Business Year 2012: A sound performance in a difficult market environment

The CPH Group generated net sales from continued operations of CHF 487.9 million for 2012, a 1.2% increase on the previous year that was achieved in a difficult business environment. Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) were raised 1.9% to CHF 38.5 million. Consolidated earnings before interest and taxes (EBIT) were a 7.7% improvement on 2011, but remained clearly negative at CHF -21.8 million. The net result for the year was improved to a profit of CHF 8.1 million, thanks to non-recurring items. The Board of Directors will recommend the distribution of an unchanged dividend of CHF 13.00 per share.

Perlen, 22 March 2013 – The CPH Group was faced with declines in demand in the core European markets of two of its three business segments in 2012. The markets concerned accounted for 61% of net sales for the year. But the decline in the Group’s overall net sales from the CHF 520.9 million of 2011 to CHF 488.7 million was due not to market trends but to the sale towards the end of 2011 of its fine chemistry operations, which had accounted for CHF 39 million of the prior year’s net sales. In terms of its continued operations, the CPH Group’s 2012 net sales of CHF 487.9 million were a 1.2% improvement on the previous year.

“The further increases in the sales and earnings of our Chemistry and Packaging divisions are very encouraging,” says Peter Schildknecht, CEO of the CPH Group. “And our favourable results here are attributable in no small part to the continuation of our efficiency enhancement programmes and our focus on higher-margin products. On the paper front, the gains from the additional 31,000 tonnes that we managed to sell in 2012 were unfortunately nullified by the declines in paper prices. But, thanks to further operational progress, our Paper Division was still able to maintain its EBIT result at its prior-year level.”

Materials, energy and personnel costs are the biggest expense items for the internationally active CPH Group. While it still amounted to 52% of net sales, the cost of materials for the Group’s continued operations was reduced in 2012 through a combination of lower raw materials prices and cost-cutting endeavours on the procurement front. At the same time energy costs rose to 16.5% of sales, largely as a result of Swiss electricity price trends. Personnel cost in 2012 remained virtually unchanged at 17% of sales. As a result of these developments, CPH achieved a consolidated EBITDA of CHF 38.5 million in its continued operations (up 1.9% on 2011), and its EBITDA margin showed a corresponding slight increase to 7.9%.

Earnings substantially affected by currency trends
Currency movements were generally less volatile in 2012, thanks to the consistent intervention of the Swiss National Bank. But while the US dollar regained some ground against the Swiss franc, the euro/franc exchange rate remained extremely low. For the CPH Group, which incurs 70% of its costs in Switzerland but makes 80% of its sales elsewhere, the strength of the franc continues to be a substantial business burden. After depreciation and amortization amounting to CHF 60.3 million, the Group posted a consolidated EBIT for its continued operations of
CHF -21.8 million (compared to CHF -23.6 million for 2011). EBIT margin improved accordingly, from -4.9% to -4.5%.

Non-recurring items boost net result
CPH sold building land in Buchrain (Lucerne) which was no longer required for its business operations in the course of 2012. The Group also contributed building land and ecological compensation areas to the Renergia project to construct a new waste incineration facility for Central Switzerland in Perlen/Root. The corresponding proceeds were used to pay down the bank loans associated with the acquisition of the PM 7 paper machine. As a result, the Group’s net financial debt was reduced by 41.4% to CHF 80.3 million, and its equity ratio rose from 71% to 73%. Interest payments were also diminished accordingly, and the financial result was improved from the CHF -12.1 million of 2011 to CHF -6.1 million.

The sale of the Group’s fine chemistry operations towards the end of 2011 did not include Dublin-based BioUETIKON Ltd., whose business operations were ceased in the second quarter of 2012. The bulk of the CHF 5.0 million provision effected in 2011 for such action was ultimately not required, enabling CHF 4.1 million thereof to be released in 2012.

These non-recurring items had a positive impact on the CPH Group’s net result for the year, which was improved from the CHF 18.0 million loss of 2011 to a profit of CHF 8.1 million.

Free cash flow almost doubled
After the sizeable investments of previous years in the PM 7 paper machine, capital spending was substantially reduced in 2012 to CHF 10.1 million. All three divisions also continued to make their contribution to enhancing the Group’s net working capital, which was reduced by CHF 13.1 million. Free cash flow amounted to CHF 62.1 million, compared to CHF 33.6 million a year before. Personnel numbers at the Group’s five operating sites remained virtually unchanged at 849 employees.

Chemistry: focus on quality reaps rewards
Following the disposal of the Group’s fine chemistry operations, the Chemistry Division is now primarily active in the silicate chemistry field, while its “other chemistry” operations comprise the manufacture of fertilizers and deuterated solvents. The division raised its net sales from continued operations 8.9% to CHF 67.1 million. Its focus on high-margin products and markets also paid off: divisional EBIT for the year was improved from CHF -2.2 million to CHF 0.1 million.

Paper: margins eroded by overcapacities
The demand for newsprint and magazine paper declined by over 10% in Western Europe in 2012. The resulting overcapacities had a correspondingly adverse impact on paper prices. So although its 508,896 tonnes of paper sold represented a 6.6% increase on 2011, the Paper Division’s net sales for the year were virtually unchanged at CHF 314.3 million. While all its paper products were manufactured in Switzerland, the division exported 80% thereof to Media release on the 2012 annual results of the CPH Group Page 2 / 4 22 March 2013
customers abroad (compared to 78% in 2011); and, since most of these sales were invoiced in euros, the strength of the Swiss franc also depressed earnings, resulting in an unchanged EBIT for the year of CHF -24.8 million.


Packaging: stronger earnings and greater market share
The growth in the market of blister packagings for the pharmaceuticals sector has slowed recently all over the world. In the key European market, the volumes of PVC-based medical packagings sold in 2012 were a full 2.5% below their prior-year levels. CPH’s Packaging Division performed well in this challenging market environment, raising its annual net sales 0.7% to CHF 106.5 million. The enhanced product mix and the corresponding improvement in sales margins also impacted positively on divisional EBIT for the year, which was increased 33.9% to CHF 5.0 million.

Outlook for 2013
The business prospects for CPH’s Paper Division remain as challenging as ever. The continuing decline in the demand for paper products will further intensify the sector’s predatory competition. Paper prices are not expected to recover substantially any time soon, and even the shutdown of paper machines already announced for mid-year are unlikely to have much market impact in 2013. The efficiency enhancement programme that the division has embarked on will, however, deliver a number of operational improvements. The Chemistry and Packaging divisions will continue to pursue their current business strategies, focusing on higher-value products and tapping new extra-European markets. But in view of the anticipated trends within its Paper Division, the CPH Group expects to post a further clearly negative consolidated EBIT result for the 2013 business year.


CPH Chemie + Papier Holding AG
Dr. Peter Schildknecht, CEO, +41 41 455 87 57
Michel Segesser, Head of HR & Communications, +41 41 455 87 51

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