Ergis

Press Release

01 September 2010, 15:30

ERGIS Group after first half of 2010: Sales increase despite adverse market conditions

Revenue from sales recorded by the Ergis Group, after the first half of 2010 amounted to PLN 286.58 million, which is an increase of more than 3% year-on-year. At the same time, net profit in that period amounted to over PLN 6.13 million.

Key events of H1 2010:

- Revenue of the ERGIS Group in the first half of 2010 increased by more than 3%, and amounted to PLN 286.58 million. Sales in the Polish market increased to over PLN 140 million (PLN 124 million in the previous year). Consequently, it was another period when the Group significantly reinforced its position among domestic customers.

 

- In the first half of 2010, the Group reduced its general and administrative expenses by 9.3%, and selling costs by 1.2% (while revenue from sales increased). Two segments: packaging products in Poland and insulating films in EU markets, are experiencing dynamic growth, and the Group will focus on developing those areas of its operations. The Group will continue its efforts to improve profitability of the packaging segment in EU markets.

FINANCIAL RESULTS – DETAILS

Financial results of the ERGIS Group in H1 2010 are presented in the table below:

PLN ‘000

H1 2009

H1 2010

Change

Revenue

277,751

286,583

+3.20%

Operating profit

24,095

11,352

-52.9%

EBITDA

35,967

21,693

-39.7%

Net profit

7,893

6,132

-22.0

It should be pointed out that the Group’s results are objectively good; they seem unimpressive compared to the first half of 2009, which was, however, record-breaking in terms of generated margins as well as EBITDA and operating profit. In its notes to the 2009 results, the Company advised of the very high unlikelihood of repeating such results in successive years.

In the first half of 2010 the results of the ERGIS Group and the Group’s companies located in Germany were adversely affected by both the macroeconomic environment and the immediate market circumstances. The prices of PET compounds increased dramatically (they were higher than those in the first half of 2009 by 30%), and the German companies were not able to reflect the resultant increase in costs in the prices of products.

In the Polish companies, in spite of increased prices of PVC, LLDPE and phthalates, the Ergis Group generated satisfactory margins.

Thus, the Group focused on maintaining the existing level of total sales and increasing the sales of strategic product lines.

In the opinion of the Management Board, if the Group continues to pursue its strategy of maintaining market position, it will be able to maximise its operating profit in the future, in the situation of a likely reversal of the current unfavourable trends regarding prices of strategic raw materials. That strategy proved to be much more effective in the Polish companies than in the German companies, where the economic crisis and simultaneous dramatic increase of the prices of raw materials had a much more severe effect on the results.

Total revenue from sales amounted to PLN 286.58 million, which is a 3.2% increase year-on-year (PLN 277.7 million). Dynamic growth occurred in the sales of stretch film (by 32.5%, to reach PLN 75.97 million), greenstrap (by 32.88%, to reach PLN 8.8 million) and rigid PVC film (by 12%, to reach PLN 38 million). In Poland, sales amounted to PLN 137.68 million, compared to PLN 123.56 million in the previous year.

Sales in foreign markets amounted to PLN 148.90 million, compared to PLN 154.19 million in the previous year. Those sales accounted for 51.96% of total sales in the first half of 2010 (55.52% in 2009). The value of sales in the European Union markets in the first half of 2010 was adversely affected, in addition to the general market conditions, by the euro mid-exchange rate, which was lower year-on-year. Sales dynamics as translated at euro mid-exchange rate was thus significantly higher and amounted to as much as 16.4%.

In 2010, the Group sold its products to 36 countries beside Poland. The foreign sales structure is markedly dominated by sales to EU countries (over 95%). In the Group’s second key market, Germany, revenue amounted to PLN 63.4 million, compared to PLN 75.1 million in the previous year. The Group recorded a high increase in sales in the Czech Republic (by 182%), to over PLN 11 million. An increase of over 16%, to PLN 19.85 million, was also noted in the French market.

“I consider the increase in revenue from sales, generated despite adverse conditions we faced outside Poland in the first half-year, to be an important achievement of the Group. It was possible primarily due to our efforts in the Polish market. At the same time, sales results in the Czech or French market show that we are also effective abroad. Although unfavourable exchange rates of the Polish zloty and radical increases in raw material costs reduce our margins, stock exchange investors can be assured that the ERGIS Group remains profitable”, says Tadeusz Nowicki, President of the ERGIS-EUROFILMS Management Board.

ADDITIONAL INFORMATION

ERGIS Group is Central and Eastern Europe's leading manufacturer of PVC products: films, compounds, wallpapers, wall panelling, and windowsills. The Company's offer includes films laminated with a layer of another film, paper, woven and non-woven fabric, etc. 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