PR Newswire/Les Echos/ press release Mersen: 2014 half-year results * Sales down 1.6 in organic, up 2% excluding chemicals * Slight improvement in operating margin before non-recurring items * Net income affected as expected by Transform plan
Paris, July 31, 2014- Mersen (Euronext FR0000039620 - MRN), a global expert in electrical specialties and graphite-based materials, today published its sales for the second quarter and results for the half- year for the period that ended on June 30, 2014. Key figures (In millions of euros) H1 2014 H1 2013 Sales 362.1 377.0 Organic growth -1.6% Operating income before non- 29.8 30.6 recurring items % of Sales 8.2% 8.1% Net income attributable to Group equity holders 0.2 11.5 Free cash flow 1.0 4.7 "Demand showed the first signs of recovery in the first half of the year if we exclude the chemicals business, which is currently at the bottom of an investment cycle. Operating margin before non-recurring items has increased slightly compared with the first half of 2013. Mersen expects demand to be stronger in the second half of the year, with Americasand the electronics market performing well. As a result, our guidance of slight growth in sales and operating margin before non-recurring items remains unchanged, but is more challenging given a sluggish business in the chemicals market. The Transform plan is also being rolled out on schedule and I am confident that it will help to improve the company's position," stated Luc Themelin, Chairman of Mersen's Management Board. Second quarter 2014 sales Second quarter 2014 sales were down 2.2% at constant scope and exchange rates compared with the second quarter of 2013. In terms of reported figures, sales were down 4.4%, reflecting a negative exchange rate effect (-3.6%) that was partly offset by the positive impact of integrating Cirprotec. Excluding the chemicals business, which includes the Sabic contract, the Group posted more than 2% growth for the quarter at constant scope and exchange rates. In organic terms, second quarter 2014 sales increased by nearly 1% compared with the first quarter of 2014. Total Organic (In millions of euros) Q2 2014 Q2 2013 growth growth Materials segment 67.8 76.9 -11.8% -9.1% Electrical segment 114.2 113.6 0.6% 2.4% Total Group 182.0 190.5 -4.4% -2.2% Europe 69.5 70.6 -1.5% -3.8% Asia Pacific 40.8 40.2 1.5% 5.9% North America 63.2 68.7 -7.9% -2.6% Rest of the World 8.5 11.0 -23.5% -19.7% Total Group 182.0 190.5 -4.4% -2.2% First half 2014 sales In the first half of 2014, Mersen's consolidated sales amounted to EUR362.1 million. On a like-for-like basis, this figure was in line with the second half of 2013, but down by 1.6% compared with the first half of 2013. Total growth includes a negative exchange rate effect amounting to nearly EUR14 millioncompared with the first half of 2013. Excluding the chemicals business, organic growth was about 2% this half-year, thanks to a good performance by other Group businesses. Total Organic (In millions of euros) Q2 2014 Q2 2013 growth growth Materials segment 139.5 153.6 -9.2% -6.3% Electrical segment 222.6 223.4 -0.3% 1.8% Total Group 362.1 377.0 -3.9% -1.6% Europe 143.0 142.7 0.2% -1.7% Asia Pacific 79.3 78.1 1.5% 6.3% North America 123.2 136.3 -9.6% -4.8% Rest of the World 16.6 19.9 -16.5% -9.9% Total Group 362.1 377.0 -3.9% -1.6% Materials segment sales amounted to EUR139.5 million, an organic contraction of 6.3% for the half-year. This decline related primarily to the situation in the chemicals business. Apart from the Sabic contract, whose deliveries end this quarter, this business has been hurt by a low level of new projects. Excluding this market, organic growth was positive for the segment, by more than 3%, in particular in the solar and electronics businesses. Electrical segment sales amounted to EUR222.6 millionat the end of June 2014, up 1.8% on a like-for-like basis. The energy business was particularly strong, most specifically in wind power. Electronics and process industries sales were flat, while rail transport showed a slight decline. In Europe, the situation was in line with the second half of 2013. Excluding the chemicals business (of which Sabic), organic growth in the region exceeded 3% compared with the first half of 2013, and performed well in electronics and, more generally, in Germany. In Asia, the trend is positive, particularly in China, in the solar, wind and process industries businesses. In America, the