Componenta Corporation Interim Report 1 January - 30 June 2016: Net sales and operating profit declined from previous year, financing arrangements and structural changes continue

Componenta Corporation Stock Exchange Release 19.7.2016 at 8.00

January - June 2016 in brief

• Net sales in the review period declined 8% from the previous year to MEUR 243 (MEUR 265).
• Adjusted EBITDA declined from the previous year to MEUR 7.6 (MEUR 20.9). EBITDA including items affecting comparability was MEUR -2.8 (MEUR 19.4).
• Profitability in the review period was weakened by lower production volumes than in the previous year, by wage inflation in Turkey and by stoppages in production caused by the tight liquidity situation. Exchange rate differences had an impact of MEUR -3.2 (MEUR 2.0) on EBITDA.
• Adjusted operating profit was down on the previous year, standing at MEUR -1.4 (MEUR 11.7). Operating profit for the period in accordance with IFRS, including items affecting comparability, was MEUR -11.9 (MEUR 10.1).  
• The adjusted result after financial items was MEUR -12.6 (MEUR 0.2) and the IFRS result after financial items, including items affecting comparability, was MEUR 20.4 (MEUR -1.4).
• Items affecting comparability that had an impact on the result after financial items for the review period totalled MEUR 33.0 (MEUR -1.6).
• The net result for the review period was MEUR 19.8 (MEUR -1.6) and basic earnings per share were EUR 0.19 (EUR -0.02).
• Order book at the beginning of July was 19% down on the previous year, at MEUR 78 (MEUR 97). Changes in the prices of recycled steel, iron and aluminium reduced the order book by some EUR 2 million compared to the same time in the previous year, because of lower raw material surcharges. The transfer of the production of the Furan line in Heerlen to Ferromatrix and the sale of the operations of Suomivalimo accounted for some EUR 3 million in total of the decline in the order book.
• Financing arrangements of Componenta Corporation to strengthen significantly the balance sheet have been completed. Componenta Corporation has on 16 May 2016 issued a convertible capital loan of EUR 40 million and discharged secured bank loans and a secured bond. As a result of the arrangement, the amount of the company’s secured debt has decreased by some EUR 72 million.
• The company is negotiating with Turkish banks concerning additional financing for the Turkish subsidiary and to extend the maturity of financing.
• The divestment of Suomivalimo’s foundry business and a related real estate located in Iisalmi was completed on 30 June 2016 and the company recorded a sales loss of MEUR 6.0 on the transaction that has been presented as an item affecting comparability.
• The company aims to sell Componenta’s pistons business and the transaction is expected to be closed during the third quarter of 2016. In addition the company is looking into the possibility of divesting other non-core business operations and property.

April - June 2016 in brief

• Net sales declined 5% from the previous year to MEUR 125 (MEUR 132).
• Adjusted EBITDA declined from the previous year to MEUR 3.3 (MEUR 11.0). EBITDA including items affecting comparability was MEUR -5.2 (MEUR 10.4).
• Profitability was weakened by lower production volumes than in the previous year, by wage inflation in Turkey and by stoppages in production caused by the tight liquidity situation. Exchange rate differences had an impact of MEUR -2.4 (MEUR 2.4) on EBITDA.
• Adjusted operating profit was MEUR -1.2 (MEUR 6.3) and the operating profit in accordance with IFRS, including items affecting comparability, was MEUR -9.7 (MEUR 5.7).
• Adjusted result after financial items was MEUR -6.9 (MEUR 0.1) and the IFRS result after financial items, including items affecting comparability, was MEUR 28.2 (MEUR -0.5).
• Items affecting comparability that had an impact on the result after financial items for the April - June period totalled MEUR 35.1 (MEUR -0.5).
• The net result for the April - June period was MEUR 27.6 (MEUR 0.1) and basic earnings per share were EUR 0.25 (EUR 0.00).

Componenta’s guidance for 2016

Due to the financial situation of the company and the structural changes currently taking place, giving earnings guidance is exceptionally challenging. Because of this, Componenta is not for the time being making forecasts about its financial performance when commenting on its prospects.

President and CEO Harri Suutari comments on the review period:

”Sales of Componenta’s iron products in the first half of the year declined some 9% from the previous year, mainly due to weak developments in sales of components for mining and construction machinery and to the machine building industry in our main market areas. Sales of aluminium products declined 5% from the previous year. The fall in sales was mainly due to decline in raw material prices.       

EBITDA on sales of iron products fell from EUR 12.9 million to EUR 0.5 million as a result of lower volumes, wage inflation in Turkey and stoppages in production caused by the tight liquidity situation and other special arrangements. In addition, the exchange rate differences weakened EBITDA significantly. Capital expenditure in the iron business totalled EUR 3.7 million.

EBITDA on sales of aluminium products improved from EUR 6.8 million to EUR 7.2 million. Capital expenditure in the aluminium business totalled EUR 11.2 million. The installation of machinery and equipment at the new production plant in Manisa, Turkey has progressed as planned.

As part of its strategic review, Componenta initiated measures towards divesting its non-core businesses. The divestment of Suomivalimo, located in Iisalmi, Finland, was completed at the end of June and the previously announced divestment of the Pistons unit which produces pistons in Pietarsaari progress according to a plan. A planned centralization of the production to Weert in the Netherlands, if realized, would be a major step improving profitability and efficiency in the Netherlands business area and it would also help Componenta in achieving its target of increasing the capacity utilization rate of the company.

At the beginning of the year, the Group renewed its management system by dissolving the matrix organization and returned functions in the customer interface to the business units. Progress was made as planned in achieving the targeted increase in efficiency and significant decrease in fixed costs by the renewal of the management system. The measures implemented so far aim to cut annual fixed costs by EUR 5.5 million. Their impact will be partly visible already in 2016 and in full from the beginning of 2017.

Componenta strengthened its financial position by discharging the company’s secured bank loans and issuing a convertible capital loan of EUR 40 million. As a result, the amount of the company’s secured debt has decreased by some EUR 72 million. EUR 17 million of the convertible loan had been converted into shares in May-July. Overall, as a result of the arrangements described above, the company’s shareholders’ equity increased by some EUR 57 million. The company is negotiating with Turkish banks for additional financing and the extension of maturity dates for the Turkish subsidiary. Due to the weak profitability the company’s liquidity has remained tight. Measures to improve profitability and cut fixed costs will be continuing.”

Key figures

Componenta’s Q2 2016 Interim Report in pdf format is in the appendix to this release. It is also available on the company’s websites at www.componenta.com

Helsinki, 19 July 2016

COMPONENTA CORPORATION

Harri Suutari
President and CEO

ENCL. Interim Report 1 January – 30 June 2016

For further information, please contact:

Harri Suutari
President and CEO
tel. +358 400 384 937  

Markku Honkasalo
CFO
tel. +358 10 403 2710

Componenta is a metal sector company with international operations and production plants located in Finland, Turkey, the Netherlands and Sweden. The net sales of Componenta were EUR 495 million in 2015 and its share is listed on Nasdaq Helsinki. The Group employs approx. 4,250 people. Componenta specializes in supplying cast and machined components and total solutions made of them to its global customers, who are manufacturers of vehicles, machines and equipment.