SIG Combibloc publishes first quarter results

By Jim Cornall

- Last updated on GMT

The company said the second quarter is likely to be weak. Pic: SIG
The company said the second quarter is likely to be weak. Pic: SIG

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SIG Combibloc Group AG has published its financial results for the three-month period ending March 31, 2020.

The company saw core revenue up 8.4% at constant currency, while the adjusted EBITDA margin was 21.3%, down from 23.6% in the first quarter of 2019.

Adjusted net income dropped from €29.1m ($31.5m) in Q1 2019 to €12.9m ($14m) for Q1 2020.

All regions contributed to growth in the first quarter. In EMEA, core revenue growth at constant currency of 3.1% reflected the ongoing benefit of new customer wins and filler placements in Europe.

March saw an increase in orders as customers responded to hoarding by consumers. In addition, coronavirus lockdowns in European countries have resulted in higher at-home consumption.

In APAC, sales in China were stable compared with a strong Q1 2019. The prohibition on movement during the Chinese New Year resulted in a significant loss of the traditional gifting business.

 However, many customers stocked up during the quarter in view of uncertainties around future measures against the spread of Covid-19. In South East Asia sales were affected by reduced economic activity in markets where lockdowns occurred.

Growth in the APAC region was augmented by the consolidation of Visy Cartons, acquired in November 2019.

The Americas registered a strong performance with a continuation of the positive trends from last year, including good sales to dairy customers in Mexico and the deployment and ramping up of new fillers in Brazil.

Adjusted EBITDA was slightly lower at €83.7m ($90.6m), reflecting the impact of the depreciation of key currencies, notably in Brazil and Thailand, against the Euro. The adjusted EBITDA margin was 21.3% (Q1 2019: 23.6%). Excluding the impact of currency, the adjusted EBITDA margin was 26.2%, which SIG said reflects a strong top line contribution and lower raw material costs. The company also noted that the first quarter has historically been the smallest quarter in terms of adjusted EBITDA and margin.

EBITDA was €67.2m ($72.8m) compared with €88.3m ($95.6m)  in the first quarter of 2019. The decrease includes an unrealised loss on commodity derivatives, which is not included in adjusted EBITDA.

Net income and adjusted net income

Adjusted net income was €12.9m ($14m), compared with €29.1m ($31.5m) in the first quarter of 2019, with the company attributing the decline to the impact of currencies on EBITDA and on intra-group financing costs.

Net income moved from a profit of €4.7m ($5.1m) in the first quarter of 2019 to a loss of €25.5m ($27.6m) in the first quarter of 2020.

A dividend of CHF 0.38 per share was paid out of capital contribution reserves on April 16, 2020, equating to a total distribution of €115m ($124.5m).

Free cash flow has historically been negative in the first quarter due to the seasonality of the business which is weighted towards the second half of the year. In the first quarter of 2020, free cash flow was positive at €16.2m ($17.5m) due to a significant improvement in net working capital, which more than offset an increase in net capex due to the construction of a new plant in China to serve the Asia Pacific region.

SIG said it is not possible to reliably predict the effects of the Covid 19 crisis or currency movements for the remainder of the year. However, the company said it remains confident in its ability to grow and to generate substantial free cash flow.

It said the second quarter is likely to be weak, primarily due to the consumption of stocks in Asia and to continuing lockdowns in many countries affecting on-the-go consumption. However, on the assumption that consumption will revert to more normal levels in the second half of the year, the company regards its full year guidance of constant currency growth at the lower end of a 6 to 8% range as achievable.

Assuming more normal consumption in the second half, and subject to currency movements, guidance of an adjusted EBITDA margin at the lower end of the 27-28% range is also maintained.

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