MERSEN • Sales down 1.6 in organic, up 2% excluding chemicals
• Slight improvement in operating margin before non-recurring items
• Net income affected as expected by Transform plan
Paris, July 31, 2014 - Mersen (Euronext FR0000039620 - MRN), a global expert in electrical specialties and graphite-based materials, today published its sales for the second quarter and results for the half-year for the period that ended on June 30, 2014.
Key figures
(In millions of euros)
H1 2014 H1 2013
Sales 362.1 377.0
Organic growth -1.6%
Operating income before non- recurring items
29.8 30.6
% of Sales 8.2% 8.1%
Net income attributable to Group equity holders
0.2 11.5
Free cash flow 1.0 4.7
"Demand showed the first signs of recovery in the first half of the year if we exclude the chemicals business, which is currently at the bottom of an investment cycle. Operating margin before non-recurring items has increased slightly compared with the first half of 2013. Mersen expects demand to be stronger in the second half of the year, with Americas and the electronics market performing well. As a result, our guidance of slight growth in sales and operating margin before non-recurring items remains unchanged, but is more challenging given a sluggish business in the chemicals market. The Transform plan is also being rolled out on schedule and I am confident that it will help to improve the company's position," stated
Luc Themelin, Chairman of Mersen's Management Board.
Second quarter 2014 sales were down 2.2% at constant scope and exchange rates compared with the second quarter of 2013. In terms of reported figures, sales were down 4.4%, reflecting a negative exchange rate effect (-3.6%) that was partly offset by the positive impact of integrating Cirprotec. Excluding the chemicals business, which includes the Sabic contract, the Group posted more than 2% growth for the quarter at constant scope and exchange rates. In organic terms, second quarter 2014 sales
increased by nearly 1% compared with the first quarter of 2014.
(In millions of euros) | Q2 2014 | Q2 2013 | Total growth | Organic growth |
Materials segment | 67.8 | 76.9 | -11.8% | -9.1% |
Electrical segment | 114.2 | 113.6 | 0.6% | 2.4% |
Total Group | 182.0 | 190.5 | -4.4% | -2.2% |
Europe | 69.5 | 70.6 | -1.5% | -3.8% |
Asia Pacific | 40.8 | 40.2 | 1.5% | 5.9% |
North America | 63.2 | 68.7 | -7.9% | -2.6% |
Rest of the World | 8.5 | 11.0 | -23.5% | -19.7% |
Total Group | 182.0 | 190.5 | -4.4% | -2.2% |
In the first half of 2014, Mersen's consolidated sales amounted to €362.1 million. On a like-for-like basis, this figure was in line with the second half of 2013, but down by 1.6% compared with the first half of 2013. Total growth includes a negative exchange rate effect amounting to nearly €14 million compared with the first half of 2013.
Excluding the chemicals business, organic growth was about 2% this half-year, thanks to a good
performance by other Group businesses.
(In millions of euros) | H1 2014 | H1 2013 | Total growth | Organic growth |
Materials segment | 139.5 | 153.6 | -9.2% | -6.3% |
Electrical segment | 222.6 | 223.4 | -0.3% | 1.8% |
Total Group | 362.1 | 377.0 | -3.9% | -1.6% |
Europe | 143.0 | 142.7 | 0.2% | -1.7% |
Asia Pacific | 79.3 | 78.1 | 1.5% | 6.3% |
North America | 123.2 | 136.3 | -9.6% | -4.8% |
Rest of the World | 16.6 | 19.9 | -16.5% | -9.9% |
Total Group | 362.1 | 377.0 | -3.9% | -1.6% |
this market, organic growth was positive for the segment, by more than 3%, in particular in the solar and electronics businesses.
Electrical segment sales amounted to €222.6 million at the end of June 2014, up 1.8% on a like-for-like basis. The energy business was particularly strong, most specifically in wind power. Electronics and process industries sales were flat, while rail transport showed a slight decline.
In Europe, the situation was in line with the second half of 2013. Excluding the chemicals business (of which Sabic), organic growth in the region exceeded 3% compared with the first half of 2013, and performed well in electronics and, more generally, in Germany.
