financial results for q1 2018 - ciech · 5/30/2018 · q1: the downside yoy • silicates...

Financial results for Q1 2018

Warsaw, 30 May 2018

2

Q1 2018 – executive summaryFinancial results for Q1 2018

PLN 886 m revenues

A slight drop in the prices of soda ash in Europe was compensated by the growth of prices in overseas markets.

A negative impact of currency rates on the business (EUR/PLN and USD/RON).

Growth in the prices of coke compensated by the use of anthracite.

Higher costs of coking coal and gas, as well as materials for production of resins and foams.

An increase in the share of dry salt sales.

Negative weather conditions had an impact on the decrease of the agricultural market in Poland.

Commencement of an investment whose purpose is to construct a weighted salt production plant in Germany (the executive stage).

Completion of the investment whose purpose was modernization of the furnace and increase of sodium silicate production.

19%adj. EBITDA margin

PLN 168 m adj. EBITDA

Adj. EBITDA – EBITDA adjusted for untypical one-off Events commentary yoy

1. Most important events of Q1 2018

2. Financial results for Q1 2018

3. Outlook

4. Appendix

60

100

140

180

220

260

300

340

Coke - ARA ports

Coking coal - spot*Coking coal - benchmark

Coking coal and coke prices [USD/t]

5

9

13

17

21

25

German Gaspool (GLP) Natural Gas – 1M Forwards[EUR/MWh]

4

Market environment: raw materialsMost important events of Q1 2018

The CIECH Group purchases coke, anthracite andpart of coal on the basis of contracts each timenegotiated (volumes and prices). Thus, marketlistings help to estimate the trend but not the actualcontract prices of CIECH. Moreover, the Group usesits stocks firstly.

The formula of gas prices is generally based onmarket listings (the Group applies partial hedging).

18.2018.17

12.99

30

40

50

60

70

80

90

100

110

ARA (cal. 25 GJ/t)

PSCMI1 (cal. 25 GJ/t)

Coal prices[USD/t]

Q1 2016 Q1 2018Q1 2017

Source: Bloomberg, IHS, www.polskirynekwegla.pl * Australia Premium Coking Coal

Q1 2016 Q1 2018Q1 2017

Q1 2016 Q1 2018Q1 2017

3,5

3,7

3,9

4,1

4,3

4,5

4,7

USD/RON

5

Market environment: FX situationMost important events of Q1 2018

3,8

4,0

4,2

4,4

4,6EUR/PLN

The Group appliesinstruments securing itagainst foreign currencychanges, according to theadopted policy. Therefore,the currency changes werenot so painful.

4.314.36

3.79

4.24

4.06

4.18

Q1 2016 Q1 2018Q1 2017

Q1 2016 Q1 2018Q1 2017

6

Business: other significant eventsMost important events of Q1 2018

Continuation of work on the construction of a new production line for baking soda with pharmaceutical quality in Germany.

Launch of a high-storage warehouse for ready salt products.

Launch of the certified R&D laboratory for the agricultural business in Warsaw.

Increase of the foam production capacity as a result of commissioning for use of long-block warehouses in September 2017.

Growth in the prices of materials for production of foams.

Launch of a new furnace and increase of solid silicates productioncapacity.

Development of new products in the resin business (non-flammable, sanitary resins, floors, laminates, glues).

A decision concerning the implementation of an investment in a weighted salt production plant in Germany and obtainment of subsidies.

Introduction of 17 new products in the standard offer of glass packaging.

Intensification of the presence in Asian markets with regard to soda ash.

Continuous high demand for soda ash.



3. Outlook

4. Appendix

8

Profit and loss accountFinancial results for Q1 2018

[PLN million] Q1 2018 Q1 2017 yoy

Revenue 885.7 898.4 -1.4%

EBIT 102.1 126.8 -19.5%

EBIT margin 11.5% 14.1% -2.6 p.p.

EBITDA 165.4 186.4 -11.3%

EBITDA margin 18.7% 20.8% -2.1 p.p.

Adj. EBITDA 167.6 186.7 -10.2%

Adj. EBITDA margin 18.9% 20.8% -1.9 p.p.

