ANNUAL REPORT
Original perspective

FULL YEAR RESULTS 2015

Key conclusions on the January-December 2015 results
  •  Viscofan ended the period of the Be MORE strategic plan with record revenue, EBITDA and net profit.
  • +15.4% in the year-on-year growth in net profit from continuing operations to €119.6 million.
  • +15.3% in the cumulative year-on-year growth in EBITDA1 to €213.8 million, with a 1.9 p.p. improvement in the EBITDA margin to 28.9%.
  • +7.8% in the cumulative year-on-year growth in consolidated revenue, which reached €740.8 million, underpinned by sales volumes and the exchange rate.
  • A net cash position2 of €3.2 million thanks to the strength of operations and the proceeds from the sale of the vegetable foods division (IAN Group).
  • At its meeting on 29 February 2016 the Board of Directors submitted to shareholders a proposal to pay a final dividend of €0.82 per share. This implies total shareholder remuneration3 of €1.35 per share, 14.4% higher than the figure of €1.18 paid last year.
  • According to José Domingo de Ampuero y Osma, chairman of the Viscofan Group: “The results for 2015 are highly satisfactory and conclude the period of the Be MORE strategic plan. Over this four-year period we have worked with a long-term vision, stepping up investment at a time of economic uncertainty and cementing Viscofan’s status as an industry leader with a larger production presence, better profitability and a stronger balance sheet whilst at the same time continuing to increase shareholder remuneration. In sum, we have a more robust Viscofan Group with further scope for improvement to become an authentic global leader that leads the way in terms of service, technology and cost.”
Financial statements analysis 2015

 

Revenue

Consolidated revenue amounted to €740.8 million in 2015, up 7.8% compared with 2014, marking eleven years of steady revenue growth and a new record high.

Casing sales advanced by 8.8% compared with 2014 to €694.7 million, spurred on by better volumes and the strength of commercial currencies, while energy sales declined by 4.7% to €46.0 million due to the booking in 2Q14 of non-recurring results of €2.9 million following the impact of legislation RD 9/2013.

2015 saw a normalisation of sales volume growth coupled with a marked strengthening of the main commercial currencies, in particular of the US$ and CNY against the €, and a weakening of benchmark currencies in emerging markets, most notably the Brazilian Real and the Russian Rouble.

This macroeconomic backdrop had some impact on commercial activity, helping during the year commercial initiatives by main casing players in North America, in particular in the second half.

In organic terms4, i.e. stripping out the impact of non-recurring results and currency fluctuations, annual revenue grew by 2.7% compared with 2014.

The geographical breakdown of revenue5 in 2015 is as follows:

  • In Europe and Asia revenue totalled €411.8 million, up 8.0% compared with 2014 boosted by sales growth in both Western Europe and Asia.
  • In North America, revenue totalled €215.9 million, up 8.9% year-on-year, driven mainly by the strength of the US$ against the €.
  • In Latin America consolidated revenue advanced 5.1% vs. 2014 to €113.1 million, a very strong organic performance considering the average 18.3% depreciation of the Brazilian real against the €.


Operating costs

Cost of consumption6 in 2015 was partly shaped by the currency fluctuations, with US$-denominated consumption more expensive while the company benefited from consumption in currencies that depreciated, in particular in Latin America. In the full year cost of consumption stood at €203.4 million (+6.7% vs. 2014), with a gross margin7 over sales of 72.5% in 2015 (+0.3 p.p. higher than in 2014).

Personnel costs increased by 7.8% in cumulative terms to €158.5 million. The average workforce in December was 4.233 (+3.5% compared with December 2014) owing to the hiring of personnel in Spain, China, Brazil and Mexico associated with production growth. In the final quarter of the year plastics production started up at the San Luis Potosí plant in Mexico.

“Other operating expenses” in 2015 stood at €172.4 million, up 2.2% compared with 2014. This was due to the decline in energy costs, thanks to which energy supply costs fell by 5.9%.

Operating profit

The focus on profitable growth is reflected in the combination of revenue growth, commercial discipline, energy cost savings and operating cost control, resulting in the improvement in operating profitability and cash flow. The EBITDA margin stood at 28.9% in 2015 (+1.9 p.p. vs. 2014).

