DGAP-News: H&R AG / Key word(s): Final Results/Miscellaneous
H&R AG expects significant earnings growth in 2015
17.03.2015 / 07:31
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PRESS RELEASE
Business Results in 2014
H&R AG expects significant earnings growth in 2015
- At EUR 1,058.6 million, sales revenues were considerably lower than the
previous year due to lower raw material costs
- EBITDA of EUR 31.5 million is still within most recently forecast
earnings range
- Strategic focus on expanding international activities in Asia and
increasing the yield from raw-material inputs
- Outlook for 2015: sales revenues at previous year's level; EBITDA of
EUR 45 to EUR 65 million
Salzbergen, 17 March 2015. Today, along with its annual report, H&R
Aktiengesellschaft (ISIN DE0007757007) published the audited results for
financial year 2014, thereby confirming the preliminary figures published
on 13 February 2015.
In financial year 2014, the company sold approximately 697,000 tons of
high-quality main products such as paraffins, white oils and plasticizers.
That is around 5% less than in the prior-year period. The Salzbergen site's
changeover to contract production, which for the first time impacted
production output for the entire year in financial year 2014, resulted in
significant economies of scale; the modified approach to managing
production at the Hamburg site also generated significant economies of
scale. In the latter case, it also caused the percentage of higher margin
main products yielded by the production process to increase.
Consolidated sales revenues totaled EUR 1,058.6 million in the year under
review. This represented a decline of around 13% compared to the previous
year (2013: EUR 1,214.4 million). A main reason for the decline was the
lower price of crude oil, which is strongly correlated with H&R AG's sales
revenues. Sales revenues decreased in line with the price and volume
effects.
Effective 30 September 2014, the company took over the majority of the
Hansen & Rosenthal Group's business activities in China. This step
strengthens H&R AG's core business division, Chemical-Pharmaceutical Raw
Materials, while expanding the higher-margin specialty-product business,
which is growing internationally. Thanks to existing synergies, the company
has been able to quickly integrate the operating units assumed, which have
already made significant contributions to earnings. The takeover affected
the distribution of consolidated sales revenues by segment. As in the past,
most of the company's consolidated revenues - around 72% (2013: 76%) -
continued to be generated by the ChemPharm Refining segment's two
refineries in Germany. The ChemPharm Sales segment's international business
accounted for around 23% of consolidated sales revenues in financial year
2014, a higher percentage than in the previous year (2013: 19%). The
Plastics segment again contributed around 5% of sales revenues.
"2014 was a year of both highs and lows. After a modest start to the
financial year, we gathered momentum over the summer and fall before we
felt the increasingly negative impact of the dramatic decrease in the oil
price toward year-end," says Niels H. Hansen, Chairman of the Executive
Board of H&R AG.
Operating income (EBITDA) was EUR 31.5 million in financial year 2014
(2013: 32.6 million), i.e., within the projected earnings range published
in December 2014. The change in EBIT was quite positive; it rose by EUR 9.9
million to EUR 5.8 million (2013: EUR -4.1 million). Consolidated income
after minority interests totaled EUR -15.4 million (2013: EUR -14.0
million), below the level reported in financial year 2013 due to the impact
of deferred taxes.
The overall earnings trend was affected by several - sometimes opposing -
factors:
Contract production at the Salzbergen site and the associated decoupling
from raw-material and product-price volatility had a stabilizing effect on
earnings. Positive momentum was also generated by the change to using
higher-value raw materials at the Hamburg site, which shifted the
allocation ratio of our output in favor of higher-margin main products.
Finally, the lower procurement prices, combined with higher base-oil
prices, resulted in satisfactory margins overall.
By contrast, at year-end, the sharp drop in the price of crude oil
(compared to the previous year) led to a relative increase in the cost of
materials, due to the fact that the production process in the ChemPharm
Refining segment lasts several weeks. These "windfall losses" totaling EUR
-13.4 million in the fourth quarter of 2014 alone (full year 2014: EUR
-16.1 million) resulted from the difference between production costs and
replacement costs for unprocessed inventories and unsold products between
the purchase date and the production date, more than offsetting the
positive impact of contract production and the improved product mix. The
consolidated earnings performance was also affected by the non-recognition
of deferred tax assets from loss carryforwards and provisions for deferred
tax assets.
During the past financial year, the number of employees in the Group
increased 9.5% to 1,553. This was primarily attributable to the significant
increase in the ChemPharm Sales segment due to the takeover of the
businesses in China.