Net result 74.0 78.1 -5.3%

Net margin 8.4% 8.7% -0.3%

Adj. EBITDA – EBITDA adjusted for untypical one-off Events

9

Results vs. consensusFinancial results for Q1 2018

[PLN million] Q1 2018 Consensus Q1 2018 Range of forecasts

Revenues 885.7 890.0 861.4 - 912.0

EBIT 102.1 105.5 95.2 - 114.9

EBIT margin 11.5% 11.9% -

EBITDA 165.4 169.8 157.9 - 180.0

EBITDA margin 18.7% 19.1% -

Adjusted EBITDA 167.6 169.8 157.9 - 180.0

Adjusted EBITDA margin 18.9% 19.1% -

Net result 74.0 72.3 64.6 - 82.0

Net margin 8.4% 8.1% -

Consensus PAP based on 8 analyst’s forecasts

10

Results in operating segmentsFinancial results for Q1 2018

67% 24% 7% 4%

-10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Soda segment Organic segment

Silicates and glass segment Transport segment

Others

88% 10% 4%3%

-10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Revenues for Q1 2018

Adj. EBITDA for Q1 2018

11

Results in business segmentsFinancial results for Q1 2018

Key products % revenues for Q1 2018

SOD

A S

EGM

ENT

Soda ash dense 36.9%

Soda ash light 13.7%

Salt 4.8%

Sodium bicarbonate 4.7%

OR

GA

NIC

SEG

MEN

T

Resins 9.9%

Poliurethane foams 10.1%

Crop protection chemicals 3.4%

SILI

CA

TES

& G

LASS Sodium silicates 3.9%

Potassium silicates 0.1%

Cointainer glass 3.1%

Transport services 0.4%

55%

21%

7%

7%

9%

Soda ash dense

Soda ash light

Salt

Sodium bicarbonate

Calcium chloride

Others

Revenue structurefrom soda segment

619 595

590

587

634

2017 2018

161 147

164

161

205

2017 2018

12

Soda segmentFinancial results for Q1 2018

Revenue [PLN million]

Q1 Q2 Q3 Q4

Adj. EBITDA [PLN million]

Q1: the upside yoy

• higher sales prices in overseas markets which compensated the drop of prices in Europe;

• stable demand for soda ash;

• higher sales of dry salt (growth in volume and prices);

• optimization of overheads;

• increase of the share of anthracite use which compensates the growth of coke prices.

Q1: the downside yoy

• higher prices of coking coal and gas;

• the strengthening of PLN against EUR, and of RON against USD;

• a slight drop in the prices of soda ash in Europe.

-3.8% -8.7%

Commentary yoy

13

Organic segmentFinancial results for Q1 2018


217 211

226

179

250

2017 2018

21,2 16,3

20,2

10,9

44,3

2017 2018

Q1: the upside yoy

• resins – growth of sales in every product group gained due to the development of new products (non-flammable resins, sanitary resins, floors, laminates, glues) and thanks to obtainment of new clients;

• foams – growth in the volume of sales as a result of strong demand; further growth of production effectiveness; growth of the production capacity; development of new products.


• agro – lower sales of crop protection chemicals (the result of long winter and successful pre-seasonal sales in 4Q2017), the global downfall trend in product prices;

• foams – higher prices of basic materials (TDI, polyols, to a large extent compensated by the rise in product prices for the purpose of minimization of margin loss).


Q1 Q2 Q3 Q4

-2.7%-23.1%

Commentary yoy

14

Silicates and glass segmentFinancial results for Q1 2018


48,9 62,9

58,2

60,6

61,6

2017 2018

6,7 7,3

8,9

10,6

10,6

2017 2018

Q1: the upside yoy

• silicates – growth in demand, mainly connected with the growth of silica production, as well as development of fumed silica sectors;

• glass packaging – higher sales of packaging glass, development of the portfolio in the direction of individual designs; higher sales volumes (also as a result of the conducted post-seasonal sale).


• silicates – negative impact connected with the switching of the furnace from packaging production to silicates production (a one-off event);

• glass packaging – intensified activities of the competition and continued price pressure.


