Pulp & Paper News

Sequana FY 2013 results: EBITDA down 11.6% from year ago to Euro 117 million



BOULOGNE-BILLANCOURT, France , April 10, 2014 (Press Release) - 

Sales came in at €3,326 million, down 7.7% due to the decline in printing and writing paper volumes, pressure on selling prices and a deterioration in the product mix EBITDA dropped 11.6% to €117 million; EBITDA margin held up well at 3.5% (down 0.2 points) Antalis: results declined due to lower volumes for printing and writing papers even though gross margin held up well thanks to the increasing contribution of Packaging and Visual Communications activities Arjowiggins: results were down on lower volumes in printing and writing papers, a deterioration in the product mix and strong downward pressure on selling prices Net loss of €301 million (including €295 million in net non-recurring charges primarily related to asset impairment and restructuring costs The Board will recommend to the shareholders at their Annual General Meeting that no dividend be paid for 2013 Agreement in principle signed with the Group's banks to restructure the Group's debt and decision by the Board of Directors to launch a €64 million rights offering underwritten by three of Sequana's main shareholders (Bpifrance, Exor SA and the Allianz group) Operational restructuring project of Arjowiggins' Graphic and Creative Papers divisions The Board of Directors of Sequana met in Boulogne-Billancourt on 9 April 2014. It examined and approved the financial statements for 2013. Consolidated sales declined 7.7% year-on-year to €3,326 million in 2013 (down 5.4% at constant exchange rates). The decline in printing and writing volumes noted in first half of 2013 continued with a sharper-than-expected decline in volumes in the second half of the year, and the situation was compounded by pressure on selling prices and a deterioration in the product mix in the fine papers segment. Lower sales were partially offset by resilient demand for Arjowiggins' specialty papers and growth in Antalis' Packaging and Visual Communications businesses, together with the successful integration of Xerox's office paper distribution business over the last two months of the year. EBITDA came in at €117 million, compared with €133 million in 2012, giving an EBITDA margin of 3.5% (down 0.2 points). This decline mainly reflected lower printing and writing paper volumes and pressure on selling prices. Sequana did however benefit from the positive impact of the reduction in fixed costs resulting from the closure of Arjowiggins plants in 2012 (Dalum, Witcel) and in 2013 (Ivybridge), as well as from Antalis' restructuring measures in logistics in Europe. Input costs (pulp, raw materials and energy) remained high, albeit at lower levels than in 2012. Recurring operating income for the year totalled €49 million (2012: €58 million) and included a €12 million gain on changes to pension plans. Operating margin was down 0.1 point to 1.5% of sales. Factoring in net non-recurring expenses of €295 million (mainly comprising €262 million in asset impairment charges and €48 million in restructuring costs), net loss attributable to owners was €301 million. Consolidated net debt stood at €537 million at end-December 2013, broadly flat against €538 million at end-December 2012. In the fourth quarter of 2013, the Group completed the acquisition of Xerox's Western European office paper distribution business and the sale of its casting paper business to the Favini group. The consolidated financial statements have been audited and the audit report is to be issued shortly. Agreement in principle to restructure the Group's debt On 9 April 2014, Sequana signed an agreement in principle with its banks setting out the terms and conditions for restructuring its credit facilities. The full legal documentation should be finalized in the third quarter of 2014. The main aspects of this financial restructuring are as follows: Concerning Arjowiggins: Restructuring of the €400 million credit facility through: (i) the conversion of €125 million of debt into non-interest bearing net share settled bonds convertible into new shares and/or exchangeable for existing shares (ORNANE) giving access upon maturity (December 2020) to 30% of Sequana's share capital on a diluted basis; (ii) the issuance of €20 million of disposal proceeds notes (DPN) redeemable in cash from the disposal of certain assets; (iii) the reinstatement of €100 million of debt (two amortisable tranches maturing in 2020); and (iv) a €155 million debt write-off; Reduction in overdraft facilities from €50 million (undrawn at 31 December 2013) to €30 million. Concerning Antalis: €200 million refinancing through the setup of a factoring programme by the end of 2014; Rescheduling of €320 million residual debt (maturity extended to December 2018, €5 million amortisation in December 2014 and December 2015); Confirmation of the external growth strategy thanks to strengthened acquisition baskets over the 2014-2018 period. Concerning Sequana: Restructuring of the €26 million credit facilities through: (i) the conversion of €7 million of debt into non-interest bearing mandatory redeemable bonds (ORA) giving access upon maturity (December 2018) to 2.5% of Sequana's share capital on a diluted basis; (ii) the reinstatement of €10 million of debt (amortizing and maturing in 2020); and (iii) a €9 million debt write-off. Rights issue with preferential subscription rights The financial restructuring will be complemented by a €64 million rights issue (inclusive of