Fourth-Quarter Results are Determined by Fall in the Price of Crude Oil
Following satisfactory business performance during the first nine months of
2014, the last quarter, which was negatively affected by the sharp decline
in the price of crude oil, dragged down full-year performance. During the
fourth quarter of 2014, the Company's sales revenues stood at EUR 252.3
million, significantly lower than in the prior-year period (Q4 2013: EUR
273.3 million); this accounted for the overall downward trend in full-year
sales revenues. Even the generally satisfactory margins were unable to
offset the aforementioned impact of the drop in the price of crude oil. H&R
AG's fourth-quarter EBITDA was EUR 6.3 million (2013: EUR 9.3 million).
Performance by Segment
The H&R AG Group breaks its business activities down into the ChemPharm
Refining and ChemPharm Sales segments - which are the two biggest segments,
measured by external sales - and the smaller Plastics segment. The
ChemPharm Refining segment includes the H&R AG Group's production at its
two refineries in Hamburg and Salzbergen. The impact of the oil price was
strongest here, where financial year 2014 sales revenues totaled EUR 768.7
million, compared to EUR 941.0 million the previous year. This segment
contributed around 71.6% of consolidated sales revenues (2013: 76.0%). The
ChemPharm Sales segment includes the H&R AG Group's advanced processing and
sales/distribution activities at its international locations. This segment
reported an increase of approximately 5.6% to EUR 244.7 million (2013: EUR
231.7 million). At the same time, it contributed around 23.1% of Group
sales revenues. In line with the strategy, the addition of the businesses
in China had a positive impact on sales revenues in this segment. In the
Plastics segment, sales revenues declined to EUR 56.5 million (2013: EUR
62.7 million), which represented around 5.3% of consolidated sales
revenues.
Slightly Negative Cash Flow
For the year as a whole, operating cash flow totaled approximately EUR -0.4
million (2013: EUR 88.9 million). The explanation for this sharp decrease
is that the prior-year figure was strongly affected by positive,
non-recurring special effects from the transfer of inventories due to the
conversion of the Salzbergen plant to contract production. This effect
limits comparability.
Cash flow from investment activities increased to EUR -10.1 million from
EUR -16.2 million in financial year 2013. The relatively higher investment
activity was offset by cash deposits from the acquisition of the Chinese
companies. The conversion to contract production also continued to have an
impact on free cash flow, which totaled approximately EUR -10.5 million in
financial year 2014, compared to around EUR 72.8 million the previous year.
Significant Increase in Shareholders' Equity
As of the end of financial year 2014, total assets had increased to EUR
706.6 million (31 December 2013: EUR 594.7 million). At the same time,
shareholders' equity rose to EUR 248.9 million on the balance-sheet date
(31 December 2013: EUR 189.2 million) - an increase of about 32%. The
significant increases are related to the increase in capital through a
contribution-in-kind implemented in late September 2014 and the inclusion
of the majority (51% of the voting rights) of the Hansen & Rosenthal
Group's Chinese businesses under the umbrella of H&R AG.
Continued Focus on International Expansion
In financial year 2015, H&R AG expects to see an upturn in the global
economy. At the same time, H&R AG assumes that European production capacity
in the lubricants segment will shrink further. The company expects the oil
price to stabilize in 2015; it has already recovered slightly from the lows
recorded at the end of 2014/beginning of 2015.
Based on the above, H&R AG will continue in 2015 to pursue the strategy it
has adopted. In particular, this calls for greater expansion
internationally, with a focus on the higher-margin global
specialty-products business. Over the next few years, the company will
continue its international expansion activities in Asia as a strategic
corporate objective. Accordingly, the company plans to further develop its
businesses in Asia in the coming years while rapidly increasing the
percentage of sales revenues in the ChemPharm Sales segment from about 23%
today to around 30%. At the same time, the company will continue to work on
optimizing its refinery and production processes. In particular, it intends
to improve its production mix in order to systematically increase the
percentage of primary products. In addition, greater efforts in sales and
distribution are expected to enhance our marketing of by-products. The
contract production introduced at the Salzbergen site will continue in 2015
in order to stabilize the business. On top of a smart raw-material
management system, the company is also planning additional steps to
increase efficiency and thereby improve earnings.
Outlook for 2015: Sales Revenues Unchanged from Previous Year; EBITDA
Expected to Increase Significantly
In 2015, the company expects sales revenues to stabilize at the prior-year
level. The lower oil price, which depresses sales revenues, should be
offset in particular by higher sales volumes in the ChemPharm Sales
segment. On the earnings side, assuming the oil price stabilizes, H&R AG
expects EBITDA to fall within a range of EUR 45 million to EUR 65 million.
