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8. August 2018

SCHMOLZ + BICKENBACH with strong momentum in the second quarter

  • Highest EBITDA since 2011 in the second quarter thanks to good demand and internal measures
  • Sales volume increased by 23.4% to 580 kilotons in Q2 2018, from 470 kilotons in Q2 2017; robust demand in all end markets and regions
  • Average sales price per ton increased to EUR 1,566 from EUR 1,489 in Q2 2017 and EUR 1,521 in Q1 2018
  • Adjusted EBITDA of EUR 84.9 million 22.0% higher than in Q2 2017 with EUR 69.6 million
  • Free cash flow of EUR –68.2 million compared to EUR 7.1 million, lower due to acquisition of Ascometal
  • Net debt increased to EUR 626 million due to higher activity and Ascometal, from EUR 557 million at the end of Q1 2018
  • Outlook for 2018 raised: SCHMOLZ + BICKENBACH now expects adjusted EBITDA between EUR 230 million and EUR 250 million

CEO Clemens Iller commented: "The favorable market environment of the first three months continued in the second quarter. Amid this environment – but also thanks to internal measures – we succeeded in achieving the best quarterly result since 2011. Some of our production sites reached the capacity limit in the quarter under review. Demand in our end markets remained strong despite the political uncertainties caused by trade barriers, punitive tariffs and the resulting retaliatory measures. Consequently, we are now in a position to raise our guidance for fiscal year 2018 and are confident that we will exceed our 2017 results by a significant margin."

Financial key figures

SCHMOLZ + BICKENBACH Group

Unit

H1 20181)

H1 2017

Δ in %

Q2 20181)

Q2 2017

Δ in %

 

 

 

 

 

 

 

 

Sales volume

kilotons

1‘125

959

17.3

580

470

23.4

Revenue

million EUR

1‘737.2

1‘407.4

23.4

908.3

699.8

29.8

Average sales price

EUR/t

1‘544

1‘468

5.2

1‘566

1‘489

5.2

Adjusted EBITDA

million EUR

155.2

136.2

14.0

84.9

69.6

22.0

EBITDA

million EUR

184.9

134.0

38.0

81.8

67.7

20.8

Adjusted EBITDA margin

%

8.9

9.7

9.3

9.9

EBITDA margin

%

10.6

9.5

9.0

9.7

EBIT

million EUR

131.0

70.6

85.6

55.5

36.0

54.2

Earnings before taxes

million EUR

110.5

41.3

45.3

13.9

Group result

million EUR

96.1

26.5

37.1

10.0

Investments

million EUR

35.9

25.0

43.6

20.8

13.7

51.8

Free cash flow

million EUR

–170.9

–24.3

–68.2

7.1

 

Unit

30.6.20181)

31.12.2017

Δ in %

31.3.20181)

 

 

 

 

 

 

 

 

 

 

Net debt

million EUR

625.9

442.0

41.6

556.5

 

 

Shareholders’ equity

million EUR

818.7

717.5

14.1

772.3

 

 

Gearing

%

69.0

61.6

68.9

 

 

Leverage

x

2.6

2.0

29.5

2.5

 

 

Balance sheet total

million EUR

2‘642.2

2‘113.1

25.0

2,486.6

 

 

Equity ratio

%

31.0

34.0

31.1

 

 

Capital employed

million EUR

1‘876.0

1‘535.1

22.2

1,764.1

 

 

Employees at closing date

positions

10‘318

8‘939

15.4

10,212

 

 

 

Unit

Q2 20181)

Q2 2017

Δ in %

Q1 20181)

Q1 2017

Δ in %

 

 

 

 

 

 

 

 

Earnings/share2)

EUR/CHF

0.10/0.12

0.03/0.03

0.04/0.05

0.01/0.01

Shareholders’ equity/share3)

EUR/CHF

0.87/1.02

0.76/0.89

0.87/1.02

0.76/0.89

Share price high/low

CHF

0.886/0.700

0.960/0.660

0.830/0.733

0.960/0.820

 

