Ergis
13 May 2010, 13:15

ERGIS GROUP AFTER Q1 2010 – HIGH LEVEL OF SALES MAINTAINED DESPITE DIFFICULT MARKET SITUATION; HIGH NET PROFIT DYNAMICS

 

The Ergis Group, the leader in plastics processing in the Central and Eastern Europe, achieved its strategic goal in the first quarter of 2010. The Group maintained its stable sales level and achieved, despite unfavourable market environment, revenue of PLN 135.2 million. Furthermore, the net profit in that period increased by more than PLN 7.5 million.

Key events of Q1 2010:

  • Revenue of the ERGIS Group in the first three months of 2010 stood at a stable level as compared with the analogous period of 2009, and amounted to PLN 135.2 million. Sales on the Polish market increased to PLN 61.07 million (PLN 54.7 million in the previous year). Consequently, it was another quarter when the Group reinforced its position among domestic customers. Foreign sales amounted to PLN 74.1 million (PLN 80.5 million in Q1 2009), which is the result of strengthening of the Polish currency.
  • ­ Net profit of the Group increased to PLN 7.6 million as compared to PLN 6,000 a year before. The reasons for such an increase include strengthening of the złoty to euro, which allowed the Group to avoid negative currency exchange differences (which affected the results of Q1 2009).
  • ­ The ERGIS Group reduced its receivables by PLN 2.2 million to PLN 91.3 million. The Management Board believes that the decrease in receivables with a comparable sales level is a proof of a good payment situation of the Group.
  • ­ A significant reduction of general and administrative expenses also deserves attention – the amount in Q1 2010 was lower by 13.1% than that recorded in Q1 2009. Concurrently the selling costs dropped in the same period by 7.2%.
  • ­ At the end of January 2010, an agreement was signed to establish MATEO-ERGIS, with registered office in Luštěnice (Czech Republic). The Company specialises in the sale of stretch film and greenstrap on the Czech market, which are among the key products of the Group. ERGIS-EUROFILMS S.A. holds 60% of shares in the company, the remaining 40% is owned by Czech partners (natural persons), who have until recently managed one of the largest companies distributing such products on the Czech market. The new company will be of fundamental significance for the development of sales of stretch film and greenstrap on the Czech market.

FINANCIAL RESULTS – DETAILS

Financial results of the ERGIS Group in Q1 2010 are presented in the table below:

PLN '000

Q1 2009

Q1 2010

Change

Revenue

135,248

135,164

-0.01%

Gross profit on sales

 32,696

 21,989

 -32.8%

Operating profit

15,433

6,737

-56.4%

EBITDA

21,387

11,985

-44.0%

Net profit

6

7,612

+1,268.0%

The value of revenue in Q1 2010 was adversely affected by the euro exchange rate. In that period, an average exchange rate was lower from the rate recorded in the analogous period of 2009 by as much as 13.75%. Strengthening of the złoty reduced the level of revenue on exports thus adversely affecting their profitability.

Further, the prices of raw materials grew dramatically (from approx. 20% to approx. 55%). In spite of all the obstacles, the Group managed to achieve its strategic goal set for the first quarter of 2010, i.e. maintaining its market position, and to record revenue at a level close to that of the previous year.

 

In the assessment 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.

One should also note the increase in the value of sales of stretch films, being a consequence of an increase in both sales volume and prices of raw materials. A high positive sales dynamics, resulting from the investments made in Flexergis in 2008-2009, was recorded in the printed packaging group. The sales of PET tapes also grows dynamically. The market of PVC compounds is gradually recovering. The decrease in the euro exchange rate largely attributed to a negative sales dynamics in the laminates and PET films group, as it regards the German companies.

The difference in results at the EBIT and EBITDA levels as compared to Q1 2009 is a consequence of exceptionally high financial results achieved by the Company in Q1 2009 due to an extremely high euro exchange rate combined with a concurrent decrease in unit prices of basic raw materials. In the first quarter of 2010 we observed an opposite situation, which strongly affected the results which were lower from the record-breaking results of Q1 2009.

In Q1 2010 EBITDA remained at a high level (PLN 11.99 million).

Net profit in Q1 2010 amounted to PLN 7.6 million, while in Q1 2009 it was close to zero, as it was burdened with high financial expenses due to a weak złoty and a disadvantageous valuation of euro-denominated loans contracted for the acquisition of the German companies. Notwithstanding a conversion of a portion of its debt into bonds, in 2009 the Group repaid PLN 30 million of the bank debt (investment loans), which, combined with the strengthening of the złoty in Q1 2010, had a positive effect on the Group’s financial result.

“Our key success achieved in the first quarter is maintaining sales at a stable level, despite an adverse economic situation. We note that again our sales on the domestic market increased thus increasing our market share. This makes us happy, as it means that the Polish market continues to grow and has good prospects,” said Tadeusz Nowicki, the President of ERGIS-EUROFILMS Management Board.

“Goals that we have set for this year include further development of three main fields of our activity – production of laminates for food, industrial packaging (stretch films PE and PET films) and PVC films. We will continue to expand on the greenstrap market in which our share grows systematically. We put great attention to the development of packaging materials (stretch films and greenstrap) through the Czech company established in January this year. We also remember about European markets and develop the network of our agents,” added Tadeusz Nowicki.

 

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