in CHF million	2018	2019	+/- in CHF	+/- in %
Net sales	533.5	524.7	-8.9	-1.7
Earnings before interest, taxes, depreciation and amortization (EBITDA)	83.1	88.0	4.9	5.9
in % of net sales	15.6	16.8
Earnings before interest and taxes (EBIT)	51.6	56.6	5.0	9.6
in % of net sales	9.7	10.8
Net result for the year	42.3	48.5	6.2	14.6
in % of net sales	7.9	9.2

Perlen, 25 February 2020 – The 2019 financial year saw a gradual deterioration in overall economic conditions that was not without its impact on the business of the CPH Group. Production facilities were well used in the first six months; but their utilization levels declined in all three divisions in the second-half period, while pricing pressures increased. As a result, the Group’s total net sales for the year of CHF 524.7 million were 1.7% below their 2018 level. “If we exclude the 1.3-per-cent negative impact of currency movements, however, our net annual sales were virtually unchanged,” says Peter Schildknecht, CEO of CPH Chemie + Papier Holding AG.

Chemistry earnings dampened by economic developments

Having reported rising sales and strong capacity utilizations for the first half of the year, the Chemistry Division saw a clear decline in its business in the second-half period in a less favourable overall economic environment. The additional tariffs imposed through the trade dispute between the USA and China depressed chemistry sales volumes. The CHF 78.2 million net sales for the year were 1.5% below their 2018 level. Sales of deuterated products and gels, however, remained strong throughout. With the falling utilizations and pricing pressures, the division’s EBIT margin declined to 5.6%.

Paper raises its EBIT margin

The demand for newsprint in Western Europe suffered a further 7.5% decline in 2019 to 4.3 million tonnes. Demand for magazine paper fell by an even higher 11.7% to 3.4 million tonnes. The CPH Group’s Paper Division sold 517 165 tonnes of press papers, a 4.3% year-on-year decline. While higher paper prices helped raise sales in the first-half period, the growing industry overcapacities depressed these as the year progressed, and Europe’s paper production facilities were no longer fully utilized. Numerous manufacturers – including Perlen Papier – responded with temporary production stops. Net annual sales for the Paper Division declined 2.6% to CHF 293.2 million. The division’s EBIT margin for the year was raised to 11.8%, however, thanks to a combination of increased efficiencies and lower energy and recovered paper costs.

Packaging improves sales and earnings

The demand for medicines remained stable in Europe in 2019, while growth rates slowed in the emerging markets. The Packaging Division sold the same volumes of its films as it had the previous year, but the higher proportion of high-value films sold had a positive impact on the division’s net sales for the year. Excluding currency factors, net sales for the year rose 1.7% to CHF 153.2 million. Net sales for Latin America saw double-digit percentage growth. Raw materials costs were slightly below their prior-year level, and EBIT margin was improved to 11.3%.

A record net group result

The CPH Group invested CHF 21.9 million in tangible fixed assets in 2019 to further enhance the efficiency of its facilities and processes. The Group generated a cash flow of CHF 79.9 million and a free cash flow of CHF 39.9 million (excluding the repayment of the CHF 100 million fixed-term deposit). The costs of the key production item of recovered paper declined in 2019, while the cost of materials was reduced from 50% to 49% of production-generated group sales. With workforce numbers rising only minimally from 1081 to 1086, personnel cost remained unchanged as a share of total group expense.

While sales declined, overall expenditure was reduced slightly more, and consolidated annual EBITDA rose 5.9% to CHF 88.0 million. After ordinary depreciation and amortization of CHF 31.4 million, the CPH Group reported consolidated earnings before interest and taxes (EBIT) of CHF 56.6 million for the year, a 9.6% improvement on 2018. “This gives us an EBIT margin for 2019 of 10.8 per cent – the first double-digit EBIT margin we have recorded since the CPH share’s stock exchange listing,” comments Peter Schildknecht. “And two of our three business divisions posted record earnings for the year.” The financial result was slightly down on 2018 at CHF –5.6 million. After the non-operating result and taxes, the Group posted a net result for 2019 of CHF 48.5 million, a 14.6% improvement on the previous year.

Distribution of CHF 1.80 per share through reduction in nominal value

The Board of Directors of CPH Chemie + Papier Holding AG will recommend to the Ordinary General Meeting of 17 March 2020 that the nominal value of the CPH share be reduced from CHF 2.00 to CHF 0.20, and that the CHF 1.80 reduction amount per share be repaid to shareholders. The prior-year dividend also amounted to CHF 1.80 per share, including a special dividend of CHF 0.50.

Outlook for 2020

“Given the current uncertain economic trends, the less-than-bright market outlook in the paper industry and the as yet unforeseeable ramifications of the coronavirus, we see little prospect of maintaining our 2020 group net sales at their prior-year levels, and are likely to see a tangible decline in our operating margin,” concedes Peter Schildknecht. The Group expects to report a net result for 2020 (excluding the extraordinary income expected) of a lower double-digit million-franc amount. The Group also plans total investments of CHF 29.4 million in tangible fixed assets in the course of the year, to further enhance efficiency and expand its business activities.

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