1)       Including Ascometal, fully consolidated since February 1, 2018

2)       Earnings per share are based on the net income (loss) of the Group after deduction of the portions attributable to non-controlling interests

3)       As at June 30, 2018 and December 31, 2017, respectively

 

Lucerne, August 8, 2018 – SCHMOLZ + BICKENBACH, a global leader in special long steel, today reported a 23.4% higher sales volume of 580 kilotons compared to 470 kilotons in the second quarter of last year. Thanks to a further increase in sales prices and volumes, revenue with EUR 908.3 million were 29.8% higher than in the prior-year quarter (Q2 2017: EUR 699.8 million). Adjusted EBITDA improved by 22.0% to EUR 84.9 million from EUR 69.6 million and EBITDA by 20.8% to EUR 81.8 million from EUR 67.7 million in the same period of the previous year.

Effects of the acquisition of Ascometal on results

The results of Ascometal, recently acquired and managed as a Business Unit within the Group, have been included in the Group figures since February 2018. The figures for the relevant prior-year periods have not been adjusted, which has had significant effects on the comparison with these figures. This is reflected in higher sales volumes, revenue and expenses. Ascometal made a slightly negative contribution to EBITDA in the first quarter and a slightly positive contribution in the second. In the first quarter – and thus the first half – of 2018, EBITDA was increased by a negative goodwill (“badwill”), which will be offset by future restructuring measures. The integration also had a significant impact on the balance sheet and cash flow figures. More detailed information is provided on pages 8 to 16 and in Note 7 of the Interim Report for the second quarter of 2018. The report can be accessed via the company's website.

Business development in the second quarter of 2018

The favorable market environment of the first quarter continued in the second quarter. This led to sustained high demand from the most important customer industries. On a comparable basis, i.e. excluding Ascometal, sales volumes remained stable. Lower sales volumes at Steeltec, caused by the streamlining of the product portfolio as part of the restructuring in 2017, were offset by slight volume growth in the Group.

The average prices for nickel, ferrochrome and scrap developed differently compared to the first quarter of 2018. Compared to the first quarter, the average price for nickel was 9.0% higher. By contrast, the average price of scrap fell by 3.2% and the price of ferrochrome rose by around 2%. Compared to average prices in the second quarter of 2017, nickel was 57%, scrap 28% and ferrochrome 5% higher. This had a favorable effect on the average achieved sales price. The average sales price per ton of steel in the second quarter of 2018 was EUR 1,566, up 5.2% from EUR 1,489 in the prior-year quarter. The increase was mainly the result of higher base prices and increased scrap and alloy surcharges. Sales prices also increased again compared to the first quarter 2018, despite Ascometal's structurally lower prices for quality & engineering steel that were now included in earnings for all three months instead of two as in the first quarter.

The most important growth driver in the second quarter remained the European automotive industry, which again reported 2.9% more new car registrations compared to the first half of 2017. Mechanical and plant engineering also continued to develop robustly with growth in the low single-digit percentage range. The oil and gas industry benefited in the second quarter from the upward trend in crude oil prices (WTI), which rose from around USD 65 to around USD 74 per barrel. However, as in the first three months, our business units only benefited to a limited extent from the positive trend in the industry due to structural changes in the business.

All regions contributed to the high revenue growth in the second quarter with double-digit growth rates. Thanks to the strong economy in Europe and the contribution of Ascometal, revenue in Europe increased by 33.5%. The base effect resulting from Ascometal mainly affected revenue in France, which almost doubled with an increase of 94.2%. The second strongest region was Africa/Asia/Australia with an increase of 17.6%. In America, sales increased by 15.1%, mainly thanks to strong sales in Canada, but also thanks to growth of 5.1% in the United States.

