Group revenue from the continuing operations of Pfleiderer AG in the first nine months of 2011 increased 7.8 percent in a year-on-year comparison, climbing to 892.8 million euros. Developments in the individual segments and regions diverged: Growth drivers were the Eastern European region and higher-quality products such as surface-finished panels. In both Western and Eastern Europe, most product groups saw double-digit price increases, thereby compensating for mounting raw material costs, the sharp rise of which continues unabated.
EBITDA from continuing operations in the first nine months of the current fiscal year increased to 72.3 million euros from 65.1 million euros in the same period of the previous year. The resulting EBITDA margin came to 8.1 percent in the period under review, up from 7.9 percent a year ago. Less the nonrecurring costs incurred for operational restructuring efforts, adjusted EBITDA amounted to 88.7 million euros and the resulting margin was 9.9 percent.
Business developments in the third quarter reinforce the positive trend At 297.5 million euros, Group revenue from continuing operations in the third quarter of fiscal 2011 was up some 5 percent from the previous year’s figure despite the closure of three plants in Germany. The Eastern European region was once again the growth driver with revenue increasing around 20 percent. Notably, this revenue growth was achieved in a challenging and unstable macroeconomic environment, particularly in Europe.
The company was able to significantly increase prices both in Western and in Eastern Europe to compensate for sharply rising raw material costs and achieve a positive effect on margins. EBITDA in the third quarter of 2011 increased around 5.6 percent to 28.1 million euros, up from 26.6 million euros in the previous year. The third-quarter EBITDA margin was 9.4 percent. Adjusted for nonrecurring expenses in the amount of 6.5 million euros, EBITDA came to 34.6 million euros with a margin of 11.6 percent. Despite the burden of the continued high costs of financing, the Group closed out the third quarter with a 1.6-million-euro profit from continuing operations. It had posted a 14.2-million-euro loss in the same quarter of 2010.
The result has yet to reflect the financial relief effected by restructuring. Despite the restructuring expenses, EBIT increased markedly from 3.0 million euros in the previous year to 30.7 million euros in the first nine months of this year. One of several contributing factors was that depreciation and amortization was reduced to 41.6 million euros (62.2 million euros in the previous year). Apart from that, the considerable debt continues to weigh down the result because the company has yet been unable to reduce the interest burden as called for by the restructuring plan, according to Pfleiderer.
The company posted a loss of 80.4 million euros (previous year a loss of 21.5 million euros) for the first nine months. On the one hand, interest earnings were higher than in the previous year; on the other, so were interest expenses. Both factors figured prominently in this period’s financial result. The increase in financial income from continuing operations resulted from cost transfers within the framework of the restructuring plan. Costs in the amount of 17.8 million euros were transferred to operations in North America, which are to be discontinued.
Basic net loss per share from continuing operations amounted to 0.93 euros compared to a loss of 0.56 euros per share in the same period of the previous year. Discontinued operations generated an additional loss of 1.11 euros per share (previous year loss of 0.45 euros).
Restructuring plan
The restructuring effort continues to progress on schedule. The measures affecting operations in Western Europe have been largely concluded and the selling process has commenced in North America. In contrast, the company has yet been unable to institute the capital measures set out by the restructuring plan. Individual shareholders and creditors have filed suit, the former against the general meeting’s resolution to approve capital measures and the latter against the conversion of hybrid bonds into share options as agreed at the creditors’ meeting. Both actions had been sanctioned by a vast majority vote.
Pfleiderer has petitioned the court, seeking to gain its approval so the company can promptly put these resolutions into action despite the pending litigation. The initial ruling by the court of first instance, the Frankfurt District Court, on the creditor meeting’s resolutions has given rise to public concerns about the financial restructuring plan’s chances of success. Pfleiderer holds this ruling to be erroneous and has contested it at the appellate court, the Higher Regional Court of Frankfurt. The Executive Board is confident that the Higher Regional Court of Frankfurt will concur with the position of the company and its legal counselors, and therefore believes that the lower court’s ruling will not jeopardize the restructuring plan.
A decision on the approval proceedings for the general meeting’s resolution has yet to be rendered. It is expected that the jurisdictional court, the Higher Regional Court of Nuremberg, will rule on this matter in January 2012. In view of the urgent need to implement the capital measures approved by the general meeting, the executive board has every confidence that the Higher Regional Court of Nuremberg will rule in favor of the company’s petition. It is expected that both approval proceedings will be concluded by February 2012.
Outlook
The following outlook is grounded in the assumption that the financial restructuring plan will be put into action as intended. Revenue from continuing operations is expected to increase by a mid-to-high single-digit percentage. The executive board hereby confirms its previous forecast. On a comparable basis - that is; without taking the North American business into account - Pfleiderer expects continued growth in 2012, unless the current economic situation deteriorates significantly.
The costs of restructuring will have a major impact on the overall 2011 result. The company still anticipates a loss for the overall year despite the marked improvement in the operating result. The executive board expects a further improvement of the Group’s operating result in 2012.
The report published today for the third quarter of 2011 takes the same approach as the report covering the second quarter, which presented the soon-to-be-sold North American business separately as discontinued operations. The previous year’s figures have been adjusted accordingly and are therefore comparable.
