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Surteco Group SE

Quarterly Report May 15, 2018

421_10-q_2018-05-15_89d9529d-508f-4463-8893-7f40eb878247.pdf

Quarterly Report

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Q1 Report for the first quarter 2018

1 January to 31 March

Overview

SURTECO GROUP

€ million 1/1/-31/3/

Sales revenues 169.7 186.7 +10

of which

  • Germany

  • Foreign

EBITDA

EBITDA margin in %

EBIT

EBIT margin in %

EBT 8.9 11.0 +23

Consolidated net profit 6.2 8.0 +28

Earnings per share in € 0.40 0.51 +28

Number of shares 15,505,731 15,505,731

Net financial debt in € million 126.3 205.2 +62

Level of debt in % 36 59 +23 pts.

Equity ratio in % 51.1 40.9 -10.2 pts.

Number of employees 2,871 3,331 +16

Net financial debt in € million 190.0 205.2 +8

Level of debt in % 54 59 +5 pts.

Equity ratio in % 41.4 40.9 -0.5 pts.

Number of employees 3,295 3,331 +1

Δ % 31/3/2018 31/12/2017
+8 205.2 190.0
+5 pts. 59 54
-0.5 pts. 40.9 41.4
+1 3,331 3,295

Equity ratio in % 51.1 40.9 -10.2 pts. Number of employees 2,871 3,331 +16

DEAR SHAREHOLDERS, PARTNERS AND FRIENDS OF OUR COMPANY

Q1

Macroeconomic and sector-specific framework conditions

Global economy once again set for robust upward development in 2018

The operating development of SURTECO correlates with the general economic situation in the individual country regions because the latter exert a direct impact on acquisition and investment affinity and therefore on the economic performance of our customers. When the Probos Group was taken over in 2017, the sales markets of Latin America, in particular Brazil, increased in importance. The wood-processing and furniture industry are predominant in the customer sectors. Furthermore, the Group supplies a number of other industries including the caravan industry through the British Nenplas Group purchased in 2016 and the cruise ship sector through its Swedish subsidiary Gislaved.

The International Monetary Fund (IMF) predicted another year of sound growth in 2018 for the global economy. In their latest forecast report published in April 2018, the experts predict global economic growth of 3.9 %. This indicates that the developed economies will see stable upward development of 2.5 %. The economies in the threshold markets and developing economies can expect a dynamic rise in economic output of 4.9 %.

Driven by the latest tax reform, the US economy is expected to expand by 2.9 %, while the eurozone is likely to undergo more modest growth by 2.4 %. This positive trend will be powered by all the important EU countries: Germany (+2.5 %), France (+2.1 %), Italy (+1.5 %) and Spain (+2.8 %). The IMF maintains that although Brexit will increasingly exert a negative impact in the United Kingdom, the country is still likely to post sound growth with an increase of 1.6 %. The economies in Central and Eastern Europe are likely to post robust growth of 4.3 % this year, although they will not be able to sustain the level reached in the year 2017 (+5.8 %). China will again play a dominant role within the BRIC countries by posting an increase in growth of 6.6 %. Brazil will be able to increasingly break out of the recent recession with growth of +2.3 %. The same applies to Russia (+1.7 %), even though sanctions imposed by the West will continue to inhibit economic growth.

Sales and business performance

During the first quarter of 2018, the sales revenues of the SURTECO Group went up by 10 % compared with the equivalent year-earlier period to € 186.7 million (2017: € 169.7 million). With exchange rates at the level of the previous year, sales revenues rose to around € 193 million. The sales of the Strategic Business Unit Paper were slightly below the year-earlier value, while the plastics line succeeded in significantly increasing its sales revenues essentially on account of the Portuguese Probos Group acquired in June 2017. Business in the domestic market rose by 6 % to € 49.0 million (2017: € 46.3 million) in the months from January to March 2018 while the rest of Europe was able to improve sales by 17 %. A countervailing development emerged on the American

Q1

continent. While sales revenues eased by 23 % primarily on account of exchange rates, sales in South America increased fivefold owing to the acquisition of the Probos companies. In Australia, sales went up by 2 % and in Asia by 31 % compared with the year-earlier period. Overall, € 137.7 million (2017: € 123.4 million) were generated abroad. The foreign sales ratio increased from 72.7 % in the previous year to 73.8 % in the first quarter of 2018.

