Recticel : First half-year 2020 results - Mitigated COVID-19 impact and key strategic moves

PRESS RELEASE

Regulated information - Inside information

Brussels, 28 August 2020 - 07:00 CET

FIRST HALF-YEAR 2020 RESULTS

MITIGATED COVID-19 IMPACT & KEY STRATEGIC MOVES

• Net sales: from EUR 453.8 million1 to EUR 374.3 million (-17.5%), including a -0.5% currency effect
• Adjusted EBITDA: from EUR 34.6 million1 to EUR 19.0 million (-44.9%)
• Result of the period (share of the Group): from EUR 16.1 million to EUR 60.1 million, including net capital gain and result for the period from discontinued operations
• Net financial debt: EUR 43.8 million (including EUR 55.2 million IFRS 16 lease obligations)
• Closing of the divestments of the participation in Eurofoam and of the Automotive Interiors division

Olivier Chapelle (CEO): "After a good start of the year, the COVID-19 pandemic has severely impacted the topline of the Group from mid-March onwards, resulting in a sales decline of -3.0% in 1Q2020 and -32.3% in 2Q2020. After reaching a low point of -51.5% in April 2020 versus April 2019, the sales shortfall versus last year has improved to -35.4% in May and -9.3% in June. This recovery trend continues with July 2020 being -4.1% lower than July 2019.

After having ensured that all sanitary measures had been put in place in all our locations to protect our employees, the Group immediately implemented measures to reduce costs and preserve cash. These measures include the adjustment of the production capacity, the use of temporary unemployment, strict spending and capital expenditure control.

As a consequence, the cash consumption of our continued operations and the negative impact on Adjusted EBITDA have been reduced to the maximum extent possible.

On June 30th, the transactions related to the divestment of our participation in the Eurofoam joint venture and to the partial divestment of our Automotive Interiors division have been closed as planned and announced. As a consequence, the Group ended the second quarter with a net positive cash position of EUR 11.4 million (excluding the IFRS 16 lease obligations), and ample financial headroom to focus and engage in the execution of its growth strategy in its higher value added business segments."

OUTLOOK

Subject to there being no further COVID-19 impacts, the dynamics of the recovery observed during the 2nd quarter and the month of July lead the Group to expect the 2H2020 consolidated net sales and Adjusted EBITDA of its retained business to be at the level of 2H2019.

1 Following the partial divestment from Automotive Interiors on 30 June 2020 (see press release of 01 July 2020), Automotive Interiors is integrated in the consolidated accounts according to the 'equity method'. Due the loss of control as a result of the partial divestment of Automotive Interiors and the sale of Eurofoam, the 2019 consolidated income statement was restated to present their operations as discontinued operations.

To facilitate comparisons and understanding of the Group's underlying performance, all comments in this document on developments in revenue or results are made on a like-for-like basis unless otherwise indicated.

Following the divestment of 50% participation in Eurofoam, the publication of combined accounts has been discontinued.

Press release - First half-year 2020 Results - 28 August 2020 - 07:00 CET

1. CONSOLIDATED GROUP RESULTS

	in million EUR	1H2019		1H2019		1H2020	%
	as published		restated 1
				(a)		(b)	(b)/(a)-1
	Sales	536,1		453,8		374,3	-17,5%
	Gross profit	101,2		88,0		65,3	-25,7%
	as % of sales	18,9%		19,4%		17,5%
	Income from associates 3	4,8		0,7		0,4	-38,4%
	Adjusted EBITDA	n.a.		34,6		19,1	-44,9%
	as % of sales			7,6%		5,1%
	EBITDA	53,2		30,4		17,4	-42,8%
	as % of sales	9,9%		6,7%		4,6%
	Adjusted operating profit (loss)	n.a.		16,8		0,9	-94,7%
	as % of sales			3,7%		0,2%
	Operating profit (loss)	24,7		12,3		( 2,9)	-123,5%
	as % of sales	4,6%		2,7%		-0,8%
	Financial result	( 4,6)		( 2,8)		( 2,6)	-8,0%
	Income from other associates 3	-		2,6		( 3,0)	n.m.
	Change in fair value of option structures	-		2,9		1,7	n.m.
	Income taxes	( 4,0)		( 2,6)		( 2,0)	-22,3%
	Result of the period of the continuing operations	16,1		12,3		( 8,7)	-170,9%
	Result of the discontinued operations	0,0		3,8		68,8	n.m.
	Result of the period (share of the Group)	16,1		16,1		60,1	273,3%
	Result of the period (share of the Group)	0,29		0,29		1,09	275,4%
	- base (per share, in EUR)
		30 Jun 2019		30 Jun 2019		30 Jun 2020
	Total Equity	265,9		265,9		331,5	24,7%
	Net Financial Debt (incl. IFRS 16 - Leases)	183,6	2	156,9	2	43,8	-72,1%
	Gearing ratio (Net financial debt/Total Equity)	69,1%		59,0%		13,2%
	Leverage ratio (Net financial debt/EBITDA)	1,7		-		0,9

1. Excluding the drawn amounts under non-recourse factoring programs: EUR 0.0 million per 30 June 2020 versus EUR 60.2 million per 30 June 2019 and EUR 47.0 million per 31 December 2019.
   As of 30 June 2020 the off-balance sheet treatment of the factoring program has been discontinued.
2. Income from associates = income from associates considered as being part of the Group's core business are integrated in Operating profit (loss); i.e. Orsafoam
   Income from other associates = income from associates not considered as being part of the Group's core business are not integrated in Operating profit (loss); i.e. Proseat and Automotive Interiors

The following changes in the scope of consolidation took place in 1H2020:

• Partial divestment of the Automotive Interiors activities at the end of June 2020, which are now operated through a new 51/49% Admetos/Recticel joint venture.
• Disposal of the 50% participation in the Eurofoam group (Flexible Foams) at the end of June 2020.

