Semperit Group has announced the company’s plan to focus on organic growth, specifically enhancing profitability, as it expects very weak operating results in the first quarter of 2017 due to the adverse trend of raw material prices.
In a statement, the company said it was able to manage the rise in raw material prices by passing it partially to customers, and with a time lag.
Semperit’s Management Board also came to the conclusion that a considerable negative impact on operating earnings compared with the previous year can also be expected for the next months to come because of the developments in the market.
The adjusted EBIT for the 2017 financial year (without one-off effects from the joint venture transaction) will therefore be significantly below the adjusted EBIT of 2016 (EUR41 million after deduction of the earnings contribution from the Thai SSC/Siam Sempermed Corporation Ltd.).
CFO Frank Gumbinger: “Over the last few weeks, we have done a thorough analysis of the current business development and the segments. During this process, we have identified a number of construction sites, which are now on top of our agenda.”
In the course of the current revision of the planning process for 2017, the Management Board has come to the conclusion that the long-term earnings outlook for the Sempermed segment (Medical Sector) must be subjected to a critical review compared with the previous assessment, which might result in a significant impairment in the segment.
While the Semperit Group continues to pursue organic growth in future, the focus will be increasingly on enhancing profitability. The company said a lot of work has to be done for this, which includes measures to increase efficiency and a review of the IT strategy. This might lead to significant one-off charges in the next quarters.
These developments have prompted the Management Board to change the outlook for 2017. Due to limited visibility and the number of issues mentioned above, the outlook for 2017 has been suspended. Therefore, a specific guidance range cannot be provided.
As communicated on March 10, 2017, Semperit is expecting unchanged significant positive effects from the joint venture transaction, which will affect earnings in the first quarter of 2017. Due to the high inflow of cash from the joint venture transaction, net debt was reduced by more than EUR150 million by the end of March 2017 (compared with the end of December 2016).
In addition, after the closing of the joint venture transaction a dividend of EUR0.70 per share can also be proposed to the Annual General Meeting.
CFO Frank Gumbinger: “We would like to use the next few months to identify further potentials to make the Group profitable on a sustainable basis. As soon as there is better visibility after our current review we will inform about further progress.”