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2006-10-28 News Headlines
Polimoon plastics products
performance and outlook
Developer and seller of plastics products, Polimoon, reports on strong
growth in sales and operating profit, acquisitions, divestment and pending
buy out offer.
Net sales for Polimoon, Oslo, Norway, in Q3 of 771mNOK, some 36% ahead
of 2005, continued the trend of acceptable volumes throughout 2006 with
most entities ahead of last year. After taking into account acquisitions
(representing 171mNOK) and a positive currency effect on translation,
invoiced sales were some 3.5% ahead of last year.
With HDPE and PP polymer prices being some 41% and 24% higher compared
to Q3 2005, it is positive to report a Raw Material margin for Q3 only
some 3 points behind. Furthermore, improved direct labour productivity
ensured that the Gross Profit margin of 36.5% (2005: 37.9%) was only slightly
behind the first half of 2006 even though raw material and energy prices
continued to increase gradually over the quarter. Prices for the Group's
main raw material, HDPE Blow-Moulding, increased by some 7%, with other
polymer groups following a similar trend.
Find
Information and Suppliers of polymer materials.
All five acquisitions concluded since November last year continue to
make a positive contribution. Net financial items of 21mNOK were above
expectations due to fair value accounting ("marked to market")
of forward currency contracts in accordance with IAS 39 which gave rise
to a 3mNOK provision in Q3. With taxes of 5mNOK, giving an effective tax
rate of 19%, profit after tax ended at 21mNOK compared to 13mNOK last
year in line with internal expectations.
Free cash flow in Q3 of 25mNOK (2005: 32mNOK) was behind 2005 in spite
of a higher EBITDA due to exceptional items such as the Danish and UK
restructuring, reported in Q2, and investments in customer tooling projects
in France. Capital investments continued to run at a level of some 4%
of net sales, excluding the one-off UK warehouse investment which was
concluded in Q3. At the end of Q3, free cash flow amounted to 30mNOK (2005:
- 10MNOK).
In early September, we finalised the acquisition
of the French group, Plastohm, for a consideration of 11.6meur (102mNOK,
including transaction costs) for 97.11% of the equity. Since then, we
have secured the purchase of a further 1% of the equity from minority
owners. Due to the time needed for proper integration into the Group's
IAS reporting, Plastohm will not be consolidated into the Group's income
statement until October. A Steering Committee has been established between
Polimoon and Plastohm senior management to monitor the integration process
and restructuring plan, which commenced immediately upon acquisition.
The plan to integrate Plastohm is proceeding as expected. A new management
structure has been communicated and it is intended to finalise restructuring
plans by the beginning of December.
Earlier this week, we announced the signing of an agreement with Rexam
PLC
to acquire their thin walled
packaging businesses in Denmark and Sweden at the end of October 2006
for a consideration in the region of 80mDKK. The business, which has a
strong position in the Nordic market for packaging of dairy products and
cups for beverages in the vending industry, will help to form a strong
food packaging business in the Nordic region together with Polimoon's
existing units. Polimoon will form a food division where we will use our
existing distribution network throughout Europe to promote the product
range in Rexam as well as the Polimoon product range. The combined Rexam
business has sales in the region of 530mNOK with a current annual EBIT
that is slightly positive and an EBITDA in the region of 22mNOK. A combination
of an investment program in Denmark to improve productivity and quality,
as well as additional measures to reduce the cost base, should bring the
business to similar profit levels as Polimoon today within a twelve month
period.
The Group has agreed to grant exclusivity to Orkla Finans to perform
due diligence on four of its properties in the Nordic region with a view
to completing a combined sale and leaseback transaction at the end of
2006. The terms and conditions of sale and subsequent leaseback on an
operational basis are considered to be attractive, whilst allowing the
Group to reduce borrowings and improve its equity ratio. If successful,
the properties to be included in the sale and leaseback, which have a
book value of 80mNOK, will generate pre-tax proceeds of some 280mNOK with
tax and related costs expected to be in the region of 64mNOK giving an
exceptional net profit of some 136mNOK. The rent of some 19mNOK through
a 15 year bare-back lease will be subject to a fixed 2 % indexation.
A process has been established to seek disposal of the Group's non-core
roto-moulding business in Bjorkelangen, Norway, which is primarily involved
in the buoyancy, marine, and industrial segments. As the business is today
on the periphery of Polimoon's main activities within Components and Packaging,
it makes sense to divest on the condition that a suitable buyer can be
found. The business operates on a similar profit level as the rest of
the Group with annual sales of approximately 68mNOK, and net assets of
some 29mNOK. It is anticipated that a final decision to divest or not
will be made prior to the end of 2006.
Polimoon has been informed that a customer will discontinue buying pots
for noodle soup from our Sutton operation in the UK. The business amounts
to some £6m annually and will cease from Q2 2007. Steps are being
taken to reduce costs in order to limit the impact from the anticipated
loss of the business, including the establishment of a restructuring plan
prior to consultation with the unions. Although some restructuring costs
will be incurred, we are at this stage working with different solutions
which need to be finalised prior to communicating costs.
On the 17th of October, CapMan
Plc Group
announced an intention to make a voluntary
offer for the shares in Polimoon ASA at 27.50 NOK, an offer which
has obtained support from shareholders and management holding 62% of Polimoon
ASA's shares. After lifting its condition for financing, CapMan and its
advisors have been given approval by the Board to perform its due diligence
activities, after which it is anticipated a mandatory offer will be lodged.
A meeting between worker representatives and CapMan has been held this
week whilst the Board is in the process of issuing a fairness opinion.
Outlook
We repeat our previous outlooks. Acceptable customer demand with mechanisms
to pass on raw material fluctuations together with continued control over
our direct and indirect cost base should ensure an EBIT margin between
5% - 6% on net sales in excess of 3.4bNOK in 2006.
Raw material and energy prices continue to increase despite lower crude
and naphtha prices, which are putting pressure on our industry as a whole.
Although this should in the medium term lead to lower prices, the raw
material market is difficult to predict at the moment due to a tight supply
situation so our forecast is based on continued high input prices.
Financial items will continue at a higher level in absolute terms due
to increased debts, while taxes are expected to be in the region of 19
- 20 % of profit before tax.
Free cash flow is expected to be in the region of EBITA for the year,
with a strong cash flow expected in Q4, allowing for some negative impact
due to Plastohm restructuring.
The 'buy and build' strategy of the Group has progressed further with
the announcement of the Rexam thin wall packaging in Sweden and Denmark
acquisition, which will ensure annualised sales for the Group in excess
of 4.5bNOK from November onwards. With more capital at our disposal through
our revolving acquisition facility and by leveraging some of our property
portfolio, we intend to continue our strategy of acquiring businesses
at sensible prices with today's prevailing low interest rates as one of
our main opportunities to create further shareholder value.
Find more information about Polimoon
Read a recent press release about - Polimoon has signed an agreement
with Rexam to purchase its Swedish and Danish thin wall plastics container
plants.
Plastics
Processing Jobs - Post Employment Opportunity!
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