SCHMOLZ + BICKENBACH Q2 2020 strongly affected by COVID-19; Josef Schultheis appointed as third member of the Executive Board
- Focus of COVID-19 crisis shifts from automotive to mechanical and plant engineering; sales volume in Q2 2020 falls to 301 kilotons from 486 kilotons in the prior-year quarter
- Average sales price per ton declines to EUR 1,561 from EUR 1,662 in Q2 2019, but is higher than in Q1 2020
- Adjusted EBITDA of EUR –45.8 million well below the EUR 40.5 million recorded in the same quarter of the previous year.
- Net assets of DEW and Ascometal impaired by EUR 86.0 million
- Lower contribution to earnings compensated by strict liquidity management generates slightly negative free cash flow of EUR –1.9 million
- Net debt cut to EUR 625 million from EUR 798 million at the end of 2019 due to successful capital increase in Q1 2020
- Transformation program to turn Company around in place and on track
- Chief Restructuring Officer (CRO) Josef Schultheis appointed to further strengthen powerful transformation organization
- Adaptation of financing to COVID-19 well underway with backstop facility through anchor shareholder BigPoint
- Outlook for 2020: Impossible to produce reliable estimate of adjusted EBITDA due to current uncertainty
CEO Clemens Iller: "The second quarter of 2020 fell firmly in the grip of the COVID-19 crisis, resulting in a dramatic slump in sales and consolidated earnings. The biggest impact came from the extensive shutdowns of major European automobile manufacturers and their suppliers. From April, a negative trend materialized in the mechanical and plant engineering industry. We had no other option but to carry out extensive and prolonged shutdowns in our plants. Despite the slight increase in customer activity from May, demand is returning extremely slowly. A cautious, very limited recovery will not emerge until the fourth quarter of 2020. However, it is becoming clear that the negative adjusted EBITDA will not be effectively offset until the end of 2020 due to seasonal and market-related factors. Given the many uncertainties, particularly as a result of the COVID-19 crisis, it is still difficult to make reliable forecasts for fiscal year 2020. It is therefore impossible at the present time to produce a reliable estimate of adjusted EBITDA due to current uncertainty. To further strengthen our transformation organization, we have appointed restructuring expert Josef Schultheis as CRO on the Executive Board."
Key financial figures
SCHMOLZ + BICKENBACH Group
| Unit | H1 2020 | H1 2019 | Δ in % | Q2 2020 | Q2 2019 | Δ in % |
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Sales volume | kilotons | 758 | 1,037 | -26.9 | 301 | 486 | -38.1 |
Revenue | million EUR | 1,174.5 | 1,691.7 | -30.6 | 469.9 | 807.6 | -41.8 |
Average sales price | EUR/t | 1,549.5 | 1,631.3 | -5.0 | 1,561.1 | 1,661.7 | -6.1 |
Adjusted EBITDA | million EUR | -52.0 | 82.8 | – | -45.8 | 40.5 | – |
EBITDA | million EUR | -61.3 | 66.8 | – | -53.7 | 28.0 | – |
Adjusted EBITDA margin | % | -4.4 | 4.9 | – | -9.7 | 5.0 | – |
EBITDA margin | % | -5.2 | 3.9 | – | -11.4 | 3.5 | – |
EBIT | million EUR | -191.3 | 15.6 | – | -159.6 | 2.3 | – |
Earnings before taxes | million EUR | -214.7 | -8.2 | – | -171.0 | -7.8 | – |
Group result | million EUR | -201.5 | -12.9 | – | -159.1 | -13.6 | – |
Investments | million EUR | 33.4 | 47.7 | -30.0 | 18.8 | 25.1 | -25.1 |
Free cash flow | million EUR | -89.2 | 35.5 | – | -1.9 | 59.2 | – |
| Unit | 30.6.2020 | 31.12.2019 | Δ in % |
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Net debt | million EUR | 624.9 | 797.6 | -21.7 |
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Shareholders’ equity | million EUR | 262.0 | 183.8 | 42.5 |
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Gearing | % | 238.5 | 433.9 | – |
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Net debt/adj. EBITDA LTM (leverage) | x | -7.5 | 15.6 | – |
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Balance sheet total | million EUR | 1,757.1 | 1,919.1 | -8.4 |
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Equity ratio | % | 14.9 | 9.6 | – |
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Employees as at closing date | Positions | 10,139 | 10,318 | -1.7 |
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Capital employed | million EUR | 1,336.9 | 1,384.1 | -3.4 |
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| Unit | H1 2020 | H1 2019 | Δ in % | Q2 2020 | Q2 2019 | Δ in % |
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Earnings/share 1) | EUR/CHF | -0.10/-0.11 | -0.01/-0.01 | – | -0.17/-0.18 | -0.01/-0.01 | – |
Shareholders’ equity/share 2) | EUR/CHF | 0.13/0.14 | 0.19/0.21 | – | 0.28/0.30 | 0.19/0.21 | – |
Share price high/low | CHF | 0.340/0.126 | 0.617/0.412 | – | 0.203/0.138 | 0.511/0.412 | – |
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1) Earnings per share are based on the result of the Group after deduction of the portions attributable to non-controlling interests.