Niels H. Hansen explains further: "This year, the focus is on expanding our
activities in Asia and on our goal of further increasing the yield from the
raw materials used so that we can offer more primary products instead of
lower-margin by-products."
Contact:
H&R AG, Investor Relations / Communication, Ties Kaiser
Neuenkirchener Strasse 8, 48499 Salzbergen
Tel.: +49 40 43218-321, Fax: +49 40 43218-390
Mail: ties.kaiser@hur.com
www.hur.com
H&R AG:
H&R AG is a specialty-chemicals company listed on the Frankfurt Stock
Exchange's Prime Standard segment. It develops and manufactures
crude-oil-based chemical and pharmaceutical specialty products and produces
high-precision plastic parts.
Forward-looking statements and forecasts:
This press release contains forward-looking statements. The
statements are based on the current estimates and forecasts by the
Executive Board and the information available to the Board at this time.
These forward-looking statements should not be interpreted as a guarantee
that the projected future developments and results contained therein will
materialize. The future developments and results are dependent on a number
of factors that entail various risks and contingencies and are based on
assumptions which could prove to be incorrect. We do not assume any
responsibility for updating the forward-looking statements contained in
this press release.
Overview of Key Figures (rounded) for Financial Year 2014:
<pre>
H&R Group - Key Figures (in EUR 1/1 - 31/12/ 1/1 - 31/12/ Change
million) 2014 2013
Sales revenues 1,058.6 1,214.4 -155.8
Operating income/loss (EBITDA) 31.5 32.6 -1.1
EBIT 5.8 -4.1 9.9
Earnings/loss before taxes -7.8 -16.8 9.0
Consolidated loss after minority -15.4 -14.0 -1.4
interests
Consolidated earnings/loss per -0.49 -0.47 -0.02
share (EUR)*
Operating cash flow -0.4 88.9 -89.3
Free cash flow -10.5 72.8 -83.3
Q4 2014 Q4 2013* Change
Sales revenues 252.3 273.3 -21.0
Operating income/loss (EBITDA) 6.3 9.3 -3.0
EBIT -2.3 3.3 -5.6
Earnings/loss before taxes -5.4 -0.8 -4.6
Consolidated loss after minority -13.5 -2.4 -11.1
interests
Consolidated earnings/loss per -0.38 -0.05 -0.33
share (EUR)*
Operating cash flow 18.0 5.8 12.2
Free cash flow 10.8 2.3 8.5
31/12/2014 31/12/2013 Change
Total assets 706.6 594.7 111.9
Shareholders' equity 248.9 189.2 59.7
Equity ratio (%) 35.2 31.8 3.4
Employees as of 31 December 1,553 1,405 148
(absolute)
Segment figures** in EUR million 1/1-31/12/2014 1/1-31/12/2013 Change
Sales revenues
ChemPharm Refining 768.7 941.0 -172.3
ChemPharm Sales 244.7 231.7 13.0
Plastics 56.5 62.7 -6.2
EBITDA
ChemPharm Refining 18.2 20,6 -2.4
ChemPharm Sales 18.8 16,5 2.3
Plastics -1.5 0,7 -2.2
Q4 2014 Q3 2013* Change
Sales revenues
ChemPharm Refining 163.4 206.6 -43.2
ChemPharm Sales 75.5 57.3 18.2
Plastics 15.3 14.5 0.8
EBITDA
ChemPharm Refining -0.7 4.5 -5.2
ChemPharm Sales 8.3 5.6 2.7
Plastics -0.7 -0.2 -0.5
</pre>
* Because of the difference in the number of shares before/after the
increase in capital through a contribution-in-kind, comparisons of EPS
figures are possible only to a limited extent.
** The Chemical-Pharmaceutical Raw Materials business segments changed
their names to ChemPharm Refining (formerly Chemical and Pharmaceutical Raw
Materials Domestic) and ChemPharm Sales (formerly Chemical-Pharmaceutical
Raw Materials International) for the first time for the 2014 financial
statements.
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Language: English
Company: H&R AG
Neuenkirchener Str. 8
48499 Salzbergen
Germany
Phone: +49 (0)40 43 218 321
Fax: +49 (0)40 43 218 390
E-mail: investor.relations@hur.com
Internet: www.hur.com
ISIN: DE0007757007
WKN: 775700
Listed: Regulated Market in Dusseldorf, Frankfurt (Prime
Standard), Hamburg; Regulated Unofficial Market in Berlin,
Hanover, Munich, Stuttgart
End of News DGAP News-Service
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333753 17.03.2015
DGAP-News: H&R AG expects significant earnings growth in 2015
| Source: EQS Group AG