share issuance premium). Three of Sequana's major shareholders (Bpifrance, Exor SA and the Allianz group) have committed to taking up €48 million of the offering, in proportion to their respective shares in Sequana's capital, and they have underwritten the remainder of the issue. Sequana will contribute the entire net proceeds of the capital increase to Arjowiggins. Dividend Sequana's Board of Directors will recommend to the shareholders at their Annual General Meeting that no dividend be paid for 2013. OUTLOOK AND ARJOWIGGINS OPERATIONAL RESTRUCTURING PROJECT The structural decline in demand for printing and writing papers is expected to continue in Europe in 2014, albeit to a lesser extent than in 2013, as is confirmed by the evolution in activity in the first quarter of 2014. Antalis' Packaging and Visual Communications businesses should fare better and Arjowiggins' specialty businesses should perform well. Given the accelerating deterioration in market conditions for printing and writing papers in 2013 - Arjowiggins' biggest market in volume terms - and the expected trends in the market in the mediumterm, Sequana has decided to step up the pace of Arjowiggins' transformation plan and to refocus the company on specialty businesses where it is a market leader. Information and consultation procedures are under way with the relevant work councils regarding a comprehensive restructuring plan of the Graphic and Creative Papers divisions. This plan aims to: Significantly reduce Arjowiggins' exposure to the standard coated paper segment by definitively exiting the US market for paper used in graphic applications and by consolidating production for the Graphic division at Bessé-en-Braye and Le Bourray (France). This plan would involve the disposal of the Wizernes mill (France) or its closure if no buyer can be found. Strengthen Arjowiggins' position in recycled paper where it is European market leader by setting up a deinked pulp unit at the Bessé-en-Braye plant to be operational by mid-2016. This investment would allow the Graphic division to continue growing on the recycled paper market and meet the increasing demand for deinked pulp from external customers. Consolidate Arjowiggins' leadership in the creative papers segment by changing the division's business model and concentrating the bulk of its production at Stoneywood (UK). This reorganisation would involve the disposal or, in the event that no buyer can be found, the closure of the Charavines mill (France), reducing the number of shifts at the Chartham mill (United Kingdom) and gradually refocusing the Gelida mill (Spain) on the bookbinding market. Commenting on the full-year performance, Sequana Chairman and Chief Executive Officer Pascal Lebard said: "2013 saw market conditions for printing and writing papers continue to deteriorate. Given expected market developments over the coming years and in order to put Arjowiggins on as competitive a footing as possible, the operational restructuring plan we are presenting this morning to the various work councils will help reduce Arjowiggins' exposure to the standard coated paper segment, strengthen our position as European market leader in recycled paper and give the Group a real competitive edge in the creative papers segment. At the same time, the financial restructuring of the Group as well as the planned capital increase approved by the Board, will give us a stronger and healthier balance sheet. Thanks to all these key measures, Sequana is in a position to move forward with all of the resources it needs to ensure its future development.  Sales came in at €3,326 million, down 7.7% due to the decline in printing and writing paper volumes, pressure on selling prices and a deterioration in the product mix  EBITDA dropped 11.6% to €117 million; EBITDA margin held up well at 3.5% (down 0.2 points) ‐ Antalis: results declined due to lower volumes for printing and writing papers even though gross margin held up well thanks to the increasing contribution of Packaging and Visual Communications activities ‐ Arjowiggins: results were down on lower volumes in printing and writing papers, a deterioration in the product mix and strong downward pressure on selling prices  Net loss of €301 million (including €295 million in net non-recurring charges primarily related to asset impairment and restructuring costs  The Board will recommend to the shareholders at their Annual General Meeting that no dividend be paid for 2013  Agreement in principle signed with the Group's banks to restructure the Group's debt and decision by the Board of Directors to launch a €64 million rights offering underwritten by three of Sequana's main shareholders (Bpifrance, Exor SA and the Allianz group)  Operational restructuring project of Arjowiggins' Graphic and Creative Papers divisions The Board of Directors of Sequana met in Boulogne-Billancourt on 9 April 2014. It examined and approved the financial statements for 2013. Consolidated sales declined 7.7% year-on-year to €3,326 million in 2013 (down 5.4% at constant exchange rates). The decline in printing and writing volumes noted in first half of 2013 continued with a sharper-than-expected decline in volumes in the second half of the year, and the situation was compounded by pressure on selling prices and a deterioration in the product mix in the fine papers segment. Lower sales were partially offset by resilient demand for Arjowiggins' specialty papers and growth in Antalis' Packaging and Visual Communications businesses, together with the successful integration