In Asia, the trend is positive, particularly in China, in the solar, wind and process industries businesses.
In America, the decrease in activity was mainly due to a slowdown in sales in the chemicals industry, particularly related to shale gas extraction. Excluding the chemicals business, sales were in line with the first half of last year, with growth in electronics and wind being offset by a slowdown in activity due to poor weather conditions at the beginning of the year.
Materials segment operating income before non-recurring items amounted to €9.6 million, representing an operating margin of 6.9% of sales, compared with 7.7% for the same period in 2013. This decline was due to reduced volume in chemicals, plus a decline in the price of graphite since the beginning of last year, both of which have been partly offset by a positive mix effect and lower depreciations.
Electrical segment operating income before non-recurring items amounted to €27.2 million. Operating margin before non-recurring items was 12.2% of sales, a one point increase compared with last year. This rise was due to good price performance and volume recovery.
1 In accordance with definition 2009.R.03 of the French accounting standards authority
3/8 Paris, July 31, 2014Net income
Net income attributable to Group equity holders amounted to €0.2 million for the period compared with
€11.5 million for the same period in 2013.
Non-recurring income and expenses resulted in a net charge of €22.7 million. For the most part, this consisted of provisions for restructuring and impairment related to the Transform plan, a global industrial reorganization plan announced by the Group last January. Mersen's net financial income totaled €5.2 million for the first half, an improvement compared with the first half of 2013 thanks to a more than €15 million decline in average net debt at constant exchange rates. The tax charge was €2.7 million for the half- year, giving an effective tax rate of 33% adjusted for exceptional items relating to the Transform plan.
Net income from operations sold or discontinued amounted to €1.8 million. This includes an additional payment related to the disposal in 2009 of the automotive brushes business. The net loss of €1.7 million in
2013 had included a contribution from the metal plate heat exchanger and mixer businesses, as well as
from the metal pressure vessels business for the nuclear industry sold during the year.
Cash and debt
Cash flows from operating activities before income tax and change in working capital requirements from continuing operations amounted to €43.0 million in the first half of the year, compared with € 47.0 million for the first half of 2013. Working capital requirements increased by €23.2 million for the period (versus an increase of €12.1 million during the first half of 2013). This change was related to the increase in trade receivables due to the seasonality of sales and billing for certain major anti-corrosion systems, payment for which is scheduled for the second half. Inventory also increased, in line with demand forecasts for the second half of the year. Capital expenditure amounted to €11.3 million, in line with forecasts.As a result, net cash flow from operations after capital expenditure generated during the first half of the year amounted to €1.0 million compared with €4.7 m in the first half of 2013.
Net debt as of June 30, 2014 was €222.7 million an increase of €11 million compared with the end of 2013 including the purchase of a majority stake in Cirprotec,.2 Operating income before non-recurring items + depreciation charges.
4/8 Paris, July 31, 2014Financial position
The Group is in a sound financial position: net debt/EBITDA leverage was 2.333 versus 2.07 at the end of
2013. The net debt to equity ratio was 49%3 versus 45% at the end of 2013.
Subsequent events
On July 16, 2014, Mersen announced that it had re-negotiated the credit lines which had been arranged in
July 2012 into a single €220 million multi-currency syndicated loan.
The maturity of the Group's syndicated loan has been extended by two years, with the new maturity date set at July 2019. The Group is also enjoying improved financial terms taking advantage of the good environment in the credit markets.
With this agreement, Mersen has a total of €365 million of confirmed credit lines, of which more than €145 million are available. The average maturity of the loans is now about five years.
Outlook
Mersen still expects the second half of the year to be better than the first: the Americas are expected to enjoy more positive conditions and the electronics business to continue growing; in addition, sales for the solar market are expected to be higher than those from last year, as expected. However, the Group must also take into account the fact that the chemicals business is unlikely to recover by the end of the year, given the low level of orders registered in the first half. As a result, Mersen believes that its targets for the year, namely slight growth in sales at constant scope and exchange rates and in operating margin before non-recurring items are achievable but more challenging.
