News Column

Annual Financial Report

February 27, 2014

FRANKFURT, Germany--(BUSINESS WIRE)--



Styrolution Group GmbH

Unaudited Presentation of Results of Operations, Financial Position and Cash flow – three and twelve months ended 31 December 2013

Forward Looking Statements

The following presentation includes “forward-looking statements”, based on our current expectations and projections about future events, including:

  • the cyclical nature of our businesses and their sensitivity to changes in supply and demand;
  • raw material availability and costs, as well as supply arrangements, including arrangements with principal feedstock suppliers;
  • the highly competitive nature of our principal industries;
  • current or future environmental requirements, including those related to greenhouse gas and other air emissions, and the related costs of maintaining compliance and addressing liabilities;
  • currency fluctuations and economic downturns in the countries in which we operate;
  • our ability to implement our business and cost reduction strategies;
  • our ability to successfully integrate our businesses and realize anticipated synergies and cost savings; and
  • our substantial indebtedness following the consummation of the Joint Venture Transaction may affect our ability to service our outstanding indebtedness, which would likely impact the way we operate our business.

    All statements other than statements of historical facts included in this presentation, without limitation, statements regarding our future financial position, risks and uncertainties related to our Company and the notes, strategy, capital expenditures, projected costs and our plans and objectives for future operations, may be deemed to be forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties. Words such as “believe,” “expect,” “anticipate”, “may”, “intend”, “will”, “should”, “estimate” and similar expressions or the negatives of these expressions are intended to identify forward-looking statements. In addition, from time to time we or our representatives, acting in respect of information provided by us, have made or may make forward-looking statements orally or in writing and these forward-looking statements may be included in but are not limited to press releases (including on our website), reports to our security holders and other communications. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

    Reporting entity

    Styrolution Group GmbH (‘Group GmbH’ or the ‘Company’) is an intermediate holding Company which is wholly owned by Styrolution Beteiligungs GmbH, a wholly owned subsidiary of Styrolution Holding GmbH. Styrolution Holding GmbH is a joint venture ultimately owned by two shareholders, INEOS Industries Holdings Ltd., a subsidiary of INEOS AG, and BASF SE (“BASF”). INEOS Industries Holdings Ltd. (“INEOS”) owns 50% of the shares of Styrolution Holding GmbH. BASF SE directly owns 18.09% of the shares of Styrolution Holding GmbH and indirectly through BASF Antwerpen N.V. (a wholly owned subsidiary) another 31.91%. The Company is domiciled in Germany and has its registered office at Erlenstrasse 2, 60325 Frankfurt am Main, Germany. The Company was formed on 19 April 2011.

    The Unaudited Presentation of Results of Operations, Financial Position and Cash flow (“presentation”) comprise the Company and its subsidiaries (together referred to as the ‘Group’ and individually as ‘Group entities’). The Group is the leading global producer, marketer and merchant seller of styrene monomer and styrenics polymers.

    Styrolution Group GmbH – Unaudited Presentation of Results of Operations, Financial Position and Cash flow

    Consolidated Statement of Income for the three and twelve months ended 31 December 2013

    In millions of EUR    

    1 October to

       

    1 January to

         

    31 December 2013

       

    31 December 2013

     
    Revenue 1,335.7 5,837.2
    Cost of sales     (1,182.0)     (5,223.7)
    Gross profit153.7613.5
     
    Selling expenses (60.7) (265.8)
    General and administrative expenses (24.8) (100.8)
    Research and development expenses (3.7) (13.7)
    Other operating expenses (net)     (21.5)     (38.3)
    Income from operating activities43.0194.9
    Interest income 0.5 3.6
    Interest expense (13.0) (48.9)
    Other finance loss (net) (15.7) (23.7)
    Net finance costs(28.2)(69.0)
                 
    Income before tax14.8125.9
    Income tax benefit (expense)     14.8     (10.5)
    Net income29.6115.4
    Attributable to:

    Non-controlling interests

       

    0.2

       

    1.3

    Owners of the company     29.4     114.1
     

    Styrolution Group GmbH – Unaudited Presentation of Results of Operations, Financial Position and Cash flow

    Consolidated Statement of Financial Position

    In millions of EUR     31 December 2013     31 December 2012
    Assets        
    Property, plant and equipment 790.0 799.6
    Intangible assets and goodwill 1,195.7 1,312.0
    Deferred tax assets 32.8 25.4
    Other receivables and miscellaneous non-current assets 17.0 25.3
    Non-current assets     2,035.5     2,162.3
     
    Inventories 499.6 581.4
    Accounts receivable, trade 651.9 682.5
    Other receivables and miscellaneous current assets 147.2 138.4
    Cash and cash equivalents 288.1 190.1
    Current assets     1,586.8     1,592.4
    Total assets     3,622.3     3,754.7
     
