Neumarkt – SDAX-listed Pfleiderer AG (ISIN DE 996764749) posted revenue of 381.4 million euros in the third quarter of 2010, which is an increase of 9.8% compared to the prior-year period. Exchange-rate effects were responsible for approximately 6 percentage points of the increase; the rest was primarily due to higher prices.

Despite the revenue growth compared with the third quarter of 2009, gross profit decreased from 80.3 million euros to 76.5 million euros. The significant increase in raw-material prices – in particular for wood and chemicals (glue and input materials) – also had a negative impact on the gross margin. It fell to 20.1 percent (Q3 2009: 23.1 percent) due to the 2.2 percentage-point increase in material expenses in relation to revenue. Compared with the first quarter of 2010 (58.1 percent), material expenses fell to 56.3 percent, however. The balance of other operating income and expenses of 4.1 million euros primarily comprises income from the retransfer of provisions for legal disputes (5.0 million euros) and from the retransfer of provisions for property renovation (1.0 million euros); expenses reflect impairments of 2.0 million euros relating to the plant closure in Fostoria, Ohio, USA.

Third-quarter EBITDA increased to 28.0 million euros, compared with 26.5 million euros in 2009. The EBITDA margin in the third quarter of 2010 was thus 7.3 percent, compared with 7.6 percent in Q3 2009. Positive exchange-rate effects, in particular from the Polish zloty and the Canadian dollar, contributed 1.5 million euros of total earnings. EBIT of minus 1.0 million euros was better than in the prior-year quarter (minus 3.2 million euros). The net financial expense of 27.4 million euros includes an amount of approximately 1.6 million euros of interest expense for the recognition of accrued transaction costs for the Group’s refinancing. Furthermore, other financial expense of 7.2 million euros primarily reflects impairments on the valuation on the balance sheet date of loans denominated in foreign currencies (17.8 million euros) as well as gains on mark-to-market valuations of exchange-rate hedges (10.2 million euros) and interest-rate hedges (0.3 million euros).

Due to the factors listed above, the result of continuing operations before taxes amounted to a loss of 28.3 million euros, compared with a loss of 14.1 million euros for the prior-year quarter. In the third quarter of this year, we recognized a deferred tax asset, which contributed to a net tax benefit of 0.4 million euros. Due to payments of taxes for prior periods, discontinued operations contributed a loss of 0.6 million euros to the overall loss for the period of 28.5 million euros, of which 1.7 million euros is attributable to minority interests. The statement of income also includes the claims of hybrid bondholders of 4.7 million euros. A loss of 31.5 million euros is therefore attributable to the shareholders of Pfleiderer AG, compared with a loss of 21.8 million euros for the third quarter of 2009.

This results in a basic loss per share from continuing operations of 54 euro cents, compared with a loss of 43 euro cents for the prior-year quarter.

Compared with the previous quarter, net debt was reduced by 48.9 million euros to 914.5 million euros. This was primarily due to the more efficient management of current assets as well as exchange-rate effects (27.5 million euros).

As already disclosed in a press release on October 11, 2010, no significant recovery of the market for raw particleboard is to be expected in the short term. In view of overcapacities in Western Europe, an adjustment of the product offering is therefore necessary. Pfleiderer is currently actively occupied with plans that could lead to the closure of further production capacities at the Ebersdorf and Nidda plants in Germany. Margins are also under pressure from major increases in raw-material costs, which can often only be passed on to customers after a certain time lag. An additional factor is that the economic situation in North America has not developed in line with our expectations.

At present, therefore, we are examining various restructuring options. In combination with economic developments, those options could lead to impairment charges and restructuring expenses. Against this backdrop, we do not exclude the possibility that if there is no sustained improvement in the market situation, we may be unable to fulfill the financial covenants agreed upon with the banks in the future, and may have to resume negotiations. This would lead to credit lines becoming more expensive or even falling due. In the worst case, it might jeopardize the company’s continuing existence. We assume, however, that also in that case, we will be able to reach an agreement with the banks once again on the continuation of our financing.

The Executive Board of Pfleiderer Aktiengesellschaft

SOURCE: Pfleiderer AG

Have something to say? Share your thoughts with us in the comments below.