As a result, consolidated EBITDA hit a new record high of €213.8 million in 2015 (+15.3% vs. 2014).

In organic terms4, stripping out the impact of non-recurring results and currency fluctuations, EBITDA rose by 6.3% in 2015 vs. 2014.

Depreciation costs in 2015 amounted to €53.0 million (+7.9% vs. 2014).

Volume growth, coupled with production efficiency and cost discipline, drove cumulative EBIT growth of 18.0% to €160.8 million.


Financial result

The Group reported exchange losses of €6.6 million, which contrasts with the gains of €1.9 million in 2014. This difference is largely due to the weakness of the BRL against the € in the second half of 2015. As a result, the net finance loss stands at -€9.3 million in 2015 (vs. -€2.0 million in 2014).

The reduction in financial debt translated into lower finance expenses, which declined by 20.8% in 2015 vs. 2014 to €3.4 million.


Net profit and tax

Profit before tax amounted to €151.5 million in 2015 while taxes totaled €31.9 million, reflecting an effective tax rate of 21.0% (22.8% in 2014).

The difference between the nominal tax rate for 2015 (25.0%) and the effective tax rate (21.0%) is basically due to the different taxes paid by non-resident subsidiaries in Navarre (Viscofan S.A. tax domicile) which pay tax in each of the countries in which they operate, applying the corporate (or similar) tax rate in force on profits for the period and tax allowances or tax credits associated with previous years’ losses by various Group subsidiaries.

As a result, the Group reported growth in net profit from continuing operations in 2015 of 15.4% to €119.6 million.

Including the €0.4 million in capital gains from the sale of the IAN Group recognised as profit from discontinued operations8, net profit attributed to the Viscofan Group amounted to €120.0 million in 2015 (+12.8% vs. 2014), surpassing the guidance given at the start of the year (€114 million - €115 million).


Property , plant and equipment and intangible assets

Investment in 2015 amounted to €57.3 million, a lower figure 6.1% than in 2014 (€61.0 million). The breakdown for investment in 2015 is as follows:

  • 45% of investment was in capacity and machinery. This includes €10 million corresponding to the new plastic casings plant in Mexico, which started production at the end of 2015.
  • 28% of investment was in process improvements.
  • 9% of investment was in energy equipment and in plant safety, hygiene and environmental improvements.
  • Ordinary investments accounted for the remaining 18%.

In addition, the Group started construction of a fibrous casing production centre in Cáseda (Spain) towards the end of 2015. A total of €20 million will be invested over the next two years with the aim of installing new capacity to come on stream in the second half of 2017. This project has been developed in response to the growth in the Viscofan Group’s fibrous casing sales in recent years and to improve service to European customers.

As of 27th May 2015 Viscofan S.A. acquired 51.67% share capital of Nanopack Technology & Packaging, S.L. (Nanopack), a company specialized in the production of crystal plastics and additive plastics. Subsequently, as a result of the investment plan established with the aim of increasing production capacity at Viscofan S.A.’s site in Cáseda (Navarra), the Viscofan Group suscribed €1.9 million of capital increase to finance this expansion. Following this transaction, the Viscofan Group controlled 90.57% of the share capital of this company.


Net equity and dividends

The Group’s net equity stood at €633.2 million at the end of 2015, up 10.0% year-on-year due to the booking of a net profit of €120.0 million (+12.8% vs. 2014) from which €24.2 million is deducted as an interim dividend against 2015 earnings (+15.6% vs. 2014).

In addition, the Board of Directors of the Viscofan Group has agreed to propose to the General Shareholders’ Meeting the distribution of a final dividend of €0.82 per share, with an amount of €38.2 million to be paid out on 9 June 2016.

This means total shareholder remuneration amounts to €1.35 per share consisting of:

  • An interim dividend of €0.52 per share paid on 29 December 2015.
  • A proposed final dividend of €0.82 per share for approval at the General Shareholders’ Meeting,
  • and a bonus for attending the General Shareholders’ Meeting of €0.01 per share.

The remuneration proposed is 14.4% higher than the total remuneration of €1.18 per share approved last year, implying distribution of 52% of the total net profit attributed to the Viscofan Group.