Consequently, the Automotive Interiors activities and Eurofoam are reported as discontinued operations. The Automotive segment is no longer reported separately.

Sales of chemical raw materials at cost to the Proseat and Automotive Interiors companies, which previously were reported under the segment Automotive, are from now on integrated under "Corporate/Eliminations".

Press release - First half-year 2020 Results - 28 August 2020 - 07:00 CET

2

Net Sales: on a like-for-like basis1 sales decreased by 17.5% from EUR 453.8 million1 to EUR

374.3 million, including a currency impact of -0.5%.

Sales in the second quarter were materially impacted (-32.3%) by the COVID-19 pandemic and the subsequent governmental lockdown measures in most countries. As the quarter progressed, a gradual improvement was observed. Sales in April, May and June declined respectively by - 51.5%, -35.4% and -9.3%.

Breakdown of the sales by segment

		restated 1					2020 versus 2019 restated
in million EUR	1Q2019	2Q2019	1H2019	1Q2020	2Q2020	1H2020	1Q	2Q	1H
Flexible Foams	96,8	92,6	189,4	89,4	57,7	147,1	-7,7%	-37,7%	-22,3%
Bedding	64,3	55,6	119,8	65,2	44,0	109,2	1,4%	-20,7%	-8,9%
Insulation	62,5	67,4	129,8	60,7	52,0	112,7	-2,9%	-22,8%	-13,2%
Corporate / Eliminations	4,6	10,1	14,7	6,2	( 1,0)	5,2	33,3%	-110,2%	-64,9%
TOTAL CONSOLIDATED SALES	228,3	225,6	453,8	221,5	152,8	374,3	-3,0%	-32,3%	-17,5%

All segments reported lower sales during 1H2020, particularly due to the significant impact of COVID-19 during 2Q2020.

• Flexible Foams sales decreased by 22.3% over 1H2020 as volumes were heavily impacted by the lockdown measures during 2Q2020. Whereas the Comfort markets bounced back strongly in June, Technical Foams remained more subdued, mainly due to the slow restart of automotive and industrial customers.
• Bedding sales decreased by 8.9% over 1H2020, due to COVID-19 retail shopping restrictions imposed in most European countries. June sales however ended ahead of last year, thanks to a strong orderbook secured from mid-May onwards as shops progressively reopened throughout Europe.
• Insulation sales decreased by 13.2% over 1H2020, with volumes heavily affected by the COVID-19 lockdown measures from mid-March until May. Accelerating activity levels in the building markets led to June volumes exceeding the level of 2019. Selling prices remained under pressure as a consequence of lower raw material costs.

Adjusted EBITDA: EUR 19.1 million versus EUR 34.6 million1 in 1H2019.

Adjusted EBITDA margin of 5.1% versus 7.6%1 in 1H2019.

Breakdown of the Adjusted EBITDA by segment

in million EUR	1H2019	1H2020	1H
	restated 1
	(a)	(b)	(b)/(a)-1
Flexible Foams	18,8	10,3	-45,4%
Bedding	6,9	4,5	-34,6%
Insulation	17,1	11,3	-33,9%
Corporate	( 8,2)	( 7,0)	-14,4%
TOTAL CONSOLIDATED	34,6	19,1	-44,9%
ADJUSTED EBITDA

Press release - First half-year 2020 Results - 28 August 2020 - 07:00 CET

3

The lower contribution from all segments is generally attributable to lower sales volumes following the COVID-19 crisis in 2Q2020. The negative volume impact has been mitigated to a maximum extent by cost saving measures and the implementation of temporary unemployment.

Adjusted operating profit (loss): EUR 0.9 million, versus EUR 16.8 million1 in 1H2019.

Adjusted operating profit (loss) margin of 0.2% versus 3.7%1 in 1H2019.

Breakdown of the Adjusted operating profit (loss) by segment

in million EUR	1H2019	1H2020	1H
	restated 1
	(a)	(b)	(b)/(a)-1
Flexible Foams	12,0	3,1	-73,8%
Bedding	2,5	0,0	-99,4%
Insulation	11,5	5,9	-48,4%
Corporate	( 9,1)	( 8,2)	-9,9%
TOTAL ADJUSTED	16,8	0,9	-94,7%
OPERATING PROFIT (LOSS)

Adjustments to Operating profit (loss):

in million EUR	1H2019	1H2020
restated1
Restructuring charges and provisions	( 1,1)	( 1,4)
Gain (loss) on disposals	0,3	0,0
Other	( 3,4)	( 0,3)
Total impact on EBITDA	( 4,2)	( 1,7)
Impairments	( 0,3)	( 2,1)
Total impact on Operating profit (loss)	( 4,5)	( 3,8)

Adjustments to Operating profit (loss) on continuing operations in 1H2020 include mainly (i) reorganisation charges in Flexible Foams (EUR 0.5 million) and in Bedding (EUR 1.0 million) and (ii) impairments on idle assets in Flexible Foams in Spain (EUR 1.1 million) and in Bedding following the closure of the Hassfurt plant (Germany) (EUR 0.9 million).

Press release - First half-year 2020 Results - 28 August 2020 - 07:00 CET

4