decrease in activity was mainly due to a slowdown in sales in the chemicals industry, particularly related to shale gas extraction. Excluding the chemicals business, sales were in line with the first half of last year, with growth in electronics and wind being offset by a slowdown in activity due to poor weather conditions at the beginning of the year. First half 2014 results Group operating income before non-recurring items(1) amounted to EUR29.8 million, close to the June 2013level ( EUR30.6 million). Operating margin before non-recurring items was 8.2% of sales, up slightly compared with the first half of 2013 (8.1%). Materials segment operating income before non-recurring items amounted to EUR9.6 million, representing an operating margin of 6.9% of sales, compared with 7.7% for the same period in 2013. This decline was due to reduced volume in chemicals, plus a decline in the price of graphite since the beginning of last year, both of which have been partly offset by a positive mix effect and lower depreciations. Electrical segment operating income before non-recurring items amounted to EUR27.2 million. Operating margin before non-recurring items was 12.2% of sales, a one point increase compared with last year. This rise was due to good price performance and volume recovery. Group EBITDA (2) amounted to EUR47.5 million(13.1% of sales), down compared with June 2013( EUR51.0 millionand 13.5% of sales). Materials segment EBITDA margin was 15.3% of sales, while Electrical segment EBITDA margin was 14.8% of sales. (1) In accordance with definition 2009.R.03 of the French accounting standards authority Net income Net income attributable to Group equity holders amounted to EUR0.2 millionfor the period compared with EUR11.5 millionfor the same period in 2013. Non-recurring income and expenses resulted in a net charge of EUR22.7 million. For the most part, this consisted of provisions for restructuring and impairment related to the Transform plan, a global industrial reorganization plan announced by the Group last January. Mersen's net financial income totaled EUR5.2 millionfor the first half, an improvement compared with the first half of 2013 thanks to a more than EUR15 milliondecline in average net debt at constant exchange rates. The tax charge was EUR2.7 millionfor the half- year, giving an effective tax rate of 33% adjusted for exceptional items relating to the Transform plan. Net income from operations sold or discontinued amounted to EUR1.8 million. This includes an additional payment related to the disposal in 2009 of the automotive brushes business. The net loss of EUR1.7 millionin 2013 had included a contribution from the metal plate heat exchanger and mixer businesses, as well as from the metal pressure vessels business for the nuclear industry sold during the year. Cash and debt Cash flows from operating activities before income tax and change in working capital requirements from continuing operations amounted to EUR43.0 millionin the first half of the year, compared with EUR 47.0 millionfor the first half of 2013. Working capital requirements increased by EUR23.2 millionfor the period (versus an increase of EUR12.1 millionduring the first half of 2013). This change was related to the increase in trade receivables due to the seasonality of sales and billing for certain major anti-corrosion systems, payment for which is scheduled for the second half. Inventory also increased, in line with demand forecasts for the second half of the year. Capital expenditure amounted to EUR11.3 million, in line with forecasts. As a result, net cash flow from operations after capital expenditure generated during the first half of the year amounted to EUR1.0 millioncompared with EUR4.7m in the first half of 2013. Net debt as of June 30, 2014was EUR222.7 millionan increase of EUR11 millioncompared with the end of 2013 including the purchase of a majority stake in Cirprotec,. (2) Operating income before non-recurring items + depreciation charges. Financial position The Group is in a sound financial position: net debt/EBITDA leverage was 2.333 versus 2.07 at the end of 2013. The net debt to equity ratio was 49%3 versus 45% at the end of 2013. Subsequent events On July 16, 2014, Mersen announced that it had re-negotiated the credit lines which had been arranged in July 2012into a single EUR220 millionmulti-currency syndicated loan. The maturity of the Group's syndicated loan has been extended