of Xerox's office paper distribution business over the last two months of the year. EBITDA came in at €117 million, compared with €133 million in 2012, giving an EBITDA margin of 3.5% (down 0.2 points). This decline mainly reflected lower printing and writing paper volumes and pressure on selling prices. Sequana did however benefit from the positive impact of the reduction in fixed costs resulting from the closure of Arjowiggins plants in 2012 (Dalum, Witcel) and in 2013 (Ivybridge), as well as from Antalis' restructuring measures in logistics in Europe. Input costs (pulp, raw materials and energy) remained high, albeit at lower levels than in 2012. Recurring operating income for the year totalled €49 million (2012: €58 million) and included a €12 million gain on changes to pension plans. Operating margin was down 0.1 point to 1.5% of sales. Factoring in net non-recurring expenses of €295 million (mainly comprising €262 million in asset impairment charges and €48 million in restructuring costs), net loss attributable to owners was €301 million. Consolidated net debt stood at €537 million at end-December 2013, broadly flat against €538 million at end-December 2012. In the fourth quarter of 2013, the Group completed the acquisition of Xerox's Western European office paper distribution business and the sale of its casting paper business to the Favini group. The consolidated financial statements have been audited and the audit report is to be issued shortly.  Agreement in principle to restructure the Group's debt On 9 April 2014, Sequana signed an agreement in principle with its banks setting out the terms and conditions for restructuring its credit facilities. The full legal documentation should be finalized in the third quarter of 2014. The main aspects of this financial restructuring are as follows: Concerning Arjowiggins: ‐ Restructuring of the €400 million credit facility through: (i) the conversion of €125 million of debt into non-interest bearing net share settled bonds convertible into new shares and/or exchangeable for existing shares (ORNANE) giving access upon maturity (December 2020) to 30% of Sequana's share capital on a diluted basis; (ii) the issuance of €20 million of disposal proceeds notes (DPN) redeemable in cash from the disposal of certain assets; (iii) the reinstatement of €100 million of debt (two amortisable tranches maturing in 2020); and (iv) a €155 million debt write-off; ‐ Reduction in overdraft facilities from €50 million (undrawn at 31 December 2013) to €30 million. Concerning Antalis: ‐ €200 million refinancing through the setup of a factoring programme by the end of 2014; ‐ Rescheduling of €320 million residual debt (maturity extended to December 2018, €5 million amortisation in December 2014 and December 2015); ‐ Confirmation of the external growth strategy thanks to strengthened acquisition baskets over the 2014-2018 period. Concerning Sequana: ‐ Restructuring of the €26 million credit facilities through: (i) the conversion of €7 million of debt into non-interest bearing mandatory redeemable bonds (ORA) giving access upon maturity (December 2018) to 2.5% of Sequana's share capital on a diluted basis; (ii) the reinstatement of €10 million of debt (amortizing and maturing in 2020); and (iii) a €9 million debt write-off.  Rights issue with preferential subscription rights The financial restructuring will be complemented by a €64 million rights issue (inclusive of share issuance premium). Three of Sequana's major shareholders (Bpifrance, Exor SA and the Allianz group) have committed to taking up €48 million of the offering, in proportion to their respective shares in Sequana's capital, and they have underwritten the remainder of the issue. Sequana will contribute the entire net proceeds of the capital increase to Arjowiggins.  Dividend Sequana's Board of Directors will recommend to the shareholders at their Annual General Meeting that no dividend be paid for 2013. OUTLOOK AND ARJOWIGGINS OPERATIONAL RESTRUCTURING PROJECT The structural decline in demand for printing and writing papers is expected to continue in Europe in 2014, albeit to a lesser extent than in 2013, as is confirmed by the evolution in activity in the first quarter of 2014. Antalis' Packaging and Visual Communications businesses should fare better and Arjowiggins' specialty businesses should perform well. Given the accelerating deterioration in market conditions for printing and writing papers in 2013 - Arjowiggins' biggest market in volume terms - and the expected trends in the market in the mediumterm, Sequana has decided to step up the pace of Arjowiggins' transformation plan and to refocus the company on specialty businesses where it is a market leader. Information and consultation procedures are under way with the relevant work councils regarding a comprehensive restructuring plan of the Graphic and Creative Papers divisions. This plan aims to: ‐ Significantly reduce Arjowiggins' exposure to the standard coated paper segment by definitively exiting the US market for paper used in graphic applications and by consolidating production for the Graphic division at Bessé-en-Braye and Le Bourray (France). This plan would involve the disposal of the Wizernes mill (France) or its closure if no buyer can be found. ‐ Strengthen Arjowiggins' position in recycled paper where it is European market leader by setting up a deinked pulp unit at the Bessé-en-Braye plant to be operational by mid-2016. This investment would allow the Graphic division to continue growing on the recycled