Componenta Corporation Half-Year Financial Report 1 January - 30 June 2017: Increase in Componenta’s comparable EBITDA

Componenta Corporation Stock Exchange Release on 18 August 2017 at 8.00

January-June 2017 in brief

  • Continued operations in the review period were the foundry operations in Finland in Pori and Karkkila, and in Sweden the machine shop in Främmestad and the forges in Wirsbo and Arvika.
  • After the end of the review period Componenta signed an agreement to sell its shareholding in Componenta Dökümcülük Ticaret ve Sanayi A.S. (“Componenta Turkey”), amounting to 93.6% of the company’s shares and votes, to Döktaş Metal Sanayi ve Ticaret A.Ş.
  • After the end of the review period Componenta Wirsbo AB and Componenta Arvika AB (“Wirsbo sub-group”) in Sweden filed for bankruptcy in the local district courts on 13 July 2017 and the companies were adjudicated bankrupt on 17 July 2017. The companies failed to obtain financing for the payment of restructuring debts.
  • Comparable net sales for continued operations in the review period increased 4% to EUR 92.5 million. Comparable adjusted net sales in the period for comparison were EUR 89.0 million and adjusted net sales according to IFRS in the period for comparison were EUR 103.1 million. The comparable adjusted figure means the continued operations in the review period, from which the figures for the divested units Suomivalimo and Pistons have been eliminated as well as the impact of the trade mark and administration service fees charged to the Netherlands and Turkey.
  • Comparable net sales for continued operations in the review period excluding Wirsbo sub-group’s operations remained at the previous year's level and was EUR 65.4 million (EUR 65.5 million).
  • Adjusted EBITDA for continued operations in the review period increased from the previous year to EUR 3.8 million. Comparable adjusted EBITDA in the period for comparison was EUR -0.2 million and adjusted EBITDA calculated from continued operations in accordance with IFRS in the period for comparison was EUR 2.0 million.
  • The adjusted EBITDA for continued operations in the review period excluding Wirsbo sub-group’s operations increased from the previous year and was EUR 2.9 million (EUR 0.9 million).
  • Profitability improved during the review period due to the reduction in fixed costs compared to the reference period and lower financing costs. The profitability of the reference period was weakened by stoppages in production resulting from the tight liquidity situation at the time as well as extra transport costs. The impact of changes in currency rates on the EBITDA was EUR -0.3 million (EUR -1.1 million).
  • The adjusted comparable operating profit for continued operations in the review period increased from the previous year to EUR 2.2 million. The comparable adjusted operating profit in the period for comparison was EUR -3.8 million and the adjusted operating profit calculated from continued operations in accordance with IFRS in the period for comparison was EUR -2.0 million. The operating profit from continued operations, including items affecting comparability, was EUR -6.9 million (EUR -8.9 million).
  • The net result for the review period was EUR -6.8 million (EUR 19.8 million) and the basic earnings per share were EUR -0.04 (EUR 0.19).
  • The local district court gave its ruling regarding restructuring of Componenta Främmestad AB and approved the composition on 3 July 2017. The court’s decision became final on 24 July 2017.
  • In Finland the administrator of the corporate restructuring proceedings filed amended draft restructuring programmes of Componenta Corporation and Componenta Finland Ltd with the District Court of Helsinki on 12 June 2017. The amended draft restructuring programmes do not differ significantly from the original draft restructuring programmes. After the end of period, according to a report drawn up by the administrator for the Helsinki District Court on 16 August 2017, a clear majority of creditors and their claims supported the draft restructuring programme with respect to Componenta Corporation and Componenta Finland Ltd. The Helsinki District Court is expected to affirm the draft restructuring programmes during the third quarter.

April-June 2017 in brief

  • Comparable net sales for continued operations in the review period was at the same level as last year, standing at EUR 46.3 million. Comparable net sales in the period for comparison were EUR 46.4 million and net sales according to IFRS in the period for comparison were EUR 53.5 million. The comparable figure means the current continued operations in 2017, from which the figures for the divested units Suomivalimo and Pistons have been eliminated as well as the impact of the trade mark and administration service fees charged to the Netherlands and Turkey.
  • Net sales for continued operations in the review period excluding Wirsbo sub-group’s operations decreased 3 % and was EUR 33.1 million (EUR 34.1 million).
  • The adjusted EBITDA for current continued operations increased from the previous year to EUR 1.9 million. Comparable adjusted EBITDA in the period for comparison was EUR 0.9 million and adjusted EBITDA calculated from continued operations in accordance with IFRS in the period for comparison was EUR 2.2 million.
  • The adjusted EBITDA for continued operations in the review period excluding Wirsbo sub-group’s operations increased from the previous year and was EUR 1.7 million (EUR 0.9 million).
  • The adjusted operating profit for continued operations increased from the previous year to EUR 1.2 million. The comparable adjusted operating profit in the period for comparison was EUR -1.0 million and the adjusted operating profit calculated from continued operations in accordance with IFRS in the period for comparison was EUR 0.1 million. The operating profit for continued operations taking into account items affecting comparability was EUR -16.6 million (EUR -6.7 million).

