- Strong improvement in the Group's operating performance
- Improved earnings in the Lead and Zinc segments despite maintenance shutdowns
- Positive consolidated net income €6.7 million
Suresnes, September 7, 2017: The Board of Directors of Recylex SA (Euronext Paris: FR0000120388 - RX) today approved the consolidated interim financial statements for the six months to June 30, 2017.
Consolidated condensed income statement and balance sheet figures (reviewed by the auditors):
| (€ million) | Six months to June 30, 2017 | Six months to June 30, 2016 | Change (€ million) |
| Sales | 218.3 | 167.8 | +50.5 |
| EBITDA1 IFRS | 9.6 | (0.1) | +9.7 |
| Restated2 EBITDA1 | 17.4 | 3.7 | +13.7 |
| Operating income before non-recurring items (IFRS) | 6.3 | (3.2) | +9.5 |
| Restated operating income before non-recurring items2 | 13.7 | 0.1 | +13.6 |
| Net income (IFRS) | 6.7 | (4.3) | +11.0 |
| (€ million) | At June 30, 2017 | At December 31, 2016 | Change (€ million) |
| Cash and cash equivalents | 6.5 | 6.2 | +0.3 |
| Net cash3 | (8.5) | (7.0) | -1.5 |
| Equity | (18.4) | (31.0) | +12.6 |
| Net debt | 83.6 | 27.1 | +56.5 |
1 Operating income before non-recurring items and before additions to and reversals from amortization, depreciation, provisions and impairment losses (non-IFRS indicator).
2 To assess the performance of its Lead segment, the Group uses the LIFO ("Last in first out", not permitted under IFRS) method in its internal reporting to measure inventories for its main lead smelter in Nordenham. To assess the performance of the Zinc segment, the Group also releases restated financial data including the contribution from 50%-owned Recytech SA consolidated proportionately, even though this method is not permitted under IFRS. See note 19 to the 2016 consolidated financial statements.
3 Cash net of drawn credit lines.
Yves Roche, Chairman and Chief Executive Officer of the Recylex Group, commented:
"Our good performance in the first half of 2017 reflects the strength of our industrial model, the confidence of our business partners and the commitment of all our teams in a very challenging situation. Indeed, after three months of negotiations, we were greatly relieved to announce a global agreement covering payment of the European Commission's fine. Despite this period of uncertainty, now at an end, our business activities and our margins recovered significantly thanks to a more supportive economic environment, and even though the major maintenance shutdowns took place during the first half. These results are encouraging and we are aware of the challenges that lie ahead, including construction of the new reduction furnace in Germany, which is crucial for our future profitability."
The Recylex Group's full 2017 Interim Financial Report may be downloaded from the Company's website (www.recylex.fr (English version) - Shareholders/Investors - Regulated Information - Interim Financial Report).
- Trend in metals prices in Euros in the six months to June 30, 20174
Average metals prices for the six-month period to end-June were as follows:
| (€ per tonne) | First-half 2017 average | First-half 2016 average | Change (%) |
| Lead price | 2,052 | 1,552 | +32% |
| Zinc price | 2,487 | 1,611 | +54% |
4 Source: London Metal Exchange 2017 - See the press release of July 27, 2017.
- Consolidated results and key balance sheet figures at June 30, 2017
- Income statement key figures
Consolidated sales in the first six months of 2017 came to €218.3 million, up 30% on the level posted in the same period of 2016, chiefly as a result of higher lead and zinc prices. Restated2 (to include the Group's share of 50%-owned Recytech's sales) consolidated sales for the six months to June 30, 2017 totaled €230.0 million, up 31% compared with the same period of 2016.
During the first half of 2017, consolidated EBITDA under IFRS came to €9.6 million. This represented a very significant improvement on the first-half 2016 EBITDA loss of €0.1 million. Over the same period, restated consolidated EBITDA came to €17.4 million, up from €3.7 million in the first half of 2016.
Despite the unfavorable base of comparison given the major scheduled maintenance shutdowns in the Lead and Zinc segments during the second quarter of 2017 (vs. no shutdown in 2016), the Group's operating performance improved significantly, chiefly owing to the far higher profitability of the Lead and Zinc segments in the first half of 2017 as a result of:
- the strong rise in lead and zinc prices in the first half of 2017 compared with the first half of 2016,
- Recylex's continued pursuit of its selective purchasing policy in the Lead segment, which is paying off,
- a solid production performance with high volumes produced and sold.