paper market and meet the increasing demand for deinked pulp from external customers. ‐ Consolidate Arjowiggins' leadership in the creative papers segment by changing the division's business model and concentrating the bulk of its production at Stoneywood (UK). This reorganisation would involve the disposal or, in the event that no buyer can be found, the closure of the Charavines mill (France), reducing the number of shifts at the Chartham mill (United Kingdom) and gradually refocusing the Gelida mill (Spain) on the bookbinding market. Commenting on the full-year performance, Sequana Chairman and Chief Executive Officer Pascal Lebard said: "2013 saw market conditions for printing and writing papers continue to deteriorate. Given expected market developments over the coming years and in order to put Arjowiggins on as competitive a footing as possible, the operational restructuring plan we are presenting this morning to the various work councils will help reduce Arjowiggins' exposure to the standard coated paper segment, strengthen our position as European market leader in recycled paper and give the Group a real competitive edge in the creative papers segment. At the same time, the financial restructuring of the Group as well as the planned capital increase approved by the Board, will give us a stronger and healthier balance sheet. Thanks to all these key measures, Sequana is in a position to move forward with all of the resources it needs to ensure its future development. Financial position The Group complied with all bank covenants concerning its syndicated credit facilities at 31 December 2013, primarily: Antalis Net debt/EBITDA = 2.62 (< 3.25) Net debt/equity = 0.92 (≤ 1.1) Recurring operating income/net finance costs = 2.65 (≥ 2.35) Arjowiggins Net debt/EBITDA = 5.78 (< 6.00) EBITDA/net finance costs = 5.98 (≥ 3.0) About Sequana Sequana, is a major player in the paper industry, boasting leading positions in each of its two businesses: Antalis: European leader in the distribution of paper and packaging products, with around 6,000 employees based in 44 countries. Arjowiggins: World leader in creative and technical papers, with more than 4,000 employees.Sequana reported sales of €3.3 billion in 2013 and employed some 10,000 people worldwide. Antalis The European printing and writing paper market contracted by a further 7% in 2013. Consequently, Antalis continued to pursue its proactive gross margin protection policy by maintaining selling prices for its stock business and keeping a close watch on bad debt risks. The Packaging and Visual Communications businesses proved resilient. Antalis sales were €2,528 million, down 6.2% year-onyear (down 3.8% at constant exchange rates). Xerox's Western European office paper distribution business was consolidated as from 1 November 2013 and added €40 million to full-year sales. EBITDA declined 16.1% on the year to €70 million (2012: €83 million), chiefly reflecting contracting volumes for printing and writing paper, partially offset by an improved product mix and reduced overheads, particularly in the logistics network. Despite the tough conditions, Antalis' gross margin held firm thanks to the increasing contribution of the Packaging and Visual Communications businesses. Recurring operating income, which included a €5 million gain arising on changes to pension plans, fell back 15.6% year-on-year to €44 million. Antalis has been able to achieve a marked reduction in debt by carefully managing its working capital requirements: running down inventories and closely monitoring its accounts receivable balances. In late October 2013, Antalis completed the acquisition of Xerox's Western European office paper distribution business. This agreement also gives Antalis an exclusive license to market and distribute Xerox-branded paper and digital print media in the region. Arjowiggins In 2013, Arjowiggins had to contend with a sharp drop in volumes in the European printing and writing papers segment together with strong downward pressure on selling prices and a deterioration in the product mix for fine papers. Specialty businesses (laminated and transfer papers and security solutions) and recycled pulp held up well. Arjowiggins sales were €1,039 million, down 11.2% year-onyear (down 9.7% at constant exchange rates). Input costs (pulp, chemical products and energy) remained high, albeit at lower levels than in 2012. Arjowiggins benefited from the positive impact of lower overheads resulting from the closure of the Dalum (Denmark) and Witcel (Argentina) plants in 2012 and the closure of the Ivybridge UK plant in late 2013. EBITDA declined by 11.1% to €56 million (2012: €63 million). Recurring operating income, which included a gain of €7 million arising on changes to pension plans, was €15 million versus €20 million in 2012. Following the shut-down of a first machine in May, the Ivybridge UK plant was closed in late 2013. At the end of December, Arjowiggins completed the sale of its casting paper commercial business and dedicated finishing equipment to Italy's Favini group for €26.5 million. The transaction also involved an exclusive long-term agreement whereby Arjowiggins Creative Papers will supply Favini with base paper and coated paper for a minimum period of five years. Meanwhile, after launching an ambitious cost-cutting plan in fourth-quarter 2013, mainly targeting savings in energy, raw materials and payroll costs, Arjowiggins has initiated a process to sell off its US Coated division.

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