EVC International NV ("EVC"), Europe's largest PVC manufacturer, today announced its full year results for the year ended 31 December 2001.
Key Results
- Group turnover of EUR 1,071.6 million (2000: EUR 1,180.3 million)
- Operating loss before exceptional items of EUR 23.8 million (2000: EUR 31.0 million)
- Net loss of EUR 86.5 million (2000: EUR 84.6 million)
Following a turbulent previous year for EVC, 2001 has been a year of both significant change and very difficult macro-economic trading conditions for the EVC Group. Having breached certain financial covenants contained in its funding facilities in late 2000, in March 2001, an EUR 75 million equity injection by INEOS was completed and revised banking facilities agreed.
Following the equity injection the composition of both Supervisory and Management Boards was completely changed and the changes approved at the Annual General Meeting of Shareholders in May.
Market conditions have been particularly difficult through 2001. Market sentiment has been cautious and there have been further pressures on margins due to destocking activities and falls in market selling prices.
Throughout the year the Management Board has focussed on the need to restructure operations, reduce fixed cost levels and to stabilise the financial position of the EVC Group.
Financial Review
Results of Operations
Group turnover at EUR 1,071.6 million was 9% lower than 2000, heavily influenced by the 25% fall in average market selling prices for S-PVC polymer resin. The Polymers business accounted for most of the decrease in turnover, down EUR 99.7 million on 2000. Turnover in the Compounds and Film businesses was more stable with only a 2% decline year on year.
Gross margin for the Group deteriorated by EUR 10 million compared to the previous year, as the squeeze on margins experienced by Polymers was only partially offset by cost savings. Both the Compounds and Film businesses were able to improve gross margins year on year, benefiting from the fall in S-PVC market prices.
EVC recorded an operating loss pre exceptional items of EUR 23.8 million (2000: EUR 31.0 million loss) with operating expenses down 21% compared to 2000, reflecting the Group's commitment to reduce fixed costs.
Exceptional items at EUR 44.4 million reflects the committed costs for rationalising the fixed cost and asset base of the Group. Rationalisation programmes will be implemented throughout the Group, impacting all Businesses, sites and offices. Severance costs will account for some EUR 35.1 million; the remainder covers the costs of relocation and asset configuration restructuring.
The Group recorded a loss on ordinary operations before taxation of EUR 82.1 million (2000: EUR 80.5 million) and EUR 86.5 million (2000: EUR 84.6 million) after taxation.
On an earnings per share basis, the net result was a loss per share of EUR 2.82 compared to a loss per share of EUR 6.17 in 2000.
In line with the conditions of the lender refinancing agreements, no dividend for the year is proposed.
Cash Flow and Net Debt
Net cash outflow before financing activities in 2001 was EUR 16.3 million compared to an outflow of EUR 3.5 million in 2000. Working capital increased by EUR 25.3 million, primarily due to trade creditors where lower average purchase prices prevailed in 2001 and a repayment of some EUR 26 million extended credit from certain suppliers which had been advanced in late 2000 whilst EVC was in negotiations over its financing facilities. Capital expenditure was EUR 17.0 million, down EUR 6.0 million on the previous year.
The Group's financial position improved in the year due to the capital injection of EUR 75 million by INEOS and the successful renegotiations of the banking facilities. Cash balances were EUR 76.1 million at the end of 2001 compared to EUR 33.6 million at the end of 2000. Net debt decreased from EUR 219.4 million in 2000 to EUR 170.3 million in 2001.
Group Performance
Polymers
The difficult market conditions experienced in the second half of 2000 flowed into 2001. Throughout the year 2001 market sentiment was dominated by cautious views over the economic outlook, a result of which was that stock levels through the product chain were maintained at low levels and the downward trend in prices which had started in mid 2000 continued until the spring of 2001, at which point prices received some modest support from the seasonal pick up in economic activity. The effect of weak selling prices on unitary margins was offset to a degree by some softening in raw material prices. Nevertheless, margins remained under pressure throughout the year.
Compared to previous years, for EVC's VCM and S-PVC units, 2001 was free of significant, unplanned production outages. All plants performed creditably and the new capacity brought on line in late 2000 at Schkopau, Germany, was available for a full year.
A Group-wide major exercise was initiated early in the year aimed at significantly reducing fixed costs. Addressing all activities and cost centres, major reductions in costs for the Polymers business were achieved. Further cost reduction programmes are now in deployment for the future.
With a modest market, poor pricing and tight margins, the benefit of the achieved cost savings were fundamental to the results of the business for 2001.
Compounds and Film
Sales from the EVC Compounds business were in line with expectations with the poor market conditions leading to reduced volumes and continued price erosion. However, margins were enhanced by the decline in raw material costs. The business also benefited from the Group-wide cost reduction programme.
EVC benefited from the conditions affecting the whole PVC Film market, with stable sales volumes significantly enhanced by the reduction in price of PVC raw material. Margins thus increased, being maintained as raw material pricing oscillated during the second half year.
Benefits of the Group cost reduction programme were also significant to the performance for the year. Major reductions to the fixed cost base were achieved in all areas of activity and a programme initiated for further improvement following planned capital expenditure on automation and business improvement projects.
Outlook for 2002
The early part of 2002 has continued to experience the weak market conditions seen in late 2001 and has encountered further volatility in sales prices. Macro economic conditions remain difficult to predict. The EVC Board will continue to focus on improvements in those areas under its control; all designed to improve the underlying position of the Group.
For further information:
John Hudson
Chief Financial Officer
Phone: +44 2 380 287 043
Fax: +44 2 380 287 046
This press release is accessible from the EVC website at www.evc-int.com/newsroom