ARBONIA AG Press release
Annual results 2018 | Revenue growth with an encouraging increase in profitability
- Net revenue of CHF 1 374.0 million incl. Vasco Group (+10.3% compared to last year; consolidated as of 1 June 2018)
- EBITDA of CHF 130.5 million (previous year: CHF 120.3 million)
- EBITDA without special effects of CHF 115.1 million (previous year: CHF 101.3 million)
- Group result from continuing operations: CHF 38.7 million (previous year: CHF 37.5 million)
- Group result from continuing operations and without one-time effects: CHF 23.8 million
Arbon, 26 February 2019 - In 2018, Arbonia recorded a net revenue of CHF 1374.0 million, equating to growth of 10.3% in comparison to the previous year (CHF 1245.6 million). When adjusted for acquisition effects, growth amounted to 5.2% and when adjusted for currency and acquisition effects, to 2.5%. In the 2018 financial year, EBITDA increased to CHF 130.5 million (previous year: CHF 120.3 million). Without one-time effects, EBITDA increased significantly to CHF 115.1 million compared with the previous year (CHF 101.3 million). The Group result from continuing operations rose from CHF 37.5 million in the previous year to CHF 38.7 million.
Arbonia's consolidated financial statements include the Belgian Vasco Group from 1 June 2018 and Spanish firm Tecna from 1 September 2018. The Coatings, Industrial Services (Condecta) and Profile Systems business units which were sold in 2017 are now only included in the Group result from discontinued operations.
Continuing high equity ratio and low net indebtedness
The total assets of Arbonia as of 31 December 2018 increased to CHF 1511.9 million due to the acquisition of the Vasco Group and Tecna (previous year: CHF 1416.6 million). As a result of these transactions and the negative currency translation differences on the balance sheet date, the equity ratio fell to a still very high figure of 58.7% (previous year: 60.9%).
Free cash flow (cash flow from operating activities and investing activities) for the 2018 financial year amounted to CHF -53.8 million (previous year: CHF +190.4 million). Cash flow from operating activities remained virtually unchanged compared with the previous year. However, investments of CHF 134.7 million which were once again higher (previous year: CHF 104.6 million) had a detrimental effect on cash flow from investing activities. Free cash flow was also affected greatly by special effects. The sale of properties and the profile systems in particular made a positive contribution in this regard. Free cash flow was negatively affected above all by the two acquisitions that were made. Without one-time effects, the free cash flow would have been CHF -65.1 million (previous year: CHF -35.8 million). Investments are also expected to amount to slightly over CHF 100 million in 2019.
In 2018, the negative free cash flow led to an increase in net indebtedness. As of 31 December 2018, it had increased to CHF -116.8 million (previous year: CHF -43.3 million). The net indebtedness ratio (net indebtedness/EBITDA) therefore increased to -0.87 (previous year: -0.34); however, this is still a very good figure. All key financial figures are maintained. The higher net indebtedness was financed by the long-term bonded loan, which was issued in April 2018.
Development in the Divisions
The HVAC Division (Heating, Ventilation and Air Conditioning) achieved a total revenue of CHF 505.5 million (previous year: CHF 408.3 million). The Vasco Group and Tecna acquisitions are included in the growth figure of 23.8% on a pro rata temporis basis. When adjusted for currency and acquisition effects, the division demonstrated its growth strength through revenue growth of 5.0%. Despite the highly competitive market environment and the challenging development of costs, the division was able to improve the EBITDA without special effects of this reporting year to CHF 54.8 million compared to the previous year (CHF 45.6 million) and to further increase competitiveness through investments in the production sites. The unadjusted EBITDA amounted to CHF 46.9 million (previous year: CHF 50.1 million). EBITDA was impacted by the restructuring provision for the Vasco Group plant to be closed in 2019 in Zedelgem (BE). The division achieved an EBIT of CHF 22.8 million, compared with CHF 34.6 million in the previous year. EBIT without special effects increased to CHF 33.1 million (previous year: CHF 29.5 million).
For 2019, the HVAC Division expects the market environment to remain satisfactory in economic terms, although some country-specific slowdown is starting to be felt. For example, there is currently growing concern in Switzerland about the high number of empty rental properties. The insufficient capacity in the installation trade, mainly in the domestic market, will also continue to have a restrictive effect. The two latest acquisitions, the Vasco Group and Tecna, have opened many possibilities for further growth and increased efficiency of the division, such as the announced closure of the Zedelgem (BE) production site in 2019, and the subsequent relocation of production to the highly automated sites in Plattling (D) and Tubbergen (NL). Furthermore, the production launch of steel panel radiator manufacturing in Stupino (RUS), scheduled for second half of 2019, is a crucial milestone for the planned revenue growth in the Russian market. Thanks to its consistently implemented strategy, expansion of its regional presence and continuous product innovations in relation to heat transfer involving water, air and electricity, the division is superbly placed to achieve further growth.