Q1 Q2 Q3 Q4

+28.6%+9.3%

Commentary yoy

15

Transport segmentFinancial results for Q1 2018


29,5 34,8

31,7

30,8

32,4

2017 2018

2,24,4

5,3

3,1

5,5

2017 2018

Q1: the upside yoy

• emergence of new transport destinations, mainly from national ports;

• a higher volume transported within the Group and outside the Group;

• growth in demand for transport services and transport fees (mainly as a result of large infrastructural investments); increase of margins on transport business.


• temporary problems with the national infrastructure during the winter season, in particular in March.


Q1 Q2 Q3 Q4

+17.8%

+100.0%

Commentary yoy

16

Debt ratio

1 2611 479

1 213 1 182

1 361

1 196

9371 0603,85

3,50

2,72

2,30

1,82

1,361,16

1,34

0,50

1,00

1,50

2,00

2,50

3,00

3,50

4,00

4,50

2011 2012 2013 2014 2015 2016 2017 1Q2018

Net debt Net debt / Adj. EBITDA

[thousand PLN] At the end of Q1 2018 At the end of 2016

Debt ratio 51.6% 53.0%

Long-term debt ratio 29.5% 29.5%

Equity capital debt ratio 106.7% 112.6%

Gross financial liabilities 1 425.6 1 426.4

Net financial liabilities 1 060.1 936.7


Methodology of calculated ratios consistent with the financial statement

17

Cash flow

[PLN million] 1Q2018 1Q2017

EBITDA 168 18

Working capital -164 -176

Interest paid -1 -1

Taxes paid -14 -10

Others 7 -20

Cash flow from operating activities -4 -21

CAPEX -120 -110

Other 2 8

Cash flow from investment activities -118 -102

Free cash flow -122 -123

Debt financing -2 -2

Cash flow from financial activities -2 -2

Total net flow -124 -125

Closing balance of cash 366 290


Operating activity:

• a change in the commercial working capital, mainly as a result of the growth of the crop protection chemicals inventory connected with the approaching seasonal sales, as well as less involvement of factoring in comparison with December 2017

Investment activity:

• expenditure connected with the investment programme implemented in the CIECH Group at a slightly higher level than in the previous year

Financial activity:

• payments under the financial lease

Simplified



3. Outlook

4. Appendix

19

Business activitiesOutlook

Continued optimization of the salt product portfolio in the direction of high-margin products and optimization of the clients’ portfolio with regard to the salt used in electrolysis.

Continuation of work connected with the launch of new products – salt licks and salt granulate in 1H2018.

Continuation of registration processes of new products and active substances.

In the business of foams - launch of multistream and mulitifill installations –reduction of wastes and optimization of raw material input.

Effective investment of the additional volume of glassy sodium silicate from the new installation.

Continued development of crop protection chemicals sales, increase of the market share and foreign expansion.

Intensification of the presence in Asian markets with regard to soda ash.

Work on the launch of a new packing line – increase of sales of products in small packaging.

Intensive R&D activity – development of the specialized resin portfolio.

Business integration with the acquired Proplan company.

Development of liquid silicates.

Work on the development of new markets.



3. Outlook

4. Appendix

21

Profit and loss accountAppendix

[PLN thousand] Q1 2018 Q1 2017 r/r

Sales revenues 885 670 898 378 (1.4%)

Cost of sales (679 044) (678 124) 0.1%

Gross profit/(loss) on sales 206 626 220 254 (6.2%)

Other operating income 11 317 11 061 2.3%

Selling costs (67 555) (61 556) 9.7%

General and administrative expenses (37 147) (34 763) 6.9%

Other operating expenses (11 158) (8 164) 36.7%

Operating profit/(loss) 102 083 126 832 (19.5%)

Financial income 4 967 3 506 41.7%

Financial expenses (11 257) (34 590) (67.5%)

Net financial income/(expenses) (6 290) (31 084) (79.8%)

Profit/(loss) before tax 95 789 95 697 0.1%

Income tax (21 739) (17 608) 23.5%

Net profit/(loss) on continuing operations 74 050 78 089 (5.2%)

22

Results by segmentsAppendix

[PLN thousand]Soda

segment

Organic

segment

Silicates

and glass

Transport

segment

Other

operations

Corporate

functions

Elimina-

tionsTOTAL

Q1 2018

Total sales revenues 594 990 210 679 62 942 34 797 33 016 - (50 754) 885 670

Cost of sales (429 171) (179 015) (46 595) (29 590) (25 704) - 31 031 (679 044)

