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 --------------------------------------------------------------------- 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. --------------------------------------------------------------------- 17.03.2015 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG. The issuer is solely responsible for the content of this announcement. The DGAP Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- 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 --------------------------------------------------------------------- 333753 17.03.2015
DGAP-News: H&R AG expects significant earnings growth in 2015
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