Ergis

Press Release

30 August 2012, 11:55

ERGIS GROUP AFTER H1 2012: THREE INVESTMENTS STARTED ACCORDING TO THE PLAN, TEMPORARY REDUCTION OF PROFITABILITY AS A RESULT OF PLACING NEW PRODUCTS ON THE MARKET

 

Warsaw, 30 August 2012

 

ERGIS GROUP AFTER H1 2012: THREE INVESTMENTS STARTED ACCORDING TO THE PLAN, TEMPORARY REDUCTION OF PROFITABILITY AS A RESULT OF PLACING NEW PRODUCTS ON THE MARKET

 

In the first half of the year, the ERGIS Group completed three new investments of strategic importance.

Production of the 33-layer PE stretch film with unique utility properties has started in Oława. The Group expects that this will increase the sales before the end of 2012.

In April, the Group launched a manufacturing line for the production of PET film, transferred from Berlin to the plant in Wąbrzeźno. The Group hopes that by the end of 2012, the sales from this line will reach 80% of production capacity used in previous years in Berlin.

The launch of the new line of flexible packaging lamination in Nowy Sącz in the first quarter of this year, allowed the sales of products generated there to be increased by almost 6%.

 

The Group recorded the sales of PLN 312 million after the first half of 2012, which is comparable to those achieved in the same period a year earlier. Operating profit in the first half of 2012 reached PLN 5 million, and net income of PLN 2.5 million ,and was lower than the previous year, due to the investment and running costs of the current market situation.

 

FINANCIAL RESULTS - DETAILS

ERGIS Group's financial results after the first half of 2012 are presented below:

PLN ’000

1H 2012

1H 2011

Dynamics

Revenue

 312,046

 313,073

-0.33%

EBITDA

15,182

17,841

-15%

Operating profit

5,003

7,976

-37%

Unrealised foreign exchange differences

 

3,650

 

234

 

+1,459.8%

 

Financial costs(interest onloans)

 

5,263

 

4,350

 

+19%

 

Net profit

 

2,469

 

4,558

 

-46%

 

The timely launch of three projects (the line of rigid PET film moved from Berlin, production line of 33-layer nanoERGIS stretch film and laminating line for flexible packaging) did not protect against temporary reduction in the Group's profitability. The period of the costs associated with the production of the new assortment (nanoERGIS film) and related to its introduction on the market coincided with an extremely adverse market stretch film, which has been observed, with particular force in April and May. At the same time the process of replacing sales of PET film which was produced so far in Germany, the film produced in Wąbrzeźno, limited sales of this assortment by 38% in the second quarter of 2012 compared to the same period last year.

The investment in the lamination line brought an immediate effect  in the form of increased sales and margins of flexible laminations for food.

One factor that traditionally has a significant impact on the financial result of the Group is the euro exchange rate the average level of which in the first half of 2012 increased by approximately 7% compared to the same period of 2011, increasing the Group's debt and the worsening financial result by higher interest expense on loans denominated in euro.

The Group's net profit dropped to PLN 2.5 million from PLN 4.6 million in the same period of 2011. In view of the lower euro exchange rate at the balance-sheet date, foreign exchange gains in the first half of 2012 amounted to PLN 3.6 million, while in the first half of 2011 revenue in this respect amounted to PLN 234 thousand. On the other hand, interest expense increased to PLN 5.2 million from PLN 4.4 million in the same period of 2011 due to the increase in the average exchange rate of the euro.

When it comes to the structure of sales, attention should be paid mainly to high sales growth of soft PVC film (an increase of 17.1%, with an increase in volume by about 12%). This increase is mainly attributable to the increase in exports (by 39% in the volume of 29%).

Worthy of note is the increase in sales of printed packaging (subsidiary company - Flexergis). It became possible thanks to the launch of a new line of flexible packaging lamination and contributed to an increase in the profitability of the Group's activities in this sector.

Tadeusz Nowicki, the President of the Management Board of ERGIS-EUROFILMS said:

”The first half of the year has passed with the Group's efforts focused on the launch of three new investments. This took place during the economic slowdown in the European Union and the raw materials disadvantaged background. Products placed on the market with a new, very innovative and unique on a European scale in the Oława line and the fact, that the start-up of production transferred from Germany to the production line of PET film gives the perspective of improving the profitability of sales before the end of the year. We hope the market will evaluate with understanding both the effort incurred by the Group and arising perspectives.”  .

 

For more information, contact: 

 

Małgorzata Kot, ERGIS - EUROFILMS S.A.

tel. 604 159 103, 604 159 159

e-mail: kot@ergis.eu 

 

Magda Kołodziejczyk, M+G

tel. (22) 416 01 02, 501 16 88 07

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

 

 

ADDITIONAL INFORMATION

 

ERGIS Group is Poland’s largest manufacturer of PE stretch film (stretch film used for e.g. wrapping loads on pallets), as well as Central and Eastern Europe's leading manufacturer of PVC products: soft films (insulation and special purpose), compounds, wallpaper and windowsills. An important segment in the Group’s operations, is the manufacturing of PVC, PVC/PE and PET rigid films, used for the manufacturing of pharmaceuticals, food and technical packaging. The Group is also a manufacturer of flexible food wraps. The Ergis Group is an important manufacturer of PET tapes (used for fastening medium heavy and heavy products and loads), PVC thermoshrink films (used, e.g. for food packaging) as well as a distributor of BOPP film (used mainly for packaging manufacturing).

 

Additional information is also available atwww.ergis-eurofilms.eu