    Equity
    Share capital 10.0 10.0
    Contributed surplus 1,641.4 1,641.4
    Other reserves (26.2) 17.3
    Retained earnings (accumulated deficit)     71.0     (38.0)
     
    Equity attributable to owners of the Company1,696.21,630.7
    Non-controlling interests 12.6 6.8
    Total equity     1,708.8     1,637.5
     

    Liabilities

    Financial indebtedness 481.0 470.6
    Employee benefits 40.1 60.9
    Deferred tax liabilities 344.6 407.0
    Other liabilities and other long term provisions 46.4 89.0
    Non-current liabilities     912.1     1,027.5
     

    Accounts payable, trade

    506.7

    531.2

    Financial indebtedness 268.7 359.1
    Current tax liabilities 59.2 35.9
    Other liabilities and short term provisions 166.8 163.5
    Current liabilities1,001.41,089.7
    Total liabilities     1,913.5     2,117.2
     
    Total equity and liabilities     3,622.3     3,754.7
     

    Styrolution Group GmbH – Unaudited Presentation of Results of Operations, Financial Position and Cash flow

    Consolidated Statement of Cash Flow

    In millions of EUR    

    1 January to

       

    1 January to

         

    31 December 2013

       

    31 December 2012

    Cash flows from operating activities
    Income before tax 125.9 82.6
    Adjustment for:
    Depreciation of property, plant and equipment 105.3 112.7
    Amortization of intangible assets 105.8 56.3
    Change in other receivables (19.4) 3.2
    Change in pension provisions, other liabilities and charges (53.9) 6.7
    Net finance cost 69.0 47.9
    Current income tax paid     (64.8)     (58.4)
    Working capital adjustments:

    - Inventories

    60.6 (123.3)

    - Trade receivables

    21.4 75.2

    - Trade payables

        (25.9)     (72.6)
    Cash generated from operating activities324.0130.3
    Interest paid     (39.7)     (44.9)
    Net cash flows from operating activities     284.3     85.4
    Cash flows from investing activities
    Investments in property, plant and equipment and intangible fixed assets (123.9) (127.9)
    Proceeds from disposal of property, plant and equipment and intangible assets 0.7 0.7
    Repayment of other investments (0.5) 0.0
    Receipt of other investments 0.0 3.2
    Proceeds from sale of disposal group (ELIX)     0.0     22.1
    Net cash flows used in investing activities     (123.7)     (101.9)
    Cash flows from financing activities
    Share purchase India 0.0 (6.6)
    Share sales India 12.7 0.0
    Receipt (repayment) from asset securitization (net) (83.6) 4.9
    Repayment of borrowings from related parties 0.0 (106.5)
    Receipts of receivables from related parties 22.4 29.1
    Receipt of other borrowings 16.4 63.4
    Repayment of other borrowings (23.6) (44.2)
                 
    Net cash flows used in financing activities     (55.7)     (59.9)
    Net changes in cash and cash equivalents     104.9     (76.4)
    Cash and cash equivalents at the beginning of the period 190.1 266.0
    Effect of exchange rate fluctuations on cash held     (6.9)     0.5
    Cash and cash equivalents at 31 December     288.1     190.1
     

    Presentation of the Styrolution fourth quarter 2013 business s results of operation

    The Company prepared this discussion and analysis of its results of operations by comparing its unaudited presentation of results of operations, financial position and cash flow for the three months ended 31 December 2013 to the unaudited presentation of results of operations, financial position and cash flow for the three months ended 31 December 2012. Additionally the Company prepared a discussion and analysis of its results of operations by comparing its unaudited presentation of results of operations, financial position and cash flow for the twelve months ended 31 December 2013 to the corresponding period of 2012.

           
    In millions of EUR

    1 October to

    1 October to

         

    31 December 2013

       

    31 December 2012

     
    Revenue 1,335.7 1,435.6
    Cost of sales     (1,182.0)     (1,302.4)
    Gross profit153.7133.2
     
    Selling expenses (60.7) (71.1)
    General and administrative expenses (24.8) (26.7)
    Research and development expenses (3.7) (1.8)
    Other operating expenses (net)     (21.5)     (0.8)
    Income from operating activities43.032.8
    Interest income 0.5 5.6
    Interest expense (13.0) (18.1)
    Other finance loss (net) (15.7) (7.0)
    Net finance costs(28.2)(19.5)
                 
    Income before tax14.813.3
    Income tax expense     14.8     (10.4)
    Net income29.62.9
    Attributable to:

    Non-controlling interests

       

    0.2

       