Accordingly, the Group recorded a positive operating income before non-recurring items of €6.3 million, a very strong improvement of €9.5 million compared to the €3.2 million loss in the first six months of 2016. Restated2 operating income before non-recurring items totaled €13.7 million, compared with a near breakeven performance in the first half of 2016.
The good performances posted by the Lead and Zinc segments-their results were significantly better than in the first half of 2016-offset the impact of the major maintenance shutdowns in the first half of 2017 and of the losses recorded by the Special Metals segment and by the Other (Holding and Environment) segment, with the Plastics segment breaking even.
In addition, the Group recorded a €1.4 million gain under Other non-recurring income and expenses, including €1.2 million on the disposal of the FMM SA subsidiary's site in Belgium.
From a financial perspective, the Group recorded a rise in its Net interest expense to €2.7 million, from €1.8 million in the first half of 2016 as a result of interest payments on its increased credit lines and the use of the borrowing facilities arranged in Germany during December 2016. Other financial income and expense showed a net expense of €2.3 million, compared with net income of €0.1 million in the first half of 2016. The key factor behind this was a reclassification for accounting purposes linked to hedging transactions covering the trading risk associated with fluctuations in lead prices5 - this has no impact on the Group's 2017 results.
Taking all these factors into account, Recylex's consolidated net income attributable to equity holders of the parent came to €6.7 million in the first half of 2017, a significant improvement of €11 million on the first-half 2016 loss of €4.2 million.
- Balance sheet key figures
The Group's net cash position (after deduction of drawn credit lines) went from negative €7.0 million at December 31, 2016 to negative €8.5 million at June 30, 2017. A strong, but temporary increase in the Group's recurring working capital requirement (reflecting the increase in the inventory of secondary materials linked to the maintenance shutdown at the Nordenham smelter) accounted for the €1.5 million in cash used by the Group.
Cash flow from operating activities came to negative €4.8 million in the first half of 2017, compared with positive €4.7 million in the same period of 2016.
Even so, the Group's gross cash remained almost stable at €6.5 million at June 30, 2017, compared with €6.2 million at December 31, 2016, owing to the use of all its available credit lines, i.e. a total of €15 million. At December 31, 2016, the Group had €15.0 million in credit lines, €13.2 million of which were drawn down.
The Group's net debt totaled €83.6 million at June 30, 2017, up from €27.1 million at December 31, 2016 chiefly as a result of:
- the €21.7 million drawdown on the borrowings arranged in December 2016 to finance investments by the German subsidiaries, including construction works on the Lead segment's new reduction furnace,
- the conversion of existing provisions into debt, including €26.6 million linked to the European Commission's fine and €7.8 million linked to the 187 rulings handed down by the Douai Appeal Court on January 31, 2017,
Overall, the Group's provisions declined sharply to €28.2 million at June 30, 2017 from €64.2 million at December 31, 2016.
Net non-current assets increased by €17.9 million to €62.4 million at June 30, 2017, from €44.5 million at December 31, 2016. This increase was chiefly attributable to investment in the new reduction furnace currently under construction.
Consolidated equity came to negative €18.4 million at June 30, 2017. This represented an improvement of €12.6 million on its level at December 31, 2016, owing chiefly to the positive impact of the €6.7 million in first-half 2017 consolidated net income and the €4.4 million in capital raised from Recylex SA's equity line.
5 See Note 5.5 to the condensed consolidated financial statements at June 30, 2017.
- Consolidated first-half 2017 results by segment (excluding holding companies and environment)
- Lead segment (69% of consolidated sales)
| (€ million) | Six months to June 30, 2017 | Six months to June 30, 2016 |
| Sales | 151.4 | 119.1 |
| Operating income before non-recurring items (IFRS) | 3.8 | (4.1) |
| Restated operating income before non-recurring items2 | 4.8 | (3.9) |
The Lead segment's first-half 2017 sales totaled €151.4 million, up 27% compared with the first half of 2016.
Despite an unfavorable base of comparison linked to the maintenance shutdown of the smelter in the first half of 2017 (vs. no maintenance shutdowns in 2016), the segment posted a good performance thanks to the rally in lead prices and a robust level of lead production in the first half of 2017.
The plants in France and Germany recycled 68,800 tonnes of used lead-acid batteries (ULAB) - a 30% increase on the 53,000 tonnes in the same period of 2016, thanks to the increased availability of materials for recycling by comparison with the first half of 2016.