Gross profit /(loss) on sales 165 819 31 664 16 347 5 207 7 312 - (19 723) 206 626

Operating profit /(loss) 97 289 9 150 2 403 2 453 5 037 (15 480) 1 231 102 083

Profit /(loss) before tax 94 900 5 701 2 495 2 387 4 956 (15 881) 1 231 95 789

Amortization/depreciation 47 752 7 137 4 910 1 457 667 1 413 - 63 336

EBITDA 145 041 16 287 7 313 3 910 5 704 (14 067) 1 231 165 419

Adjusted EBITDA 146 907 16 307 7 317 4 367 5 600 (14 159) 1 232 167 571

Q1 2017

Total sales revenues 618 601 216 923 48 919 29 546 32 402 - (48 013) 898 378

Cost of sales (433 535) (182 370) (39 310) (27 364) (22 780) - 27 235 (678 124)

Gross profit /(loss) on sales 185 066 34 553 9 609 2 182 9 622 - (20 778) 220 254

Operating profit /(loss) 115 799 13 620 1 783 822 5 722 (11 819) 905 126 832

Profit /(loss) before tax 109 024 10 879 1 577 810 6 234 (33 732) 905 95 697

Amortization/depreciation 44 006 7 515 4 883 1 471 600 1 090 - 59 565

EBITDA 159 805 21 135 6 666 2 293 6 321 (10 728) 905 186 397

Adjusted EBITDA 160 992 21 206 6 679 2 198 5 520 (10 824) 906 186 677

23

Abbreviated balance sheetAppendix

[PLN thousand] 31 March 2018 31 December 2017

ASSETS

Total non-current assets 3 218 923 3 204 963

Total current assets 1 446 910 1 438 548

Total assets 4 665 833 4 643 511

EQUITY AND LIABILITIES

Equity attributable to shareholders of the parent 2 260 334 2 187 596

Non-controlling interests (2 701) (2 951)

Total equity 2 257 633 2 184 645

Total non-current liabilities 1 376 506 1 369 282

Total current liabilities 1 031 694 1 089 584

Total liabilities 2 408 200 2 458 866

Total equity and liabilities 4 665 833 4 643 511

24

Working capitalAppendix

[PLN thousand] Q1 2018 2017

1. Current assets. including: 1 446 910 1 438 548

Inventory 390 458 364 517

Trade receivables and services and advances for deliveries 360 269 339 092

2. Cash and cash equivalents and short-term investments 421 146 547 733

3. Adjusted current assets (1-2) 1 025 764 890 815

4. Current liabilities. including: 1 031 694 1 089 584

Trade liabilities and advances taken 338 285 387 331

5. Short-term credits and other current financial liabilities* 231 194 234 483

6. Adjusted current liabilities (4-5) 800 500 855 101

7. Working capital including short-term credits (1-4) 415 216 348 964

8. Working capital (3-6) 225 264 35 714

* Other current financial liabilities include current bond liabilities. current finance lease liabilities + current derivative liabilities + factoring liabilities.

This document has been prepared solely for informational purposes. It includes only summary information. is not exhaustive. and may not be used as a sole basis for any assessment or analysis. CIECH S.A. makes no guarantees (explicit orimplicit) regarding information presented herein and such information. including forecasts. estimates and opinions. should not be unduly relied upon. CIECH S.A. does not accept any responsibility for possible mistakes. omissions orirregularities found herein. The document is based on sources of information which CIECH S.A. deems to be reliable and accurate. however. it does not guarantee them to be exhaustive nor to fully reflect the actual situation. This documentdoes not constitute an advertisement or a public offer of securities. It may include forward-looking statements that involve investment risks or uncertainties and may significantly differ from actual results. CIECH S.A does not accept anyresponsibility for consequences of decisions made based on this document. The responsibility lies exclusively with the party using the document. This document is protected by the Copyright and Related Rights Act. Copying. publishing ordistributing it requires prior written consent of CIECH S.A.

CONTACT FOR INVESTORS:Małgorzata MłynarskaManagement Board Representative for Investor Relations +48 669 600 567, [email protected]

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financial results for q1 2018 - ciech · 5/30/2018 · q1: the downside yoy • silicates...

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