CHAM, Switzerland , Aug. 21, 2014 (Press Release) -
Dynamic revenue performance thanks to favourable market conditions and successful products Significant improvement in results, EBIT margin climbs to 4.7% Continued transfer of technology to Italy planned for 2015 Urban planning competition for "Papieri" site successfully completed Healthy balance sheet, equity ratio again exceeds 50%The Cham Paper Group got off to an excellent start in 2014. The favourable economic climate, the continued growth in demand for the strategic products of all key product groups in all segments, and the positive perception of the Cham Paper brand have led to favourable half-year results. To further opti-mise the competitive strength of the Group's speciality papers, the company has decided to continue the transfer of technology from Switzerland to Italy and invest accordingly in the Italian mills, which will lead to another increase in productivity there. Relocation of the coating technology operations currently run from Cham for producing the digital imaging and barrier papers is scheduled to take place in the first quarter of 2015, and is expected to result in a further staff reduction of approx. 50 in Switzerland.
During the first six months, total revenue dropped to CHF 116.7 million as a result of less profitable products being discontinued. The production of speciality papers at both Italian mills increased by 6.0% to 70,729 tonnes, resulting in a revenue increase of 12.4% to CHF 101.0 million. In Switzerland, pro-ceeds from the production of finished base paper increased to CHF 15.7 million. In the Digital Imaging unit in Cham, growth amounted to 18.7%. At CHF 5.5 million (EBIT margin of 4.7%), the operating result achieved by the Group was significantly above that of the corresponding period in the previous year (CHF 2.9 million, EBIT margin: 1.7%), that still being affected by the demanding transformation phase. The net profit of the first six months amounted to CHF 3.6 million.
Dynamic growth of core products in all markets
Consumer Goods: The demand for flexible packaging papers showed positive trends thanks in part to a slightly improved economy in our primary market, Europe. The single-sided coated papers for high-end packaging were particularly in demand. Developments in our key Asian market was in line with expecta-tions, the papers for the tobacco market in China in particular generating high sales figures. Capacity utilisation at our mill in Carmignano which manufactures these papers was high during the first half of 2014.
Industrial Release: Sales of our glassine papers trended slightly upwards. Our primary market Europe remained stable, and thanks to the advantages afforded by our superior quality we were able to expand market share. Unfortunately sales in Asia fell short of our expectations as the price war there did not al-low for any profitable growth.
Digital Imaging: The market for digital sublimation printing of textiles continues to exhibit above-average growth. Digital sublimation printing is increasingly coming to supplant classic printing technologies so that the market potential in this segment is on the rise thanks to the technical innovations of our customers. Our recently revamped product range is meeting with considerable interest in the marketplace. Sales in this area have expanded significantly, particularly in Europe and the USA.
Continued reluctance of the market to accept barrier products
Although further progress has been achieved with the innovative Barnamic barrier papers - these prod-ucts are currently undergoing testing by several potential customers - the restraint already observed last year with regard to ordering continues unabated. Many customers (still) perceive a switchover to this brand-new class of food packaging to be too risky. This realisation has also meant that the business plan for the operations in Cham has had to undergo a reassessment. At present it is clear that the vol-ume required for satisfying the fundamental economic prerequisites for constructing a new coating unit in the area of Cham proposed for 2016 will not be achieved in the foreseeable future.
Integration in northern Italy instead of constructing a new plant in Switzerland
Consequently the Board of Directors is currently planning to have the products to which finishes are cur-rently applied in Cham integrated, along with their associated technology, in the company's own coating unit of the Carmignano mill in northern Italy, and to dispense with constructing a new facility in Switzer-land. Integration will be part of an investment programme which has been initiated to modernise and expand capacity at Carmignano and is to be completed in 2015. The associated reduction in staff by approx. 50 at the technology centre in Cham will be deliberated with social partners in a consultation procedure. Plans have been made to support employees with a redundancy scheme in a manner similar to the one that has proved effective during the past two years. This means that only 30 to 40 jobs will remain in Cham in the future. These include research & development in the Digital Imaging unit, market-ing & sales, small roll processing and group functions. To carry through the transfer, we are currently reckoning with provisions and value adjustments of approx. CHF 4.0 million. However, they are non-cash only in part and will be recognised in the 2014 financial year.
Balance sheet continues to be robust
During the first six months the Cham Paper Group succeeded in optimising its level of trade receivables and inventories of raw stock and finished goods on hand, which resulted in a reduction in tied-up capital of CHF 8.1 million. This infusion of cash was used in part to pay suppliers earlier and thus benefit from more favourable purchasing terms. Following this practice led to an increase in net working capital of 4.7%, which resulted in a slightly negative free cash flow of CHF 0.8 million during the reporting period. Despite repaying liabilities to banks in the amount of CHF 6.8 million and a dividend yield to sharehold-ers of CHF 2.2 million, the Group had cash reserves of CHF 44.6 million at the end of the period under review and thus is free of net debt. The equity ratio increased again by 5.6% and now amounts to a comfortable 51.9%.
Test planning and urban planning competition in Cham concluded
In October 2013 four planning teams were tasked with the challenge of developing a concept for utilis-ing the "Papieri" site located in the residential area of the municipality of Cham. In doing so they took in-to account the objectives and issues that had been previously formulated in concert with local residents in various workshops. At the end of June 2014, a review committee consisting of external experts, rep-resentatives of the municipality of Cham, Cham Paper Group Schweiz AG and various cantonal agen-cies unanimously decided in favour of one of the four concepts as a guide project for elaborating a mas-ter plan. A fully developed proposal is scheduled to be submitted to the municipality of Cham for a ref-erendum in 2016.
Positive outlook despite demanding tasks
The Board of Directors and the Executive Management Board are confidently expecting continued busi-ness performance during the current year and beyond. A slightly positive net result is expected for the year, despite the provisions required for the technology transfer. In the wake of the successful transfor-mation, the Group is well-placed and will continue to benefit from the strong performance capabilities of its products and services in all markets. However, this is predicated on continued improvements in per-formance at all levels in the future.
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