    0.3

    Owners of the company     29.4     2.6
     


    Presentation of the Styrolution twelve months 2013 business results of operation

               
    In millions of EUR

    1 January to

    1 January to

         

    31 December 2013

       

    31 December 2012

        %
     
    Revenue 5,837.2 5,989.5 (2.5)
    Cost of sales     (5,223.7)     (5,415.5)     (3.5)
    Gross profit613.5574.06.9
     
    Selling expenses (265.8) (316.0) (15.9)
    General and administrative expenses (100.8) (86.6) 16.4
    Research and development expenses (13.7) (11.3) 21.2
    Other operating expenses (net)     (38.3)     (23.2)     65.1
    Income from operating activities194.9136.942.4
    Interest income 3.6 5.8 (37.9)
    Interest expense (48.9) (53.8) (9.1)
    Other finance loss (net) (23.7) (6.3) >100.0
    Net finance costs(69.0)(54.3)27.1
                       
    Income before tax125.982.652.4
    Income tax expense     (10.5)     (33.0)     (68.2)
    Net income115.449.6>100.0
    Attributable to:

    Non-controlling interests

       

    1.3

       

    1.0

       

    30.0

    Owners of the company     114.1     48.6     >100.0
     


    Revenue: Revenue in the fourth quarter of 2013 amounts to EUR 1,335.7 million, a decrease of EUR 99.9 million or (7.0)% compared to EUR 1,435.6 million in the fourth quarter 2012. The revenue decrease resulted mainly from the lower EMEA Styrene Monomer and Polysytrene volumes as the Marl facility was closed during the fourth quarter of 2012.

    As a result of the closure, the Group was able to use a relatively higher portion of Styrene Monomer for its internal demand and sold less into the market. The Group´s revenue in 2013 was also impacted by the Texas City turnaround, albeit to a lesser extent.

    Polystyrene sales decreased because the company follows a value approach strategy mainly in EMEA and Americas.

    ABS revenues and volumes improved mainly in Asia compared with previous year due to a scheduled maintenance shutdown at the Ulsan plant in 2012. This effect was offset by both weak re-export market demand from China and current oversupply in Asia putting pressure on margins

    Specialties revenues and sales volumes increased across all product lines in the fourth quarter 2013 compared to the fourth quarter 2012. The strongest increases were in EMEA, because of stronger focus on profitable market segments and applications and in Asia because of stronger demand in India and from good automotive sector demand in China.

    Revenues by segment:

               
     
    In millions of EUR    

    1 October –

    31 December 2013

       

    1 October –

    31 December 2012

        %
    Polymers EMEA 458.1 490.2 (6.5)
    Polymers Americas 291.7 326.9 (10.8)
    Polymers Asia 259.2 242.8 6.8
    Styrene Monomer     326.7     375.7     (13.0)
    Revenue     1,335.7     1,435.6     (7.0)
     

    Revenues by product:

     
    In millions of EUR    

    1 October –

    31 December 2013

       

    1 October –

    31 December 2012

        %
    Acrylonitrile Butadiene Styrene 196.4 186.0 5.6
    Polystyrene 530.7 602.9 (12.0)
    Styrene Monomer 326.7 375.7 (13.0)
    Specialties     281.9     271.0     4.0
    Revenue     1,335.7     1,435.6     (7.0)
     


    Cost of Sales: Cost of sales decreased by EUR 120.4 million, or 9.2%, to EUR (1,182.0) million compared to EUR (1,302.4) million in the previous year. This decrease is also due to lower volume as a result of the Marl closure and the Group´s value approach strategy.

    Cost of sales includes impacts resulting from purchase prices allocations at the formation of the Styrolution joint venture. The cost of sales impact for the fourth quarter 2013 was EUR 24.1 million compared to EUR 15.7 million in the fourth quarter of 2012. This increase was mainly due to higher depreciation and amortization costs.

    Gross profit: Gross profit increased by EUR 20.5 million, or 15.4% to EUR 153.7 million compared to EUR 133.2 million in the previous year. The Group was able to improve its polymer margins in the fourth quarter 2013 in all regions and all businesses, except for margins of ABS Standard and Polystyrene products in Asia. The Group benefited mainly from synergy advantages and a margin over volume strategy. These effects were mainly visible in the Americas and EMEA.

    The gross profit of the styrene business increased significantly, because of better market conditions in EMEA. Gross profit was significantly up as a result of much stronger margins driven by tighter supply balances due to competitor outages and low Propylene Oxide Styrene Monomer (POSM) rates in Europe. This was partly offset by the planned Texas City turnaround and slightly negative flow through.

    Selling expenses: Selling expenses decreased by EUR 10.4 million or 14.6% to EUR (60.7) million compared to EUR (71.1) million in the previous year. The decrease mainly reflects lower freight and selling costs. Freight costs in 2013 were lower because of lower styrene monomer sales volumes as a result of the Marl closure.

