Semperit reports lower earnings for first three quarters of 2023

Vienna, Austria – In the first three quarters of 2023, the Semperit Group performed solidly in a challenging market environment characterized by high inflation and a weak economy. Revenue of EUR 547.6 million was generated, which was 7.7% below the previous year’s figure. EBITDA from continued operations amounted to EUR 56.8 million (1-9 2022: EUR 79.8 million), which included one-time effects of around EUR 6.6 million from the transaction costs for the acquisition of the Rico Group, from profits recognized in advance in the purchase price allocation and from one-time severance payments for changes to the Executive Board and for reductions in headcount. At EUR 15.7 million, earnings after tax from continued operations were positive, while earnings from the discontinued and now sold Sempermed segment developed negatively, as expected. Total earnings after tax thus amounted to EUR -26.8 million (1-9 2022: EUR -34.6 million).

“Our business in the first three quarters was characterized by increasingly strong economic headwinds, in which we held our ground solidly and countered with measures to reduce costs and increase efficiency. At the same time, we successfully realized our transformation into an industrial rubber and elastomers specialist with the disposal of the medical business and took an important step towards growth with the acquisition of the Rico Group. In addition, our new, streamlined organization with two powerful divisions enables us to optimally scale our business for further profitable growth,” says Semperit CEO Karl Haider.

Earnings development in detail: In the first nine months of 2023, continued operations of the Semperit Group recorded revenue of EUR 547.6 million (–7.7%). The two divisions, in which the former Industrial Sector has been reorganized, developed differently. While the economic market environment led to a decline in revenue of –24.2% to EUR 264.5 million in the Semperit Industrial Applications division (SIA, including Hoses and Profiles), the Semperit Engineered Applications division (SEA, including Form, Belting and Rico) benefited above all from the continued strong special economic situation for mining products and the related demand for conveyor belts as well as the demand for specialty products in the business unit Form. Revenue in the SEA division thus increased by 21.8% to EUR 254.9 million, of which EUR 16.0 million was attributable to Rico (for the months of August and September 2023). In the Surgical Operations business (production of surgical gloves in Wimpassing including packaging in Sopron), revenue decreased by 25,1% to EUR 31.0 million as expected.

Total expenses fell by 8.8% to EUR 491.1 million. Savings in cost of materials (–20.4%), primarily as a result of lower production volumes, were partly offset by higher personnel expenses (+9.1%) and other operating expenses (+5.5%), which resulted from one-time effects (in particular the transaction costs of the Rico acquisition and one-time severance payments in connection with the changes to the Executive Board and the reduction in overheads in the personnel area), among other things. The cost-cutting programs introduced have already cut down expenses by a total of EUR 2.7 million, of which around 85% was attributable to personnel expenses and the remainder to other operating expenses.

EBITDA in continued operations amounted to EUR 56.8 million (–28.8%), while the EBITDA margin was 10.4% (1-9 2022: 13.5%). Rico’s operating contribution to EBITDA totalled around EUR 3.6 million. However, the recognition of anticipated profits of EUR 1.1 million in the first two months as part of the purchase price allocation and the transaction costs of EUR 3.0 million initially reduced this contribution to around EUR –0.5 million.

EBIT in continued operations totaled EUR 30.9 million (1-9 2022: EUR 48.5 million), while earnings after tax from continued operations were EUR 15.7 million (1-9 2022: EUR 30.7 million). Earnings after tax from discontinued operations were clearly negative at –42.4 million (1-9 2022: EUR –65.3 million). However, they included a reclassification of historical currency translation differences of EUR –23.5 million due to deconsolidation. Total earnings after tax (from continued and discontinued operations) amounted to EUR –26.8 million (1-9 2022: EUR –34.6 million).

Free cash flow before strategic growth investments is the net cash flow available for strategic growth investments and debt and equity servicing. It amounted to EUR 111.0 million for the first nine months of 2023, driven primarily by the proceeds from the sale of the medical business, and was used mainly for strategic growth investments in property, plant and equipment totalling EUR 17.5 million (expansion investments for the DH5 plant in Odry and the Rico expansion in Thalheim), the acquisition of the Rico Group and the payment of dividends.

After a solid performance in continued operations in the first three quarters of 2023, the Executive Board of the Semperit Group expects the market environment to remain challenging in the coming months. For SIA, no significant recovery in demand is expected in the short term, as the reduction of increased customer inventories will extend into the first half of 2024, and the leading indicators for the construction industry (e.g.building permits in Germany) continue to decline. For SEA, the good demand from the mining industry, healthcare and food sectors as well as the railway sector should continue, while demand for products linked to the construction industry and related sectors will be lower.

In anticipation of this development, countermeasures have already been introduced. These include improvements to the product mix, cost reduction programs and a streamlining of processes, accompanied by an increase in operating efficiency. Defined and already established measures for savings include a run-rate of more than EUR 10 million. Against this backdrop, the outlook for the 2023 financial year is confirmed, with EBITDA from continued operations expected at the lower end of the original guidance range at around EUR 70 million.