Guidelines updated for 2017

The company expects continued operations excluding Componenta Wirsbo AB and Componenta Arvika AB to have net sales of EUR 110 - 130 million in 2017. Corresponding EBITDA excluding items affecting comparability is expected to be EUR 4 - 6 million. In 2016 corresponding comparable net sales was some EUR 122 million and EBITDA EUR 0.8 million.

Harri Suutari, CEO of Componenta Corporation:

”Demand for Componenta’s castings and forged products remained at the high level it had been at the start of the year. Comparable net sales and order book increased slightly from the period for comparison. The Adjusted EBITDA for continued operations improved from the previous year to EUR 3.8 million (EUR -0.2 million). The improvement is particularly due to the reduction in fixed costs and a better liquidity situation compared to the reference period, which enabled more effective planning and implementation of production and logistics. Exchange rate differences account for some EUR 0.8 million of the improvement. 

After the end of period Componenta signed an agreement to sell its shareholding in Componenta Turkey to Döktaş Metal Sanayi ve Ticaret A.Ş., which is owned by the management of Componenta Turkey. One prerequisite for the completion of the share transaction is that the Turkish club loan banks approve the sale and discharge Componenta Corporation from all liabilities and obligations based on the club loan agreement, including the discharge from a loan guarantee of EUR 80 million.

In accordance with the overall agreement relating to the sale of the shares, Componenta Turkey approved the draft restructuring programmes for Componenta Corporation and Componenta Finland Ltd. This is a major factor for the success of the companies’ restructuring programmes at the Helsinki District Court, since Componenta Turkey, as the major creditor of Componenta Corporation, could on its own have prevented affirmation of the company’s restructuring programme.

The restructuring creditors of Componenta Corporation and Componenta Finland Ltd were able to vote by the beginning of August on the companies’ draft restructuring programmes, and the administrator gave a report on the vote on 16 August 2017. According to the report, the creditors who voted had a positive view of the draft restructuring programmes, since a clear majority of the creditors and their claims supported the draft restructuring programmes for Componenta Corporation and Componenta Finland Ltd. However, the Helsinki District Court still has to affirm the draft restructuring programmes. The results of the votes on the restructuring programmes and the sale of the shareholding in Componenta Turkey have reduced the uncertainty concerning the ability to continue as a going concern.

After the end of period Componenta filed for bankruptcy for Componenta Wirsbo AB and Componenta Arvika AB, which have forge operations in Sweden. The restructuring programmes for the companies were affirmed in the local courts in December 2016 and the rulings came into force in January 2017. As previously announced, the primary objective was to keep the forge operations of Wirsbo and Arvika as part of the Group. According to the terms of the restructuring rulings the companies should have paid restructuring debts of some EUR 4.9 million in July 2017. However, the main goal was to agree with creditors on postponing payment of the restructuring debts and to arrange refinancing by January 2018. It was not until July 2017 that it became clear that arranging external financing and postponing payment of restructuring debts until January 2018 was unlikely due to insufficient support from creditors. At the same time Componenta was negotiating with potential buyers for the forge operations, but the negotiations ended without a result, and the only remaining option then was to file for bankruptcy for the companies. The proceedings for restructuring at the parent company and the arrangements with the company in Turkey were still in progress and this placed the parent company in a weaker position to assist in the financing for Wirsbo and Arvika. I consider that filing for bankruptcy for the companies is regrettable since we had achieved considerable improvements in operations at the forge business. The effect of Wirsbo sub-group on the net sales of Componenta Group in the review period was EUR 27.1 million and on operating profit EUR 0.5 million. On the other hand, the cash flow forecast for the next few years for Wirsbo and Arvika was considerably negative, mainly due to the needs for financing working capital. The stock of steel in particular increases working capital, since there is a wide range of grades and dimensions for steel products. The long payment periods for receivables from the heavy truck industry also place a burden on working capital. Operations were maintained under a temporary arrangement with working capital financing from customers. 