Financial liabilities

The strong earnings performance and the proceeds from the sale of the IAN Group led the Group to end the year 2015 with net cash position of €3.2 million at the end of December 2015 compared with Net Bank Debt of €74.6 million in December 2014.

At 31 December 2015 the Group’s consolidated gross financial debt amounted to €41.2 million (€100.2 million at 31 December 2014), with €26.1 million of this amount corresponding to longterm financial debt (€33.2 million at 31 December 2014). These liabilities accrue interest at a variable rate linked to the Euribor or Libor plus an average differential of 1.5 percentage points.

The Viscofan Group’s financial situation means it is well placed to meet its scheduled payment obligations over the next 12 months.


Financial commitments

Based on estimated growth, the Group plans to invest to strengthen its leadership position in the casings market and to continue improving the service it provides, as well as to upgrade its existing industrial equipment and operations. Commitments include the construction of the new fibrous casings plant in Cáseda, technological upgrades, process optimisation and increases in production capacity. Accordingly, commitments at the end of 2015 amounted to €12.4 million (€15.0 million at the end of 2014).

At 31 December 2015, the Group has contracted buildings and other assets under finance leasing whose minimum payments and present value amounted to €0.6 million (€0.8 million at 31 December 2014).

The Group also has various premises and other items of property, plant and equipment under operating lease arrangements. Future minimum payments for these contracts at 31 December 2015 amounted to €5.4 million (€4.3 million at 31 December 2014).

Changes to the consolidated group


Sale of 100% of IAN Group :

On 10 March 2015, Viscofan S.A. successfully concluded the sale of IAN S.A.U. and its subsidiaries for an equity value of €55.8 million. This price paid in cash on the date of signing the contract implies a capital gain after tax of €0.4 million for the consolidated group.

In compliance with the provisions of International Financial Reporting Standard 5, net profit at the IAN Group in 2015 and 2014 was recognised in the Consolidated Income Statement under “Profit or loss from discontinued operations”. The IAN Group’s assets and liabilities at the end of December 2014 were classified as “Held for sale” on the Viscofan Group’s consolidated balance sheet.


Nanopack Technology & Packaging, S.L.:

As of 27th May 2015 Viscofan S.A. acquired 51.67% share capital of Nanopack Technology & Packaging, S.L. (Nanopack), a start-up company specialized in the production of crystal plastics and additive plastics. Subsequently, as a result of the investment plan established with the aim of increasing production capacity at Viscofan S.A.’s site in Cáseda (Navarre), the Viscofan Group subscribed €1.9 million of capital increase to finance this expansion. Following this transaction, the Viscofan Group controlled 90.57% of the share capital of this company.

Due to this acquisition Nanopack Technology & Packaging, S.L is included in the scope of consolidation of the Viscofan Group in the second quarter of 2015 and is consolidated by the full integration method, thus, at the end of December 31, 2015 is incorporated in the consolidated balance sheet the total value of its assets and liabilities, and in the consolidated income statement of the period seven months impact of its operations.

  1. EBITDA = Operating Profit (EBIT) + depreciation of property, plant and equipment and amortization of intangible assets.
  2. Net bank debt = long and short bank financial debt - cash and cash equivalents.
  3. Total shareholder remuneration includes the interim dividend for the year, the final dividend and the bonus for attending the General Shareholders’ Meeting.
  4. Organic terms: For comparative purposes, organic growth excludes the impact of the different exchange rates applied in the consolidation of the financial statements and the impact of the US$ variation in business transactions and non-recurring results recorded in 2015 related to the outsourcing of pensions in the US and in 2014 due to changes in cogeneration regulations.
  5. Revenue by origin of sales.
  6. Cost of consumption = Net purchases +/- Change in finished and work in progress products.
  7. Gross margin = Revenue – Cost of consumption/Revenue
  8. In compliance with the provisions of International Financial Reporting Standard 5, net profit at the IAN Group in 2015 and 2014 was recognized in the Consolidated Income Statement under “Profit or loss from discontinued operations”. The IAN Group’s assets and liabilities at the end of December 2014 have been classified as «Held for sale» on the Viscofan Group’s consolidated balance sheet.

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