PanariaGroup Industrie Ceramiche : Press release - 17/03/2017

PRESS RELEASE 2016, Panariagroup historic sales record Panariagroup Industrie Ceramiche S.p.A.: The Board of Directors approves the Draft Financial Statement at 31 December 2016.

• Net Revenues amounted to 377.0 million Euros (342.9 in 2015) with an increase of 10.0% compared to 2015.
• Gross operating profit amounted to 40.8 million Euros (30.8 million Euros in 2015, equal to +32.6%).
• Net Operating profit amounted to 19.1 million Euros (11.1 million Euros in 2015), equal to +71.8%).
• Consolidated net Profit is 11.2 million Euros (5.9 million Euros in 2015, equal to +91.2%).

The Board of Directors of Panariagroup Industrie Ceramiche S.p.A., a Group specialized in the production and distribution of ceramic material for floors and high‐end and luxury coating, today approved the Financial Statement at 31 December 2016, drafted in accordance with International Financial Reporting Standards (IFRS).

In an economic environment of an improving trend, in which the world economy continued the growth, began in 2015, albeit with an uneven pace of development in the various areas, the Group fully benefited from its international footprint with excellent business and profitability volume growth results.

The achieved turnover represents the historical record for Panariagroup, with a more balanced geographical distribution of sales compared to the past and with a greater control on all major global markets in the ceramic sector.

This improvement resulted in an increase in revenues of 34.1 million Euros, an increase in EBITDA of

10.0 million Euros and an increase of 5.3 million Euros in Net Income.

Also all the main consolidated balance sheet indices have reported a significant improvement; in particular, the ratio between Net Debt and EBITDA, which now stands at 2.1 and the ratio between the Net Working Capital and the Sales Revenues, which stands at 32%.

FINANCIAL HIGHLIGHTS

(thousand Euros)

Nature	31 DEC 2016	31 DEC 2015	Var. €
Revenues from sales and services	377,045	342,910	+ 34,135
Value of production	391,440	359,248	+ 32,192
Gross operating profit	40,828	30,797	+ 10,031
Net operating profit	19,066	11,097	+ 7,969
Consolidated net profit	11,215	5,865	+ 5,350

"Geographical diversification, a distrinct feature of the Group's strategy ‐ says Emilio Mussini, Chairman of Panariagroup - has made it possible to fully exploit the growth opportunities offered by all the critical markets where Panariagroup operates. Revenues of the year have reached an historical peak for Panariagroup, with a 34.1 million Euro increase with respect to 2015, together with a considerable improvement of all income statement and balance sheet indicators".

"Panariagroup's current structure ‐ continues Mussini ‐ characterised by a very solid economic and financial base, its industrial and state‐of‐the‐art competitiveness and by its well‐defined and balanced strategic and geographical positioning, places in us an excellent situation to be able to develop, in 2017, a new and ambitious development plan".

REVENUES

The Net Sales Revenues recorded an overall increase of 10.0%, from 342.9 million Euros in 2015 to

377.0 million Euros in 2016 (+34.1 million Euros).

The achieved turnover is made from 82% by the foreign markets, of which more than half outside the European Union borders.

UNITED STATES - The growth in turnover and market shares continued with an increase of 9% of the turnover; in this area for over five years, the Group has been demonstrating a considerable continuity of results. The presence in the American territory of a company structured such as Florida Tile, able to serve the market through diversified distribution channels (Own Shops, Independent Distributors, Home Centres) allows the Group to enjoy a competitive basis on which to base its commercial development strategies, by creating synergies also with the two commercial divisions: Panariagroup USA and Lea North America.

The impact of the US market on the total of the revenues is equal to 37% (38% in 2015).

EUROPE - Excellent performances have been recorded on the European markets, with an overall growth of 20%; the achievement of this result is attributable to both the Business Units focused on these markets (Italian and Portuguese) and the effectiveness of their commercial action.

In all major areas, excellent results have been achieved, but, in particular, sale increases achieved in Portugal (with a further strengthening of the leadership of Gres Panaria Portugal), Germany, Austria, Great Britain, Holland and Belgium stand out.

The European market share on the total turnover was 34% (31% in 2015).

ITALY ‐ The Group's performances in the Italian market have increased slightly and in line with the overall trend of the market. Compared to the marked uncertainties of recent years, signs of moderate optimism about the future prospects for the domestic market are found.

The incidence of the Italian market on the consolidated turnover was 18% (incidence of 19% in 2015).

ASIA, CANADA, SOUTH AMERICA, OCEANIA AND AFRICA ‐ The Group achieved a growth of 7%; while on the markets of Central and South America a total slowdown was recorded. Excellent growth in Oceania (+ 19%) and on the promising Asian markets (+ 18%).

The share of "other markets" on the total turnover was 11% (12% in 2015).

FINANCIAL RESULTS

The Gross operating profit of 40.8 million Euros was equal to 10.4% on the Value of Production (30.8 million Euros equal to 8.6% in 2015) with an improvement of 10.0 million Euros.

The improvement in the operating margin was mainly driven by the growth in the sales volumes and in the reduction of production costs.

The sales increase was generated by the conquest of market shares in terms of volumes, while prices remained in line with the previous year.

Production costs have benefited, to a great extent, of the higher volumes produced, and by achieving a high degree of capacity utilization, resulting in reduction of the impact of the component of fixed production costs on the unit cost.

The European plants have also benefited from a reduction in energy prices.

NET FINANCIAL POSITION

The Net Financial Debt was increased compared to the end of 2015 by 0.7 million Euros, but with a decidedly positive evolution of the ratio between Net Financial Debt and EBITDA, which fell from 2.7 to 2.1; the result is to be considered extremely positive, in consideration of the significant level of investments made, and it was made possible by the excellent contribution in self‐management.

The improvement in the NFP/EBITDA ratio and the financial balance has also been confirmed for next year as one of the primary goals of management.

SHAREHOLDERS' EQUITY

The Shareholders'equity of the Group has increased, rising from 159.3 million Euros in 2015 to

172.2 current Euros, mainly due to the positive economic results of 2016.

OUTLOOK FOR GROUP OPERATIONS

The excellent results achieved in 2016, continuing the trend of strong growth in the two previous years, confirm the effectiveness of the strategic choices made in recent years and the effectiveness of deep renewal actions that the Group has implemented in all the Business Units and in all the Company areas.

The expectations for 2017 are positive, both in terms of turnover and of profitability.

In terms of Revenues, the outlook is of further growth in all Business Units, thanks to the expected effects of the commercial development programmes implemented and to a complex macro‐ economic framework in tendential improvement.

Specifically, we are seeing a particularly positive contribution by the Italian Business Unit, for which the positive impacts resulting from the profound revision of the commercial model should be consistently consolidated.

As regards production costs, significant benefits are expected.

Firstly, the 2017 Budget provides for a more intense use of the plants, leading the European plants to near‐production capacity saturation levels and a consequent reduction in the incidence of fixed costs.

Secondly, the implementation of major industrial investments made in the last two years will enable us to benefit from major advantages in terms of efficiency and productivity.

Finally, based on the agreements signed for 2017, we are expecting a further reduction in cost for the supply of gas and electricity.

We conclude, with 2016, a decidedly positive three‐year cycle, which has led to a growth in Revenues for the Group of over 100 million of Euro, on achieving satisfactory economic results and on strengthening its financial position.

Panariagroup's current structure, characterised by a very solid economic and financial base, its industrial and state‐of‐the‐art competitiveness and by its well‐defined and balanced strategic and geographical positioning, places in us an excellent situation to be able to develop, in 2017, a new and ambitious development plan.