Ergis

Press Release

31 August 2011, 00:00

The ERGIS Group after H1 2011: high sales dynamics and sound profits despite adverse market conditions

 

Press release

 

Warsaw, on 31 August 2011

 

 

The ERGIS Group after H1 2011: high sales dynamics and sound profits despite adverse market conditions

 

The ERGIS Group, a leader in plastics processing in the Central and Eastern Europe, recorded in the first half of 2011 a visible marked increase in sales by more than 9% to PLN 313 million. Despite negative market factors such as high prices of raw materials, which still remain unchanged, the Group manages to generate considerable profits at all levels. Operating profit in that period amounted to almost PLN 8 million, while the net profit – to PLN 4.6 million.

 

Key events:

 

­   Revenue of the ERGIS Group after the first half of 2011 increased by more than 9%, and amounted to PLN 313 million. It was mainly Ergis-Eurofilms S.A. that was responsible for the growth in sales.

­   Domestic sales in the first half of 2011 grew by 7.8% to PLN 151.15 million, as compared to the result of the analogous period of 2010. While the Group’s foreign sales increased in that period by 10.6% and achieved the amount of PLN 161.92 million.

­   The Group’s financial result for the first half of 2011 was adversely affected by a continued increase in the prices of all key raw materials. Although market conditions were very demanding, the Group generated a significant financial result at all levels.

­   The Group pursues the project of creating a new PVC rigid films manufacturing plant in Wąbrzeźno. The value of the investment is estimated at approx. PLN 22 million. The investment may have a significant beneficial effect on the Group’s future results, as the production means will be relocated and concentrated on one site. Contribution of an organised part of the Ergis enterprise, separated in organisational and financial terms as Rigid Film Division to MKF-Ergis Sp. z o.o. Transfer of process line from Berlin to the new hall in Wąbrzeźno was completed, and the ongoing technological tests are satisfactory with respect to the production effectiveness and quality. Film rewinders for PVC and PVC/PE films will also be installed in the new hall.

­   The Company concluded an agreement on supply and start-up of a process line for multi-layer PE stretch film processing with Windmoller & Holscher KG (Germany). The process line will be installed in Oława and the start-up thereof is planned for the first quarter of 2012.

 

FINANCIAL RESULTS - DETAILS

 

Financial results of the ERGIS Group in H1 2011 are presented in the table below:

 

PLN '000

Q1-Q2 2010

Q1-Q2 2011

Change

Revenue

286,583

313,073

+9.2%

 

 

 

 

Profit on operating activities

11,352

7,976

-30.0%

EBITDA

21,693

17,840

-17.7%

Net profit

6,132

4,558

-25.7%

 

FINANCIAL RESULTS - DETAILS (CONTINUED)

 

An increase in the revenue on sales in the first half of 2011 is significantly due to an increase in the prices of products sold. An increase in sales volume was recorded in the group of products known as soft films (6.8%) and PET tapes (by 6.8%). The volume of sales in other groups of products (apart from extruded products) is comparable to the one recorded in the first half of 2010.

 

The Company’s financial result for the first half of 2011 was determined by the level of prices of raw materials which remained high for most of the period. In spite of the fact that the Group increased the prices of its products, the consequences of an increase in the price of PET (by approx. 27% in comparison with the first half of 2010) was still visible in that period. A further growth in prices of PVC (by approx. 17% in comparison with the first half of 2010) and FDO (by approx. 38% in comparison with the first half of 2010) also adversely affected the margin level.

 

Such situation forced the Group to continue the strategy implemented in 2010, consisting in developing sales despite the unsatisfactory margin level. Revenue on sales increased by almost 9% with comparable average Euro exchange rates. High sales dynamics was reported on foreign markets (an increase by approx. 11% in comparison with the first half of 2010). However, domestic sales showed a slightly lower dynamics (increase by approx. 8% in comparison with the first half of 2010).

 

ERGIS GROUP INVESTMENTS

 

Currently, the Group executes or is going to execute the following investments:

§  The process line for multi-layer PE stretch film processing, executed by Ergis-Eurofilms S.A. The process line will be installed in Oława and the start-up thereof is planned for the first quarter of 2012. The expected outlays for that investment will amount to PLN 24 million, of which PLN 12 million is planned for 2011. The investment will be co-financed from the European funds under the Innovative Economy Operational Programme (40% of the expected outlays, i.e. about PLN 9.6 million), the remaining part will be financed from the bank loan. The process line will increase its production capacity by 25% in comparison with the capacity in 2011.

§  Investments connected with concentration of PVC rigid film manufacturing in Wąbrzeźno, including completion of production hall construction. The commencement of the hall use and the regular calendar operation is planned for September 2011. Expenses connected with the completion of the construction and the start-up of the process line in the amount of approx. PLN 14 million will be borne by MKF-Ergis Sp. z o.o., who shall finance them by means of an investment loan.

§   Process line for PET tapes processing is an investment planned by Ergis-Eurofilms S.A. for 2012. The process line will be installed in Oława. The expected outlays for that investment will amount to PLN 10.7 million. The investment will be financed from a bank loan or a lease and will increase production capacity of PET films by 100%.

 

§  Replacement investments - on average, expenses for that kind of investments amount to about 8 million a year in the Parent Undertaking and PLN 4 million in the subsidiaries, and are financed from own funds.

 

“Although the results for the first half of 2011 were influenced by negative market factors, the Ergis Group remains efficient regardless of external pressure. In the opinion of the Management Board, the Company’s current financial situation is good. The level of EBITDA, which is one of the main factors describing financial safety, demonstrates considerable stability. What is more, in our opinion, the segment of packaging products and the segment of insulating films are experiencing dynamic growth, and we will focus on developing these areas of our operations. We are also executing previously planned investments, which, in our opinion, will have a positive influence on future results. We are also going to take more measures aimed at a further development on foreign markets”, said Tadeusz Nowicki, President of the Management Board of ERGIS-EUROFILMS.

 

For more information, contact:

 

Małgorzata Kot, ERGIS-EUROFILMS S.A.

Tel. 0604 159 103, 0604 159 159

e-mail: kot@ergis.eu

 

Magda Kołodziejczyk, M+G

Tel. (22) 625 71 40, 0501 16 88 07

e-mail: magda.kolodziejczyk@mplusg.com.pl

 

 

 

ADDITIONAL INFORMATION

 

ERGIS Group is Poland’s largest as well as 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