    General and administrative expenses: General and administrative expenses decreased by EUR 1.9 million, or 7.1%, to EUR (24.8) million compared to EUR (26.7) million in the previous year. The decrease was caused by implemented synergies such as the reduction in service level agreements, IT harmonization and optimization of the organisation.

    Research and development expenses: Research and development expenses increased by EUR 1.9 million, or 105.6%, to EUR (3.7) million compared to EUR (1.8) million in the previous year because of unusually low expenses in the fourth quarter of 2012. Research and Development costs of the fourth quarter of 2013 are in line with the normal spending pattern of the Group.

    Other operating expenses: Other operating expenses were EUR (21.5) million, an increase of EUR 20.7 million compared to other operating expenses of EUR (0.8) million in the previous year. The operating expenses of the fourth quarter 2013 primarily include special items related to the IT integration, termination cost for the Marl tolling agreement and legal expenses.

    EBITDA before special items: EBITDA before special items increased by EUR 38.3 million, or 45.6%, from EUR 83.9 million to EUR 122.2 million. The fourth quarter of 2013 was an acceptable volume and margin quarter in an uncertain economic environment. The increase is mainly due to improved performance as a result of the margin over volume strategy and synergy effects.

    Reconciliation of EBITDA before special items to income (loss) before tax:

    In millions of EUR    

    1 Oct -

    31 Dec 2013

       

    1 Oct -

    31 Dec 2012

       

    1 Jan -

    31 Dec 2013

       

    1 Jan -

    31 Dec 2012

                   
    EBITDA before special items 122.283.9442.2334.6
    Special items (restructuring expenses) (19.7) (9.9) (36.2) (28.7)
    Depreciation and Amortization (59.5) (41.2) (211.1) (169.0)
    Income from operations43.032.8194.9136.9
    Net finance costs     (28.2)     (19.5)     (69.0)     (54.3)
    Income before tax     14.8     13.3     125.9     82.6
     


    EBITDA represents income from operations plus depreciation of property, plant and equipment and amortization of intangible assets. EBITDA before special items represents EBITDA less special items. Although EBITDA and EBITDA before special items should not be considered substitute measures for profit and net cash flow from operating activities, we believe that they provide useful information regarding our ability to meet future debt service requirements. EBITDA and EBITDA before special items may not be comparable to similarly titled measures used by other companies.

    LIQUIDITY AND CAPITAL RESOURCES

    The cash flow statement is prepared in accordance with the indirect method. Cash and cash equivalents do not include deposits and guarantees that are not immediately available. These amounts are included in other receivables.

    Cash provided from operating activities

    Cash provided from operating activities by the Group in the year 2013, excluding interest payments increased by EUR 193.7 million or more than 100% to EUR 324.0 million. The cash flows provided from operations were significantly higher than the result from operations on the income statement due to material depreciation and amortization amounts included in the result from operations. The increase in cash flows from operating activities was driven by a significantly stronger operating performance that is accompanied by a reduction of working capital. In an environment of higher feedstock prices the Group had a negative cash flow for working capital changes of EUR 120.7 million in 2012 whereas in the reporting period changes in working capital resulted in a positive cash flow of EUR 56.1 million.

    Cash used in investing activities

    The cash used in investing activities consists of investment activities in tangible fixed assets (EUR 112.6 million) and internal use software (EUR 11.3 million).

    Cash used in financing activities

    The Group used cash flow in financing activities primarily to reduce the balance from asset securitizations by EUR 83.6 million, partly offset by EUR 22.4 million collections on receivables from shareholders that resulted from the formation of the joint venture and receipts of EUR 12.7 million for a partial sale of some shares in its subsidiary in India.

    Financing of Styrolution

    The financing of the Group is mainly through the issuance of Senior Secured Notes of EUR 480 million, a Trade Receivables Securitization Facility (up to EUR 500 million) and ancillary lines for instruments such as guarantees and letters of credit.

    The financing of Styrolution and the use of funds at the end of December 2013 of the Group was as follows:

    In millions of EUR     31 December 2013     31 December 2012
    Senior secured bond*     480.0     480.0
    Short term borrowings from asset securitizations 250.6 334.2
    Other Financing 26.0 24.9
    Total Financing756.6839.1
    Cash and cash equivalents     (288.1)     (190.1)
    Net Debt*     468.5     649.0
     


    * Net debt includes the notional amount of the senior secured bond rather than the carrying amount in accordance with IFRS which is lower than the notional amount due to debt issuance cost that are amortized over the term of the bond.



    STYROLUTION GMBH

    Source: STYROLUTION GMBH


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