The Group also continues to roll out Transform, in line with the initial plan. The estimated cost of this plan is about €30 million over the full year; ultimately, it should improve the Group's operational efficiency and competitiveness prompting an increase in its operating margin before non-recurring items of about 1.5 points (on a level of business comparable with 2013).
3 According to the calculation used for the US$100m private placements issued in November 2011 and to the syndicated credit facility of July 2012
5/8 Paris, July 31, 2014Condensed Consolidated Income Statement
(In millions of euros) | June 30, 2014 | June 30, 2013 |
Consolidated sales Total gross margin Selling, marketing and other costs Administrative and research costs | 362.1 112.8 (36.8) (46.2) | 377.0 110.5 (38.2) (41.7) |
Operating income before non-recurring items % of Sales | 29.8 8.2% | 30.6 8.1 % |
Non recurring income and expenses, net Amortization of revalued intangible assets Operating income Financial income Current and deferred income tax Net income from continuing operations Net (loss)/income from assets held for sale or discontinued operations | (22.7) (0.5) 6.6 (5.2) (2.7) (1.3) 1.8 | (4.4) (0.6) 25.6 (5.6) (6.3) 13.7 (1.7) |
Net income for the period | 0.5 | 12.0 |
Net income attributable to Group equity holders | 0.2 | 11.5 |
EBITDA % of Sales | 47.5 13.1% | 51.0 13.5 % |
Segment analysis excluding corporate expenses
Materials segment (AMT) Electrical segment (ECT)
(In millions of euros) | June 30, 2014 | June 30, 2013 | June 30, 2014 | June 30, 2013 |
Sales EBITDA % of Sales | 139.5 21.4 15.3% | 153.6 26.0 16.9 % | 222.6 33.0 14.8% | 223.4 30.9 13.9 % |
Operating income before non- recurring items % of Sales | 9.6 6.9% | 11.8 7.7 % | 27.2 12.2% | 25.0 11.2 % |
Condensed Consolidated Statement of Financial Position
(In millions of euros) | June 30, 2014 | Dec. 31, 2013 |
Non-current assets Inventories Trade and other receivables Other assets | 620.4 163.9 147.1 13.6 | 610.7 154.3 121.5 16.3 |
TOTAL | 945.0 | 902.8 |
Equity Provisions Employee benefits Trade and other payables Other liabilities Net debt | 448.0 26.9 68.2 127.1 52.1 222.7 | 452.8 13.6 66.5 118.0 39.9 212.0 |
TOTAL | 945.0 | 902.8 |
Condensed Consolidated Cash-Flow Statement
(In millions of euros) | June 30, 2014 | June 30, 2013 |
Net cash from operating activities before change in WCR Change in working capital Income tax paid Net cash from discontinued operations | 43.0 (23.2) (7.6) 0.1 | 47.0 (12.1) (11.7) (6.4) |
Net cash from continuing operations | 12.3 | 16.8 |
Capital expenditure | (11.3) | (12.1) |
Net cash from continuing operations after capital expenditure | 1.0 | 4.7 |
Impact of changes in the scope of consolidation Disposals of non-current assets and other | (4.1) (0.7) | 0.7 0.4 |
Net cash from/(used by) operating and investing activities | (3.8) | 5.8 |
Mersen's first half 2014 financial statements were reviewed by the Supervisory Board on July 30, 2014. They were closed by the Management Board on the same day.
The half-year report and presentation are available on the website www.mersen.com
Financial calendar
2014 Q3 sales: October 29, 2014 after close of trading
About MersenGlobal expert in electrical specialties and graphite-based materials, Mersen designs innovative solutions to address its clients' specific needs to enable them to optimize their manufacturing process in sectors such as energy, transportation, electronics, chemical, pharmaceutical and process industries.
The Group is listed on NYSE Euronext Paris - Compartment B
Visit our website www.mersen.com/en
Contact Press ContactVéronique Boca Nicolas Jehly / Guillaume Granier
VP, Financial Communication FTI Consulting Strategic Communications
Mersen Tel: +33 (0)1 47 03 68 10
Tel: + 33 (0)1 46 91 54 40 Email: nicolas.jehly@fticonsulting.com / Email: dri@mersen.com guillaume.granier@fticonsulting.com
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