Results for The Ergis Group 2018: rising sales, results under the influence of increased raw material prices

The ERGIS Group, a leader in plastics processing in Central and Eastern Europe, has published its results for 2018.

Last year, the Group generated sales higher by 3.5% than in the previous year, but the results on other levels were adversely affected by the difficulties on the market of rigid films and laminates for food packaging. The results also suffered a negative effect due to a delay in achieving full capacity of a new line for the production of PET films and laminates in the Berlin factory. In addition, EBITDA and net profit were burdened by the rising remuneration costs in the Group.

FINANCIAL PERFORMANCE IN DETAILS

The main reason for the decline of the results in 2018 were the difficulties that the Group suffered on the market of rigid films and laminates for food packaging. Despite the slight increase in revenues, EBITDA achieved in that business was close to zero in comparison with almost 9 million in 2017. 2018 saw a sharp increase in the prices of raw materials which are significant for that segment - the price of PET flakes grew by 20.7% (the price increase in 2017 was 11.1%), and the price of PET virgin grew by 17.2% (the price increase in 2017 was 18.1%). A transfer of such a significant raw materials cost increase onto the clients within a short time period proved to be impossible.

The financial results also suffered due to problems with launching the new line for the production of PET films and laminates in Berlin. To this day, the line has not achieved the planned parameters and the Company has not completed its contractual acceptance. The Company expected that the line will increase the level of EBITDA in 2018 by PLN 4 million.

The Group has fully achieved its goals relating to EBITDA gained from the sales of PET tapes. The financial results achieved through the sales of soft PVC films and printed food packaging were close to the expectations and slightly better than in 2017. In 2018 there continued to be an increase in sales and profits from the Group's flagship product - stretch nanoErgis® film. The Greenstrap® tapes also saw a significant increase in sales.

EBITDA and profits in 2018 also suffered due to an increase in remuneration costs in the Group - the costs were greater by PLN 6.9 million in comparison with the remuneration costs in 2017 (greater by PLN 14.1 million in comparison with 2016).

'Although our sales increased in 2018, the financial results were affected by a significant price increase of some of the raw materials we use, primarily in the segment of rigid films and laminates for food packaging. A transfer of increased costs onto prices of finished products was not possible within a short time period, which put pressure on the margins achieved by the Group. Like most entities, we also felt the increase of costs related to the general market situation - this was mainly related to labour costs. Our goal for this year is to increase profitability.We hope that we will achieve this goal through such measures as the launch of another line for the production of stretch films in Oława, which took place in April of this year, as well as the planned acceptance of the line for the production of PET films and laminates in Berlin,' said Tadeusz Nowicki, President of the Ergis Group.

'We are also continuing works in R&D. We are developing the ErgisMark® technology and our subsidiary, Circular Packaging Design, is working intensely on new, environmentally-friendly types of food laminates.The development of the ultra-barrier films for electronics project, led by us with an external partner, is also advancing positively.At the same time, the strategic options, which we announced at the end of last year, are still under review.Our plan is that this process will be finished by the end of 2019,' added Tadeusz Nowicki, President of the Ergis Group.

ADDITIONAL INFORMATION

The ERGIS Group, listed on the Warsaw Stock Exchange, holds the leading position in the plastics processing sector in the Central and Eastern Europe. Out of its five manufacturing plants, four are situated in Poland and one in Germany. The Group's profile includes manufacturing of packaging for food (printed multilayer laminates, and PVC and PET-based barrier films and laminates) and industrial packaging (LLDPE stretch films and PET binding tapes). Moreover, ERGIS is a manufacturer of pharmaceutical packaging films, waterproofing membranes, and PVC compounds. In 2018, the Group's revenue exceeded PLN 776 million.

Additional information is also available onwww.ergis.eu