Componenta Främmestad AB machines, paints and distributes the cast iron components produced by Componenta’s foundries in Finland and by Componenta Turkey for the heavy truck industry. This business accounts for about two thirds of all the cast component business. Componenta Främmestad AB received its restructuring ruling at the beginning of July. Under this ruling it has to pay within 12 months some SEK 20 million of its restructuring debts outside the Group. I believe that Componenta Främmestad AB will be able to pay these debts in time with its own income from operations. 

In September 2016 the Group obtained working capital financing from customers and commitments to finance operations for Componenta’s operations in Finland and Sweden. At the end of the review period some EUR 2.2 million of this financing is in use. The Group’s liquid assets at the end of the period were some EUR 3 million, excluding the Wirsbo sub-group. In addition, the administrator for Componenta Främmestad AB has control over EUR 2.2 million.

Pasi Mäkinen, who has been in charge of Componenta’s Orhangazi iron foundry under a fixed term agreement since November 2015, took over as SVP, Cast Components Business Area, at the beginning of July. Following the bankruptcy of the Wirsbo sub-group he is in charge of the Group’s remaining business operations, which comprise the iron foundries in Pori and Karkkila and the machine shop in Främmestad. Our priorities for the near future are to carry out the restructuring programmes and ensure we have the required financing for these, as well as to boost efficiency in business operations. Concluding Componenta's corporate restructuring proceedings as I see it, opens up new opportunities for the Group. As for myself, from now on I will concentrate on strategic management."

Key figures

  1-6/2017 Comparable adjusted 1-6/2016 (1
 
Change
(1-6/2017 vs.
comp. adj.
1-6/2016)
1-6/2016 Change
(1-6/2017 vs.
1-6/2016)
2016
Net sales, continued operations, MEUR 92.5 89.0 4 % 103.1 -10 % 183.6
Net sales, continued operations, excluding Wirsbo 65.4 65.5 0%     121.8
Adjusted EBITDA, continued operations, MEUR 3.8 -0.2 n/a 2.0 90 % 3.1
Adjusted EBITDA, continued operations, excluding Wirsbo 2.9 0.9 219%     0.8
Adjusted operating profit, continued operations, MEUR 2.2 -3.8 n/a -2.0 n/a -5.8
Operating profit, continued operations -6.9 -   -8.9 22 % -46.0
Adjusted result after financial items, continued operations, MEUR 1.9 -   -7.9 n/a -17.0
Result after financial items, continued operations, MEUR -7.2 -   28.7 n/a -16.5
Items affecting comparability after financial items, continued operations, MEUR -9.1 -   36.6 n/a 0.5
Net result, MEUR -6.8 -   19.8 n/a -215.5
Earnings per share, euro -0.04 -   0.19 n/a -1.64
Adjusted return on investment, % n/a
 
-   -1.0   -0.2
Adjusted return on equity, % n/a -   -9.4   n/a
Gross investment in continued operations incl. finance leasing, MEUR 1.4 -   1.0   1.3
Cash flow from operations, continued operations, MEUR 0.5 -   -8.7   -9.9
Group’s restructuring debt, MEUR 155 -       163
Number of personnel at end of quarter, incl. leased personnel, continued operations 888 944 -6 % 1072 -17 % 878
Average number of personnel during review period, incl. leased personnel, continued operations 882 932 -5 % 1060 -17 % 992
Order book, continued operations, MEUR 22.0 21.6 2 % 21.8 1 % 30.8

(1 The comparable adjusted figure means the current continued operations in 2017, from which the figures for the divested units Suomivalimo and Pistons have been eliminated as well as the impact of the trade mark and administration service fees charged to the Netherlands and Turkey. Suomivalimo was sold on 30 June 2016 and Pistons on 17 August 2016. The operations in the Netherlands were declared bankrupt in the third quarter of 2016. Consolidation of the operations in Turkey as part of Componenta Group ended at the end of 2016.

Componenta’s Half-Year Financial Report 1 January – 30 June 2017 in pdf format is in the appendix to this release. It is also available on the company’s websites at www.componenta.com

 

Helsinki, 18 August 2017

  

COMPONENTA CORPORATION

  

Harri Suutari
President and CEO

  

For further information, please contact:


Harri Suutari
President and CEO
tel. +358 10 403 2200

Marko Karppinen
CFO
tel. +358 10 403 2101


Componenta is an international technology company. Componenta specializes in supplying cast and machined components to its global customers, who are manufacturers of vehicles, machines and equipment. The company’s share is listed on Nasdaq Helsinki.