Balta : FY 2021 Results 25/02/2022Balta Group

Press Release

Sint-Baafs-Vijve, 25 February 2022, 7:00 a.m. CET

Regulated information

For immediate publication

Balta FY 2021 and Q4 2021 Results

Group Highlights1

• FY 2021 consolidated Revenue of €634.3m (+12.9% YoY)

1. Rugs +27.7%, Commercial +4.0%, Residential +8.3%

• 1. Organic Revenue increased YoY by +13.7% with an FX impact of -0.8%
• FY 2021 Adjusted EBITDA of €87.0m (+28.0% YoY) and Adjusted EBITDA margin of 13.7% (12.1% FY 2020)
• 1. Rugs +€21.1m YoY

• 1. Commercial +€1.7m YoY o Residential -€3.7m YoY
• Q4 2021 consolidated Revenue of €164.5m (+8.9% YoY), with Adjusted EBITDA of €21.8m (vs. an extraordinary strong Q4 2020 EBITDA of €27.9m) and an Adjusted EBITDA margin of 13.3% (18.5% FY 2020).
• Net Debt2 increased by €47.5m to €330.7m at FYE 2021 from €283.2m at FYE 2020, due to (i) higher working capital (mainly as a result of cost increases in raw materials, energy and transportation, and a partial reversal of the strong working capital reduction during 2020), (ii) non-cash increase of IFRS16 debt due to lease contract extensions, and (iii) one off costs associated with the maturity extension of the SSN and with the Disposal (defined below).
• Leverage3 decreased to 3.6x from 4.2x at the end of 2020, driven by our strong LTM Adjusted EBITDA.
• Total available liquidity amounted to €69.7m at FYE 2021, comprising cash of €55.3m and a further €14.5m headroom to draw under the revolving credit facilities.
• The Board will not propose a dividend for the year.
• On 28 November 2021, Balta entered into a binding agreement to sell its Rugs, Residential polypropylene and Non-Woven businesses, together with the Balta brand (the "Disposal" or the Discontinued Operations), to Victoria PLC.
• The following sections will therefore focus on the Continuing Operations comprising our Commercial and premium Residential polyamide businesses.

1. The Group presented on a historic basis, ignoring the distinction between Continuing and Discontinued Operations
2. Including IFRS16
3. As defined in the SSN facility agreements, excluding IFRS16 impact but including sale and leasebacks

Wakkensteenweg 2, 8710 St-Baafs-Vijve, Belgium

[phone]

[e-mail]

www.baltagroup.com

Group Highlights Continuing Operations

• FY 2021 Revenue of the company after giving effect to the Disposal (the "Continuing Operations") of €276.8m (+7.1% YoY).
• FY 2021 Adjusted EBITDA of the Continuing Operations is €43.1m (+13.3% YoY), with an Adjusted EBITDA margin of 15.6%, representing an improvement of 0.9% compared to 14.7% in FY 2020.
• Estimated Net Debt at FYE 2021 pro forma for the Continuing Operations would have been €153m4 implying a pro forma leverage5 of 3.3x.

Full Year 2021 Revenue and Adjusted EBITDA per segment Continuing Operations

	FY	FY	% Change	o/w organic	o/w
(€ million, unless otherwise mentioned)	2021	2020		growth	FX
Commercial	198.1	190.5	4.0%
Residential PA*	78.7	67.9	15.9%
Consolidated Revenue	276.8	258.4	7.1%	8.8%	(1.7)%
Commercial	32.4	30.7	5.6%
Residential PA*	10.7	7.4	45.0%
Consolidated Adjusted EBITDA	43.1	38.0	13.3%	16.0%	(2.7)%
Commercial	16.3%	16.1%
Residential PA*	13.6%	10.9%
Consolidated Adjusted EBITDA Margin	15.6%	14.7%

* Residential PA is comprised of residential PA and tiles

Discontinued Operations

	FY	FY	% Change	o/w organic	o/w
(€ million, unless otherwise mentioned)	2021	2020		growth	FX
Consolidated Revenue	357.5	303.5	17.8%	17.8%	0.0%
Consolidated Adjusted EBITDA	43.9	29.9	46.7%	46.7%	0.0%
Consolidated Adjusted EBITDA Margin	12.3%	9.9%

1. Including IFRS16
2. As defined in the SSN facility agreements, excluding IFRS16 impact but including sale and leasebacks.