In this context, the Group continued to pursue its selective purchasing policy, which helped to improve its margins.
Production by the Weser-Metall GmbH smelter reached 57,358 tonnes in the first half of 2017, an increase of 10% on the 52,011 tonnes recorded in the same period of 2016, despite the smelter's maintenance shutdown during the first half of 2017.
The Lead segment's operating income before non-recurring items under IFRS rose sharply in the first half of 2017, to €3.8 million, compared with a loss of €4.1 million in the first six months of 2016. Restated operating income before non-recurring items2 for the same period came to €4.8 million, compared with a loss of €3.9 million in the first half of 2016.
The upturn in lead prices and higher battery volumes processed helped to improve the segment's margins over the period.
Thanks to the bank loans arranged in December 2016, the Group began the construction in January 2017 of the Weser-Metall GmbH subsidiary's new reduction furnace in Germany.
The aim of this investment of approximately €40 million is to restore the Lead segment's profitability over the long term by recovering more of the lead content from the input materials.
Work continues on schedule, and the furnace is expected to be commissioned in the first half of 2018.
- Zinc segment (24% of consolidated sales)
| (€ million) | Six months to June 30, 2017 | Six months to June 30, 2016 |
| Sales | 52.4 | 32.3 |
| Operating income before non-recurring items (IFRS) | 7.5 | 2.5 |
| Restated operating income before non-recurring items2 | 14.0 | 5.6 |
The Zinc segment's sales totaled €52.4 million in the first half of 2017, representing a very strong increase of 62% compared with the first half of 2016. Restated2 to include the Group's share of 50%-owned Recytech SA's sales, the segment's sales came to €64.1 million, representing an identical percentage increase.
This increase was chiefly attributable to the strong rise in zinc prices compared with the first half of 2016, which helped to offset the impact of the scheduled shutdown for maintenance by the Harz-Metall GmbH plant in the first half of 2017 (vs. no maintenance shutdown in 2016).
The Group's total Waelz oxide production by the Harz-Metall GmbH subsidiary and (50%-owned) Recytech SA reached 35,273 tonnes in the first six months of 2017 from 34,884 tonnes in the first half of 2016.
Norzinco GmbH's zinc oxide production rose 7% to 12,564 tonnes in the first half of 2017 from 11,716 tonnes in the equivalent period of 2016.
The Zinc segment recorded operating income before non-recurring items of €7.5 million in the first half of 2017, compared with income of €2.5 million in the equivalent period of 2016. The rise in zinc prices, which helped to offset the impact of the Harz-Metall GmbH subsidiary's shutdown for maintenance, was the main factor that drove this increase.
Restated2 operating income before non-recurring items came to €14.0 million in the first half of 2017, compared with €5.6 million in the first six months of 2016.
- Special Metals segment (3.5% of consolidated sales)
| (€ million) | Six months to June 30, 2017 | Six months to June 30, 2016 |
| Sales | 7.2 | 8.0 |
| Operating income before non-recurring items (IFRS) | (1.1) | 0.2 |
The Special Metals segment's first-half 2017 sales totaled €7.2 million, down 10% on their level in the first half of 2016.
This fall was chiefly attributable to the strong decline in germanium and gallium sales, despite firm arsenic sales.
Due to these challenging conditions, the segment posted an operating loss before non-recurring items of €1.1 million in the first half of 2017. In the same period of 2016, it had recorded modest operating income before non-recurring items of €0.2 million.
- Plastics segment (3.5% of consolidated sales)
| (€ million) | Six months to June 30, 2017 | Six months to June 30, 2016 |
| Sales | 7.3 | 8.4 |
| Operating income before non-recurring items (IFRS) | 0.0 | 0.2 |
The Plastics segment's first-half 2017 sales totaled €7.3 million, down 13% on the level recorded in the first half of 2016.
The segment's total production dropped 10% to 7,128 tonnes of recycled polypropylene in the first half of 2017 from 7,933 tonnes in the corresponding period of 2016.
Given weaker demand, especially from the automotive industry, and competition from virgin materials owing to the low level of oil prices, the segment's operating performance before non-recurring items was at breakeven in the first six months of 2017. In the first half of 2016, it had recorded modest operating income before non-recurring items of €0.2 million.