by two years, with the new maturity date set at July 2019. The Group is also enjoying improved financial terms taking advantage of the good environment in the credit markets. With this agreement, Mersen has a total of EUR365 millionof confirmed credit lines, of which more than EUR145 millionare available. The average maturity of the loans is now about five years. Outlook Mersen still expects the second half of the year to be better than the first: the Americasare expected to enjoy more positive conditions and the electronics business to continue growing; in addition, sales for the solar market are expected to be higher than those from last year, as expected. However, the Group must also take into account the fact that the chemicals business is unlikely to recover by the end of the year, given the low level of orders registered in the first half. As a result, Mersen believes that its targets for the year, namely slight growth in sales at constant scope and exchange rates and in operating margin before non-recurring items are achievable but more challenging. The Group also continues to roll out Transform, in line with the initial plan. The estimated cost of this plan is about EUR30 millionover the full year; ultimately, it should improve the Group's operational efficiency and competitiveness prompting an increase in its operating margin before non-recurring items of about 1.5 points (on a level of business comparable with 2013). (3) According to the calculation used for the US$100mprivate placements issued in November 2011and to the syndicated credit facility of July 2012Condensed Consolidated Income Statement June 30, June 30, (In millions of euros) 2014 2013 Consolidated sales 362.1 377.0 Total gross margin 112.8 110.5 Selling, marketing and other costs (36.8) (38.2) Administrative and research costs (46.2) (41.7) Operating income before non-recurring items 29.8 30.6 % of Sales 8.2% 8.1% Non recurring income and expenses, net (22.7) (4.4) Amortization of revalued intangible assets (0.5) (0.6) Operating income 6.6 25.6 Financial income (5.2) (5.6) Current and deferred income tax (2.7) (6.3) Net income from continuing operations (1.3) 13.7 Net (loss)/income from assets held for sale or discontinued operations 1.8 (1.7) Net income for the period 0.5 12.0 Net income attributable to Group equity holders 0.2 11.5 EBITDA 47.5 51.0% of Sales 13.1% 13.5% Segment analysis excluding corporate expenses Materials segment Electrical segment (AMT) (ECT) June 30, June 30, June 30, June 30, (In millions of euros) 2014 2013 2014 2013 Sales 139.5 153.6 222.6 223.4 EBITDA 21.4 26.0 33.0 30.9 % of Sales 15.3% 16.9% 14.8% 13.9% Operating income before non- 9.6 11.8 27.2 25.0 recurring items % of Sales 6.9% 7.7% 12.2% 11.2% Condensed Consolidated Statement of Financial Position (In millions of euros) June 30, Dec. 31, 2014 2013 Non-current assets 620.4 610.7 Inventories 163.9 154.3 Trade and other receivables 147.1 121.5 Other assets 13.6 16.3 TOTAL 945.0 902.8 Equity 448.0 452.8 Provisions 26.9 13.6 Employee benefits 68.2 66.5 Trade and other payables 127.1 118.0 Other liabilities 52.1 39.9 Net debt 222.7 212.0 TOTAL 945.0 902.8 Condensed Consolidated Cash-Flow Statement (In millions of euros) June 30, Dec. 31, 2014 2013 Net cash from operating activities before change in WCR 43.0 47.0 Change in working capital (23.2) (12.1) Income tax paid (7.6) (11.7) Net cash from discontinued operations 0.1 (6.4) Net cash from continuing operations 12.3 16.8 Capital expenditure (11.3) (12.1) Net cash from continuing operations after capital expenditure 1.0 4.7 Impact of changes in the scope of consolidation (4.1) 0.7 Disposals of non-current assets and other (0.7) 0.4 Net cash from/(used by) operating and investing activities (3.8) 5.8 Mersen's first half 2014 financial statements were reviewed by the Supervisory Board on July 30, 2014. They were closed by the Management Board on the same day. The half-year report and presentation are available on the website www.mersen.com Financial calendar 2014 Q3 sales: October 29, 2014after close of trading About Mersen Global expert in electrical specialties and graphite-based materials, Mersen designs innovative solutions to address its clients' specific needs to enable them to optimize their manufacturing process in sectors such as energy, transportation, electronics, chemical, pharmaceutical and process industries. 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