The 2018 business year: CPH Group achieves record operating margin

The CPH Group increased its annual net sales by 13.6% to CHF 533.5 million in 2018. Earnings before interest and taxes (EBIT) were raised from CHF 2.9 million to CHF 51.6 million. The net result amounted to CHF 42.3 million. A doubled dividend of CHF 1.30 per share will be proposed for the year, together with a special 200th anniversary dividend of CHF 0.50 per share.

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Perlen, 26 February 2019 – With revenues raised in all three of its business divisions, the CPH Group achieved net sales for 2018 of CHF 533.5 million, a 13.6% improvement on the previous year. “We can look back on a very successful anniversary year of expanded business activities, further international growth and the integration of new acquisitions,” says Peter Schildknecht, CEO of parent company CPH Chemie + Papier Holding AG.

Chemistry confirms growth course

The Chemistry Division generated net sales for the year of CHF 79.4 million, a 5.3% improvement on 2017. The division benefited from high investment activities in the energy sector and the growing demand for molecular sieves for oxygen purification purposes. As a result, its production capacities in the USA and China were fully utilized throughout the year. The division assimilated the Chinese molecular sieve distribution activities, which it had acquired from Shanghai Yusheng Chemical and the deuterated product business of new acquisition Armar, and also moved into its new Swiss site. The new manufacturing plants in Zvornik (Bosnia and Herzegovina) and Rüti (Switzerland) ramped up their production in the first and fourth quarters respectively. The successful realignment of the Chemistry Division has already had a sustainable impact on its profitability: for the third year in succession, the division reported a positive EBIT result that was a substantial improvement on the previous year. Divisional EBIT margin for 2018 amounted to 7.7%.

Paper sees broad balance between supply and demand

The Paper Division increased its annual production 1.3% to 543 554 tonnes, and sold 542 126 tonnes of newsprint and magazine paper in the course of the year. With supply and demand broadly balanced in both product areas, paper prices were up on their prior-year levels. This boosted the division’s net sales, which increased by 14.0% to CHF 301.1 million. On the expenditure front, despite higher prices, the costs of recovered paper were reduced because, following the division’s acquisition of the activities of Papierfabrik Utzenstorf on 1 January 2018, some 81% of this key raw material was sourced in Switzerland, with correspondingly lower transport costs. Energy costs rose, while a weakening of the Swiss franc against the euro had a positive impact on earnings. The favourable business developments were duly reflected in a divisional EBIT margin of 10.0%.

Packaging substantially raises earnings

Demand for medicines continued to grow in 2018, and so did the demand for the films used in manufacturing their blister packs. The growth showed regional variations, however, with the highest rates recorded in the emerging Asian and Latin American markets. The Packaging Division increased its net sales for the year 17.5% to CHF 153.0 million, and substantially raised its EBIT margin to 10.1%. The division invested in enhancing the productivity of its European plants and raised the utilization of its Chinese manufacturing facility to handle the higher demand. Operations were also expanded to Brazil with the acquisition of the Sekoya company and the opening in autumn of a new Anápolis plant. The division’s new Perlamed BLISTair single-use powder inhaler continued to win further innovation prizes, including the packaging industry’s most prestigious distinction, the World Packaging Award.

Efficiency further enhanced

The prices of key raw materials such as recovered paper, energy and ethylene all rose in 2018. At least part of these increases could be passed on to the markets. That the cost of materials compared to production-generated sales was reduced from 54% to 49% was due largely to the favourable developments in the Paper Division. While workforce numbers were increased from 1 019 to 1 081, personnel cost declined from 18% to 17% as a proportion of total costs. The new recruits primarily strengthened the Packaging Division, which now employs over 400 personnel. The strong demand and high plant utilizations entailed additional production shifts. With efficiency showing positive trends in all three divisions, consolidated EBITDA for the year was raised 146.2% to CHF 83.1 million, and EBITDA margin improved to 15.6%.

A record operating result

After ordinary depreciation and amortization of CHF 31.5 million, the Group reported consolidated earnings before interest and taxes (EBIT) of CHF 51.6 million, a CHF 48.7 million improvement on the prior-year result. “Our consolidated EBIT result and our EBIT margin of 9.7% are the highest the CPH Group has ever achieved since its stock exchange listing in 2001,” notes Peter Schildknecht. The financial result was slightly below its prior-year level at CHF – 6.0 million. With no major real estate disposals (unlike in 2017), the non-operating result declined from CHF 22.8 million to CHF 0.1 million. Despite this, however, the net result for the year was improved from CHF 16.2 million to CHF 42.3 million.

CHF 1.80 dividend proposed

The Board of Directors will propose to the Ordinary General Meeting of 19 March 2019 that a dividend of CHF 1.30 (double the 2017 amount) per share be distributed for the 2018 financial year, and that a further special dividend of CHF 0.50 per share be awarded to mark the 200th anniversary of the CPH Group. Both dividends will be paid from the capital contribution reserve.

CPH Group refinances its Swiss-franc bond

The CPH Group had liquid funds of CHF 89.0 million and an equity ratio of 51% at the end of 2018. To secure its long-term outside financing, the Group issued a CHF 100 million five-year 2% corporate bond in autumn 2018. The proceeds from this are intended to refinance the current CHF 120 million 2.75% bond, which matures in summer 2019. A total of CHF 22.4 million was invested in tangible fixed assets in 2018, largely to enhance efficiency and to establish and develop the new Rüti and Anápolis sites. The Group generated a cash flow of CHF 69.0 million and a free cash flow of CHF 18.3 million.

Encouraging outlook for 2019

In view of its current order book health, the CPH Group expects to see a continuation of the present positive business trends in the first half of 2019. “Provided prices and currencies remain stable, we should see a slight further increase in our net sales this year,” says Peter Schildknecht. “It will be challenging, however, to maintain our EBIT margin at its 2018 level.” Thanks to higher non-operating income, the net result excluding extraordinary influences is likely to be broadly in line with its prior-year level. The Group plans to invest a further CHF 29.9 million in tangible fixed assets during the year, to further enhance efficiencies and raise production capacities.

CPH Chemie + Papier Holding AG
Dr. Peter Schildknecht, CEO, +41 41 455 8757
Richard Unterhuber, CFO, +41 455 87 53,
Christian Weber, Head of Corporate Communications, +41 41 455 8751,

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