- Latest developments in legal proceedings6
- Legal proceedings concerning Metaleurop Nord SAS
The document summarizing developments in the legal proceedings concerning Metaleurop Nord SAS and Recylex SA, updated on July 26, 2017, is available from the Recylex Group's website at www.recylex.fr - News - Legal proceedings schedule.
Following the 187 rulings handed down on January 31, 2017 by the Douai Appeal Court concerning claims for dismissal without fair cause brought by former employees of Metaleurop Nord SAS, Recylex SA decided to lodge an appeal with the Cour de Cassation7.
Furthermore, on March 2, 2017, the Douai Administrative Appeal Court found in Recylex SA's favor, deciding to enjoin the French ministry of labor to cancel the order of November 5, 2013 placing the Metaleurop Nord facility in Noyelles-Godault on the list of asbestos manufacturing, flocking and insulating plants eligible for the early retirement allocation for asbestos workers ("ACAATA allocation").
6 See Note 1 to the 2016 consolidated financial statements.
7 See the press release dated February 1, 2017.
- European Commission inquiry into the lead recycling sector8
On February 8, 2017, the European Commission fined several European companies active in the scrap lead car battery sector. That included a fine of €26.7 million for the Recylex Group. Recylex and its relevant subsidiaries have decided to appeal the European Commission's decision.
After discussions with the European Commission and the Group's main financial partners, a global agreement was reached comprising a payment plan for the fine (with payment of a large proportion of the fine being deferred over the medium to long term) and the deferred repayment of existing debts, with the financing arrangements in France and Germany remaining in place.
8 See press releases dated February 8, 2017 and May 18, 2017, as well as Note 1 to the condensed consolidated financial statements at June 30, 2017.
- Outlook for the second half of 2017
After moving higher in the first quarter of 2017, metals prices stated in Euros underwent a correction during the second quarter of 2017. While prices currently remain at good levels thanks to the positive fundamental outlook, the direction of the euro/US dollar exchange rate will be a key factor influencing trends in the second half of 2017. With the euro currently at its highest level against the US dollar since January 2015, this could ultimately depress metals prices stated in Euros were the trend to continue or even to gain strength.
- Lead segment
The segment's second-half 2017 financial performance will depend chiefly on the direction of lead prices over the period and on the availability of materials for processing.
Given that the smelter's maintenance shutdown took place in the first six months of 2017, the Group's objective for the second half of 2017 is to maintain a high level of production.
The Group's strategic priorities in the Lead segment are to maintain its selective purchasing policy and continue construction of the new reduction furnace at Weser-Metall GmbH's smelter.
- Zinc segment
In the Zinc segment's two businesses, second-half 2017 financial performance will be heavily influenced by the direction of zinc prices over the period. At the end of August 2017, the zinc price reached $ 3,000 per tonne, a 10-year record high.
In Waelz oxide production, provided that the availability of materials for recycling remains on a par with the situation in the first six months of 2017, production performance in this business should improve in the second half of 2017 since the maintenance shutdowns took place in the first half of the year.
In zinc oxide production, Norzinco GmbH will continue its initiatives in the second half of 2017 to develop and diversify its sources of supply in the objective to meet the increased demand from customers.
- Special Metals segment
Based on its current performance due to persistently challenging market conditions, PPM Pure Metals GmbH is set to strengthen its commercial initiatives, with a particular emphasis on germanium, to restore its margins.
- Plastics segment
In a tough economic environment, the Plastics segment's priority will be to develop and diversify its commercial portfolio.
As every year, the scheduled annual maintenance shutdowns took place at the Group's two plants in July and August 2017.
- Financial agenda
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Regenerating the urban mine
With operations in France and Germany, Recylex is a European group specialized in lead, plastics and zinc recycling, as well as a producer of special metals. A key player in the circular economy with long-standing expertise in urban waste recovery, the Group has more than 660 employees in Europe and generated consolidated sales of €382 million in 2016.
For more information about Recylex Group: www.recylex.fr and on twitter: @Recylex
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Press/Investor contact:
Gabriel ZEITLIN
+ 33 (0)1 58 47 29 89
gabriel.zeitlin@recylex.fr
Disclaimer: This press release may contain forward-looking statements that do not constitute forecasts regarding results or any other performance indicator, but rather trends or targets. These statements are by their nature subject to risks and uncertainties as described in the Company's annual report available on its website (www.recylex.fr). Further information about Recylex is available on its website (www.recylex.fr). Unless otherwise indicated, all comparisons made in this press release are on a year-on-year basis (2017/2016).