The Sanitary Equipment Division recorded total revenue of CHF 144.8 million, a figure that was 1.3% below the previous year's value (CHF 146.7 million). The currency-adjusted revenue development amounted to -4.1%. Noticeable difficulties were experienced in the very challenging markets in France and Germany in particular, while Switzerland saw pleasing developments. At CHF 11.7 million, the EBITDA figure was unable to match the previous year's value (CHF 14.0 million). Excluding special effects, the division achieved an EBITDA of CHF 12.5 million (previous year: CHF 16.9 million). At CHF 7.2 million, EBIT was also below the previous year's level (CHF 9.9 million). Excluding special effects, EBIT amounted to CHF 8.2 million (previous year: CHF 12.8 million).
The capacity shortages experienced in the installation sector will continue to limit opportunities for growth in the sanitary market. The situation is not expected to ease in the short term, especially in Germany, Austria and Switzerland. In order to offset the negative external factors, particularly in Germany and France, various measures are being evaluated or have already been implemented to take important steps which will enable the division to set the course for its production, product development, sales and service activities in 2019.
The Sanitary Equipment Division is therefore viewing the 2019 financial year with cautious optimism. The major international ISH trade fair in Frankfurt (D) is sure to provide stimuli. In addition, ongoing projects as well as investments in production efficiency and processes are set to reveal their positive effects. Thanks to its expertise as the European market leader for shower enclosures, the division is therefore well placed to sustainably generate growth and profit in the future.
The Windows Division increased its revenue by 4.4% to CHF 366.3 million (previous year: CHF 351.0 million) during the reporting year. When adjusted for currency effects, this resulted in growth of 2.7%. EBITDA fell from CHF 29.7 million in the previous year to CHF 19.7 million due to the sale of the property in Altstätten (CH) in December 2017. Without special effects, EBITDA rose from CHF 13.3 million in the previous year to CHF 16.0 million. This was achieved in spite of the negative impact of significant increases in the CHF/EUR exchange rate, particularly in the first half of the year, which had an adverse effect on the result due to production within the eurozone and the high proportion of sales in Switzerland. In addition, the decision to relocate wood/aluminium window production from Switzerland to Thuringia (D) further impacted on the division's result. Against this backdrop, the division's profitability performance at EBITDA level is positive. As a result of higher depreciation, EBIT shifted from CHF 15.0 million in the previous year to CHF 1.5 million, and without special effects from CHF -1.4 million in the previous year to CHF -2.5 million.
As the 2018 reporting year draws to a close, the production transfer and restructuring process for the Windows Division is largely complete. The additional costs incurred as a result of relocating wood/aluminium window production from Switzerland to Langenwetzendorf (D), which still had a significant impact on the 2018 results, should decrease significantly in 2019. What's more, the reduction in the workforce at the Altstätten (CH) production site is set to have a positive impact on the results. As a result of the investment activities of recent years (including the division's own insulating glass production facility in Slovakia), standardisation of the product ranges and modernisation of production facilities in Zambrow (PL), the division anticipates further improvements in productivity and profitability. With respect to the market, the division expects healthy demand to continue in 2019. In all markets, it anticipates slight growth in the sales market as well as revenue growth at the same level as 2018.
During the reporting year, the Doors Division achieved a revenue of CHF 357.5 million (previous year: CHF 340.0 million), which represents growth of 5.1%. Adjusted for currency effects, the revenue increased by 2.1%. The division's EBITDA amounted to CHF 39.6 million (CHF 36.7 million in the previous year). Without special effects, EBITDA grew from CHF 36.4 million in the previous year to CHF 40.2 million. The result for the EBIT amounted to CHF 18.7 million (CHF 14.9 million in the previous year). Excluding special effects, this resulted in an EBIT of CHF 19.3 million (CHF 14.7 million in the previous year).
For 2019, the Doors Division expects to see a continued positive if slightly more cautious economic climate in its domestic markets. The limited numbers of tradespeople in the construction industry are curbing the potential for growth. The Doors Division is tackling this tough environment by making substantial investments in modernisation and capacity expansion of the production facilities to continue to improve its competitiveness. The division is expected to achieve significant process optimizations and efficiency improvements in the coming years. At Prüm, the focus of investments in 2019/2020 will primarily be on expanding logistics operations. In 2019, the production site is being extended to include a highly automated loading area which will enable the division to optimise and greatly accelerate the provision and loading process as a whole. Following this, the division is planning to extend its high-bay warehouse by 60% in 2020. As a result, an additional 13 finishes will be able to be supplied directly from the warehouse within a very short period of time. Garant will be receiving a fully automated processing centre for custom doors. What's more, work on installing a complete frame production line is set to commence at the end of 2019. Invado will be commissioning its new door leaf and frame production lines. RWD Schlatter, meanwhile, will be being equipped with a modern coating facility and a new highly flexible processing centre in 2019/2020.
Guidance
For 2019, Arbonia is anticipating organic revenue growth of ~3% and an operating EBITDA of CHF 128 - 136 million. The effect of IFRS 16 is set to come to approx. CHF 10 million. The amount is included in the EBITDA guidance. It will primarily be neutralised in depreciations but also in financial expenses. In the 2019 financial year, Arbonia's investments will again reach a value of slightly more than CHF 100 million before being reduced to the level of depreciations, with the exception of the Doors Division. Arbonia is convinced that this is the guarantee for sustainable growth. At the Annual General Meeting, the Board of Directors will apply to pay a dividend for the 2018 financial year for the first time since the 2013 financial year.
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