Wakkensteenweg 2, 8710 St-Baafs-Vijve, Belgium

[phone]

[e-mail]

www.baltagroup.com

Business Update Continuing Operations

• In FY 2021, the Continuing Operations saw a substantial increase in both Revenue and Adjusted EBITDA compared to FY 2020, despite the impact of COVID-19 related headwinds in the Commercial end markets. Unlike the more retail focused perimeter of the Discontinued Operations, which started to recover in H2 2020, the Continuing Operations has untapped potential to return to pre-COVID-19 levels.
• The Continuing Operations achieved an Adjusted EBITDA margin improvement of 0.9 percentage points in FY 2021 compared to FY 2020, as a result of continued efficiency and margin improvements from our NEXT program, price increases implemented over the year and fixed costs which remained in line with FY 2020.

Q4 2021 Revenue and Adjusted EBITDA per segment

• Q4 2021 consolidated Revenue of €76.8m (+15.4% YoY) for the Continuing Operations, with Adjusted EBITDA of €11.8m (-8.2% vs. a very strong Q4 2020).

1. Commercial Revenue for Q4 2021 of €56.2m increased by 23.5% (€45.5m in 2020) with higher sales in Europe and US.

• 1. Residential Q4 2021 Revenue of €20.6m, -2.1% YoY (€21.1m in Q4 2020), with a lower volume in the UK and the DACH-Region.
• Adjusted EBITDA margin Q4 2021 of 15.4% is down from the high level in Q4 2020 due to significantly higher cost for raw materials, energy and transportation partly off-set by sales price increases and margin improvements from NEXT initiatives, but in line with the margins achieved throughout the year.

Continuing Operations

	Q4	Q4	% Change	o/w organic	o/w
(€ million, unless otherwise mentioned)	2021	2020		growth	FX
Commercial	56.2	45.5	23.5%
Residential PA*	20.6	21.1	(2.1)%
Consolidated Revenue	76.8	66.5	15.4%	12.9%	2.4%
Commercial	9.4	9.6	(1.9)%
Residential PA*	2.4	3.3	(26.2)%
Consolidated Adjusted EBITDA	11.8	12.9	(8.2)%	(9.7)%	1.6%
Commercial	16.7%	21.1%
Residential PA*	11.9%	15.7%
Consolidated Adjusted EBITDA Margin	15.4%	19.4%

* Residential PA is comprised of residential PA and tiles

Wakkensteenweg 2, 8710 St-Baafs-Vijve, Belgium
[phone]	[e-mail]	www.baltagroup.com

Discontinued Operations

	Q4	Q4	% Change	o/w organic	o/w
(€ million, unless otherwise mentioned)	2021	2020		growth	FX
Consolidated Revenue	87.8	84.5	3.9%	3.9%	0.0%
Consolidated Adjusted EBITDA	10.0	15.0	(33.5)%	(33.5)%	0.0%
Consolidated Adjusted EBITDA Margin	11.4%	17.8%

Cyrille Ragoucy, CEO and Chairman of the Board of Balta said,

"2021 was a year of recovery from the COVID-19 disruptions experienced the year before. We emerged stronger from the crisis with increased sales and significantly improved Adjusted Operating Profit. Our manufacturing and distribution activities went back to normal levels, while we continued to focus on the safety and well-being of our employees.

In 2021 we saw commodity prices rising continuously, to levels that the industry has not seen before. Raw materials, energy and transportation cost increased significantly. In order to mitigate the impact, we took swift action and increased prices across all divisions, most markets and customer groups. We expect more cost inflation impacts in 2022, which will require further actions.