2) As at June 30, 2020 and as at December 31, 2019
Lucerne, August 12, 2020 – The financial figures for the second quarter of 2020 were severely affected by the COVID-19 crisis. The drop in demand caused by production stoppages translated into reduced sales volumes and revenue. SCHMOLZ + BICKENBACH, a world leader in special long steel, today reported a 38.1% decline in sales volume of 301 kilotons, compared with 486 kilotons in the second quarter of 2019. Revenue decreased by 41.8% from EUR 808 million to EUR 470 million. Adjusted EBITDA, the Group result and free cash flow were negative. Net debt was EUR 172.7 million or 21.7% lower than the end of 2019 thanks to the capital increase and strict liquidity management at EUR 624.9 million.
Business performance in the second quarter of 2020
At 301 kilotons, 38.1% less steel was sold in the second quarter of 2020 than in the prior-year quarter (Q2 2019: 486 kilotons). The fall is attributable to the decrease of 42.3% in sales volumes for quality & engineering steel. Prompted by the sharp drop in demand from the automotive industry, which affected this product group in particular. Sales volumes also decreased compared with the prior-year quarter in the two other product groups – stainless steel and tool steel – but with less severe declines of 28.3% and 22.2 % respectively.
The average sales price per ton of steel was EUR 1,561.1 in the second quarter of 2020, 6.1% lower than in the prior-year quarter. This fall is mainly attributable to lower base prices as well as lower scrap and alloy surcharges than in the previous year.
The negative development in prices and the contraction in sales volume led to revenue of EUR 469.9 million, down 41.8% on the prior-year quarter. This decline was at its most pronounced in the quality & engineering steel product group, which posted a fall of 50.1%. Revenue from stainless steel was down by 33.6%, and from tool steel by 34.2%. Nearly all regions of the world posted a double-digit decline in revenue compared with the prior-year quarter.
At EUR –45.8 million, EBITDA adjusted for one-time effects was significantly lower than in the prior-year quarter. The one-time effects amounted to EUR 7.9 million and are attributable to consultancy services in connection with efficiency improvement programs and restructuring measures. Including the one-time effects, EBITDA fell to EUR –53.7 million, reducing the adjusted EBITDA margin to –9.7% and the EBITDA margin to –11.4%.
In the second quarter of 2020, an impairment of EUR 86.0 million on the net assets of the DEW and Ascometal business units was booked under Depreciation, amortization and impairments. At EUR –11.4 million, the financial result was slightly higher than in the prior-year quarter.
As a result of these developments, earnings before taxes (EBT) stood at EUR –171.0 million. Tax income of EUR 11.9 million was generated by the negative EBT. In the second quarter of 2020, the Group posted a negative result of EUR –159.1 million.
Free cash flow in the second quarter of 2020 was negative, at EUR –1.9 million.
Net debt, comprising current and non-current financial liabilities less cash and cash equivalents, came to EUR 624.9 million, a decrease on the figure as at December 31, 2019 (EUR 797.6 million). The main reason for this was the capital increase coupled with stringent liquidity management.
Appointment of Josef Schultheis as Chief Restructuring Officer (CRO)
SCHMOLZ + BICKENBACH is adding a third position to the Executive Board and appointing restructuring expert Josef Schultheis as a new member.
Mr. Schultheis has more than 30 years of management and consulting experience in operational restructuring, liquidity management and financing negotiations.
As a full member of the Executive Board, Josef Schultheis will use his experience as CRO to drive the transformation even more intensively. This will enable SCHMOLZ + BICKENBACH to counter the drastic effects of the COVID-19 crisis more effectively.
Outlook for fiscal year 2020
In 2020, SCHMOLZ + BICKENBACH will ramp up its continued focus on short-term liquidity protection measures in order to safely navigate the COVID-19 crisis and the resulting slump in demand in the automotive industry, mechanical and plant engineering and the oil and gas industries. As part of the structural improvements, it will concentrate on systematically executing and implementing the transformation plan. Temporary and structural personnel measures will increasingly take center stage.
A further focus is on securing medium to long-term financing. To this end, it is planned to further use government aid programs. While SCHMOLZ + BICKENBACH has already received state-guaranteed loans in France for one the French Business Units, further loans in France, Switzerland and Germany are at an advanced stage. In addition, the company is in proactive and constructive discussions with banks, anchor shareholders and potential investors in order to push ahead with a sustainable financing concept. The adaptation of the financing to COVID-19 is well under way with a backstop facility. This is provided by the anchor shareholder BigPoint Holding AG and is used in particular to ensure the financing of growth when demand picks up again.
Based on current evidence, we are not expecting a cautious, very limited recovery to emerge until the fourth quarter at the earliest. However, it is becoming clear that the negative adjusted EBITDA will not be offset until the end of 2020 due to seasonal and market-related factors.
Given the many uncertainties, particularly as a result of the COVID-19 crisis, it is still difficult to make reliable forecasts for fiscal year 2020. It is therefore impossible at the present time to produce a reliable estimate of adjusted EBITDA due to the current uncertainty.
– END –
For further information:
For media queries:
Dr. Andrea Geile, a.geile@schmolz-bickenbach.com, tel +41 (0)41 581 4121
For analyst/investor inquiries:
Daniel Geiger, d.geiger@schmolz-bickenbach.com, tel +41 (0)41 581 4160