3 2008

Q1-Q3 2009

Change

Revenue

426,864

419,719

-1.67%

Gross profit on sales

Operating profit

68,934

14,305

 84,219

32,932

 +22.2%

+130.2%

EBITDA

 30,789

50,412

+63.7%

Net profit

8,559

18,084

+112.9%

The Group’s revenue after three quarters of 2009 was lower by 1.67% in comparison with the parallel period last year. A minor decrease in raw material prices translated into a decrease in transactional prices of certain products and consequently into a slightly lower sales revenue. Still, the sale in quantitative terms after three quarters was close to the one carried out in the parallel period last year.

VERY GOOD THIRD QUARTER – STRONG INCREASE IN ALL FINANCIAL RATIOS

Last three months were very successful for the ERGIS Group. It should be emphasized that the Group’s revenue in the third quarter of 2009 itself was higher by 5.3% in comparison to the parallel period of 2008 in spite of rather difficult market conditions – the economic slowdown in Poland and the recession on many European markets.

In the third quarter the gross profit on sales amounted to PLN 24.3 million, whereas in the parallel period last year it was PLN 21.6 million. The operating profit amounted to PLN 8.8 million; with PLN 4.3 million in the same period of 2008.

Results of the ERGIS Group in the third quarter of 2009 are presented in the table below:

PLN '000

Q3 2008

Q3 2009

Change

Revenue

134,831

141,968

+5.3%

Gross profit on sales

Operating profit

 

21,554

4,309

 

24,312

8,837

 

+12.8%

+105.1%

EBITDA

9,737

14,445

+48.4%

Net profit

307

10,191

+3219.5%

A slight surplus of export over import observed this year positively affects profitability ratios. On the other hand, the strengthening of zloty in the third quarter of 2009 in comparison to the second quarter of the current year positively affected the net profit, which amounted in this period to PLN 10.2 million, in comparison to PLN 0.3 million in the parallel quarter last year.

An improvement in the net result is brought about by an increase in operating profitability, as well as in decreasing negative exchange rate differences constituting financial costs, which arise as a result of the current valuation of the EUR denominated loans.

The value of unrealised exchange rate differences attributable to it, referred to the profit and loss account, became positive and amounted to PLN 0.2 million for 9 months of 2009, whereas for 6 months of this year the Group recorded negative differences; PLN -4.1 million. This means an improvement in profit by PLN 4.3 million in the third quarter, due to a currency revaluation of the loans denominated in EUR.

ISSUE FOR REPAYMENT OF LOAN TRANCHE

In connection with the repayment of tranche B of the loan contracted for the acquisition of shares in MKF-Folien GmbH and Schimanski GmbH, in the amount of PLN 22.168 million and EUR 1.36 million, falling at the end of January 2010, the Group undertook actions aimed at acquiring funds for that purpose. The Group considers and prepares either the share issue under an authorised capital or the bond issue. Currently the bond issue is a priority for the Group.

GROUP'S OUTLOOK

The Group’s financial standing is good. EBITDA level, being one of the main factors determining the Group’s financial security, amounted to PLN 50.4 million after three quarters of 2009, in comparison to PLN 30.79 million a year before. At the same time flows from the operational activity increased from PLN 15 million after nine months of 2008 to PLN 23.5 million now. Due to such a situation the Group may still to a large extent use discounts offered by suppliers, thus significantly reducing costs.

The Group shall continue to concentrate on the development of three main fields of its activity – production of laminates for food, industrial packaging (stretch films PE and PET films) and products from plastics for a construction industry (PVC). An expansion on the market of PET films shall be continued, where the Group appeared for the first time in 2007 and where it systematically has increased its share.

“The third quarter of the current year is another quarter when we can pride ourselves to our shareholders and stock investors on the record financial results. We consistently implement a strategy which has proved effective in front of the economic crisis and which shall allow us to develop quickly when a business cycle improves. Currently we concentrate on the repayment of the part of the loan which we contracted for an expansion on the German market. I am positive as far as obtaining funds by means of the bond issue is concerned, in particular since a potential demonstrated by the ERGIS Group provides investors with a guarantee that their money shall contribute to a further strengthening of a good position of our company on the European market of plastics" comments Tadeusz Nowicki, the President of the Management Board of ERGIS-EUROFILMS SA.

ADDITIONAL INFORMATION

ERGIS Group is the largest in Poland and Central and Eastern Europe’s leading manufacturer of PVC products:  films, compounds, wallpapers, wall panelling, and windowsills. Its offer includes films permanently laminated with a layer of another film, paper, woven and non-woven fabric, printed films, insulation films,  packaging films (including films for packaging pharmaceuticals), bus floor covering, compounds for cable manufacturing, interior and exterior wall panels, expansion joint tapes, artificial leather, coated fabrics, tablecloths, and vinyl and paper wallpapers. Additionally, the Group is Poland's largest manufacturer of stretch films (tensile films, used e.g. for wrapping loads on pallets, PVC thermoshrink films (used, e.g. for food packaging) and PET and PP tapes (used for fastening medium heavy and heavy products and loads), as well as a distributor of polypropylene BOPP film (used mainly for packaging manufacturing). The Group manufactures also packaging film for food industry (laminates, single layer films, rigid films, flexible films, ‘skin’ films), as well as flexible packaging films and multi-layer laminates. 

Additional information is also available at www.ergis-eurofilms.eu