We have launched a new transformation and profitability improvement program that will leverage further our NEXT program, which ended this year surpassing its ambitious targets from 3 years ago. The new program is called BEYOND and will focus on sustainability through innovative products and production, lean strategies in production and procurement and emphasising agility through digital initiatives, such as e-commerce.

On November 28th, the company entered into a binding agreement to sell its Rugs, Residential polypropylene and Non-Woven businesses to Victoria PLC. The Transaction will allow the Continuing Operations to focus on developing its Commercial businesses in Europe and the United States under the main brands modulyss and Bentley, as well as its premium European Residential polyamide (Residential PA) business (ITC). These businesses are yet to fully recover from the effects of pandemic restrictions. The Continuing Operations have a stronger cash flow and balance sheet, as well as a reduced risk profile. A higher average EBITDA margin and better cash conversion will enable more investment in sustainability and growth through innovation, manufacturing optimization and more agile digital solutions. Being more focused and less complex is also expected to improve overall efficiency. Furthermore, the impact of currency fluctuations and international transport costs will be significantly reduced in the Continuing Operations."

Wakkensteenweg 2, 8710 St-Baafs-Vijve, Belgium
[phone]	[e-mail]	www.baltagroup.com

Earning enhancement programs

NEXT (actual Balta Group):6

At the end of 2018, we launched our holistic, three-year transformation and earnings enhancement program called NEXT. Today, we are pleased to report that the program has been a resounding success, surpassing the initial ambitious targets formed three years ago. Through the efficient implementation of Commercial Excellence, Procurement Excellence and Lean strategies in our 8 plants, we managed to drive our top-line growth and improve our profitably.

• Revenue enhancement initiatives such as e-commerce in Rugs, focus on new growth segments for Bentley, our direct-route-to-market in modulyss and the continued launch of additional innovative and sustainable products in all divisions, generated €122m incremental Revenues vs. 2018, of which €54m in 2021 in spite of challenging global logistics conditions
• Cost improvements through lean and procurement initiatives, drove €17m EBITDA savings vs. 2018, of which €4m in 2021

BEYOND (Continuing Operations):

Continuing the strong legacy of our NEXT-program, we have outlined a 4-year roadmap called BEYOND, which consists of three courses of action:

• Increased focus on Sustainability through innovative products and production processes
• Incremental drive for Efficiency through further lean and procurement initiatives
• Emphasis on Agility through digital initiatives such as e-commerce

The BEYOND program will be detailed at the end of H1 2022.

Financial Review Continuing Operations

Balta delivered full year 2021 consolidated Revenue of €276.8m for the Continuing Operations, up 7.1% versus 2020, and consolidated Adjusted EBITDA of €43.1m, up 13.3%. The consolidated Adjusted EBITDA margin of 15.6% was up from 14.7%, reflecting margin improvements in our Commercial and Residential divisions. The significant cost impact, that started in the course of 2021, from raw materials, energy and transportation, were addressed early with the implementation of price increases.

Financial Review Continuing Operations by Division

Commercial

Full year Revenue for 2021 increased by 4% to €198.1m (€190.5m 2020). The Commercial markets were less severely hit by the first lock downs in 2020 than the retail oriented businesses, but have been experiencing a slower rebound. The US and Europe were able to slightly increase sales as restrictions on indoor construction sites eased and projects started up again towards the later part of 2021, but are still awaiting the return to pre- COVID-19 levels.

Full year Adjusted EBITDA for 2021 increased to €32.4m or 16.3% (€30.7m or 16.1% in 2020). The division was able to maintain margins thanks to the swift implementation of price increases to address cost inflation and to the strong results from NEXT initiatives.

6 See Glossary for definition of NEXT Key Assumptions and Impacts

Wakkensteenweg 2, 8710 St-Baafs-Vijve, Belgium
[phone]	[e-mail]	www.baltagroup.com