EVC International N.V., ("EVC") Europe's largest PVC manufacturer, today announced its results for the six months ended 30 June 2001.
Key Features
- Group turnover of EUR 568.7 million (H1 2000: EUR 608.0 million)
- Operating loss of EUR 15.7 million (H1 2000: EUR 5.5 million profit)
- Net loss of EUR 26.7 million (H1 2000: EUR 6.2 million)
- EUR 75.0 million equity injection in March 2001.
Trading conditions for the first half of 2001 proved to be difficult with the deteriorating market conditions recorded in the second half of 2000 continuing into early spring. A seasonal recovery allowed some improvement of prices and margin through March and April but this reversed by June such that the first half closed with market sentiment being cautious in view of the general concerns over world economics, thereby leading to a reduction in unitary margin.
In March, EVC completed its EUR 75.0 million equity raising through which the INEOS Group obtained a controlling position. New Supervisory and Management Boards were appointed by shareholders at the Annual General Meeting in May. The immediate focus continues to be a stabilization of the financial performance of EVC and a marked reduction in the level of fixed costs.
Financial Review
Results of Operations
Group turnover for the first six months was EUR 568.7 million, 6.5% down on the equivalent period in 2000 in which the market had been particularly strong in terms of both sales prices and volumes. Average PVC selling prices were 26% down on last year. With the absence of the capacity availability problems experienced last year, volumes were able to increase by 18% compared to the first half 2000. The Compounds and Films businesses, which also experienced difficult market trading conditions, recorded a 9% fall in turnover.
Ethylene input costs increased further from the high levels seen in 2000 which, combined with the fall in sales prices, led to an intense squeeze on unitary margins; the effects of which were only partially offset by the improved Polymer resin volumes and further fixed costs savings across all production sites. Overall, the Group achieved a EUR 17.9 million gross margin for the first six months, down EUR 25.5 million on last year.
Operating expenses, at EUR 33.6 million (2000 : EUR 37.9 million) improved as a result of various cost and manpower reduction initiatives launched in late 2000.
The operating results for the Compounds and Films business area benefited from lower priced input costs compared to those seen in the first half of last year. The Group recorded a EUR 15.7 million operating loss and exceptional items of EUR 3.3 million; the exceptional items stemming from manpower reduction initiatives in this period.
The net result for the first half year was a loss of EUR 26.7 million.
Cash flow
There was a EUR 39.3 million (H1 2000: EUR 20.6 million) cash outflow before financing in the first six months of the year. The outflow was a reflection of the weak trading results, increased sales volumes and the return to more normalised terms with a number of key suppliers. Control on capital expenditure remains tight such that spend (EUR 7.4 million) is significantly below depreciation levels.
Financial Position
At 30 June 2001, the Group had net borrowings of EUR 191.8 million compared to EUR 219.4 million at the end of last year. Shareholders' equity stands at EUR 313.5 million, an increase of EUR 44.2 million on the 31 December 2000 position reflecting the EUR 75.0 million equity injection and the year to date trading position.
Outlook
Market sentiment remains cautious due to the uncertainties surrounding global economics. Sales prices have reduced since May and there are increasing signs of destocking activities through the product chain. This, combined with seasonality effects will maintain pressures on margins through the third quarter..
For further information:
John Hudson
Chief Financial Officer
T. +32 2 674 78 11
F. +32 2 674 09 85