Sales volumes in the individual product groups developed similarly to the first three months of the year. Sales volumes of quality & engineering steel rose by 32.7% to 446 kilotons (Q2 2017: 336 kilotons). After a slight year-on-year decline in the first quarter, volumes of stainless steel increased by 1.1% to 93 kilotons in the second quarter (Q2 2017: 92 kilotons). Sales volumes of tool steel remained weak, down 4.9% year-on-year. Lower volumes in this product group were more than offset by significantly higher sales prices, so that tool steel revenue nevertheless increased by 4.9%.

Higher sales prices and the consolidation of Ascometal were the main reasons for the 29.8% growth in Group revenue to EUR 908.3 million compared to EUR 699.8 million in the prior-year quarter. It was particularly high in quality & engineering steel with an increase of 62.0% to EUR 484.5 million. This is because Ascometal's products are fully included in the quality & engineering steel product group. Revenue in stainless steel rose by 8.1% to EUR 293.2 million and in tool steel by 4.9% to EUR 116.7 million.

Adjusted for the one-time effects from the acquisition of Ascometal, EBITDA of EUR 84.9 million was 22.0% higher than the EUR 69.6 million achieved in the prior-year quarter and reaching the highest value since 2011. At 9.3%, the adjusted EBITDA margin was lower than in the prior-year quarter with 9.9% due to the dilutive effect of Ascometal. Despite the negative one-time effects, which amounted to EUR 3.1 million, EBITDA improved by 20.8% to EUR 81.8 million compared to EUR 67.7 million in the second quarter of 2017, resulting in a margin of 9.0% compared to 9.7%.

At EUR –10.2 million, the financial result was significantly better than in the second quarter of 2017 (EUR –22.1 million). This reflects the lower interest expenses of the refinancing successfully carried out in April 2017. On June 25, 2018, SCHMOLZ + BICKENBACH topped up the corporate bond by EUR 150 million to EUR 350 million. The proceeds were primarily used to repay drawings under the EUR 375 million syndicated revolving credit facility, which were mainly used in connection with the acquisition of Ascometal. The costs incurred were capitalized.

SCHMOLZ + BICKENBACH achieved earnings before taxes (EBT) of EUR 45.3 million in the second quarter 2018 compared to EUR 13.9 million in the same quarter of the previous year. Tax expenses of EUR –8.2 million were significantly higher than the previous year's figure of EUR –3.9 million due to the higher pre-tax profit. Group result thus increased to EUR 37.1 million compared to EUR 10.0 million in the same period of the previous year.

Free cash flow improved compared to the first quarter, at EUR –68.2 million, but was still clearly below the previous year's figure of EUR 7.1 million. This was due on the one hand to payments for the purchase of Ascometal and on the other hand to an increase in net working capital following the strong demand. The build-up of inventories for graphite electrodes contributed to that as well.

Net debt of EUR 625.9 million was significantly higher than one year ago. This is attributable to the lower free cash flow described in the previous section. Accordingly, net debt to adjusted EBITDA increased to 2.6 times.

Outlook 2018

We expect the specialty long steel industry to continue to grow in 2018, both in terms of sales volumes and product value, as we expect a further shift towards more demanding production and steel applications.

We want to consistently pursue the positive trend of the last two years and our strategy and make even better use of our strengths. At the same time, we are focusing on cost discipline, which is necessary to mitigate rising raw material and personnel costs. However, the integration and operational improvement of Ascometal will be a clear focus. In order to bring this acquisition to a successful conclusion, we will deploy considerable management capacities over the next two years.

The political risks have again increased significantly in recent weeks in view of trade barriers, punitive tariffs and countermeasures. Nevertheless, we do not yet see a fundamental slowdown in our businesses. Although visibility in the summer months is lower than in the rest of the year, we expect the market environment to remain robust, as reflected in well-filled order books. These developments have prompted us to raise our outlook for 2018. We now expect adjusted EBITDA between EUR 230 million and EUR 250 million (previously EUR 200 million to EUR 230 million).