Strategic Business Unit Paper

The sales development of the individual product groups in the Strategic Business Unit Paper proved volatile in the first quarter of 2018. The business with decorative printing increased by 3 % compared with the year-earlier value at the beginning of 2018. Sales revenues with fully impregnated finish foils (+6 %), pre-impregnated products (+1 %) and in particular with release papers (+30 %) increased compared with the equivalent year-earlier quarter. By contrast, the business with melamine edgebandings eased by 5 % and with impregnates by 10 %. Overall, the paper line generated sales revenues amounting to € 95.8 million (2017: € 97.0 million) in the first quarter of 2018. Sales revenues of € 25.1 million were attributable to Germany after € 24.4 million in the previous year (+3 %). In the Rest of Europe, sales rose by 9 % and in Asia and Australia – in each case from a relatively low initial position – by 46 % and 48 % respectively. The reduction in business in North America amounting to 29 % reflected negative currency effects, shifts in product mix, as well as restrained demand from a number of customers. Overall, foreign sales at € 70.8 million were below the year-earlier value of € 72.5 million on account of negative currency effects amounting to € 2.7 million.

Strategic Business Unit Plastics

In the first quarter of 2018, the plastics line increased sales by 25 % to the current level of € 90.9 million after € 72.8 million in the year-earlier period. In particular, the business with plastic edgebandings rose by 42 % compared with the year-earlier period during the quarter under review. This is essentially due to the acquired Probos Group with production locations in Portugal and Brazil. However, gains were also made in the product groups not affected by the acquisition. Sales with plastic foils and skirtings therefore increased in each case by 5 % and with technical extrusions (profiles) by 6 %. Only the area of roller-shutter systems fell back by 9 % compared with the previous year. The sales in Germany increased by 9 % to € 23.9 million (2017: € 21.9 million). In the Rest of Europe, sales rose by 29 % and in Asia by 20 %. The business in South America increased sevenfold acquisition-related, whereas business in North America posted a fall of 10 % also due to negative currency effects. Sales revenues in Australia remained stable at the year-earlier level. Overall, foreign sales revenues at € 67.0 million were 32 % above the year-earlier value of € 50.9 million. Currency effects of € 3.4 million prevented a much stronger rise in sales in the plastics line.

Expenses

The purchase prices for the technical raw papers used in the Strategic Business Unit Paper rose significantly at the beginning of 2018 owing to price increases for important intermediate products such as cellulose and titanium dioxide. The prices for virtually all chemical additives also increased significantly in the first quarter of 2018. In the Strategic Business Unit

Q1

Plastics, the prices for the raw materials ABS (acrylonitrile butadiene styrene) and PMMA (polymethyl methacrylate) in particular were above the anticipated values. The accumulated cost of materials ratio of the SURTECO Group therefore rose from 47.8 % to 48.8 % in the months from January to March. Furthermore, the Probos acquisition increased the overall cost of materials from € 80.5 million to € 91.4 million. The personnel expenses also went up on account of the external growth from 43.9 million in the year-earlier period to € 46.7 million. The personnel expenses ratio fell from 26.0 % in the first quarter of 2017 to 24.9 % in 2018. Other operating expenses at € 26.9 million were € 1.6 million above the year-earlier value of € 25.3 million and the ratio as a function of the total output improved from 15.0 % to 14.3 %.

Group results

The total output of the SURTECO Group at +11 % rose rather more significantly than the sales revenues and amounted to € 187.5 million in the first quarter of the year after € 168.6 million in the previous year. After taking account of the expense items amounting to a total of € 165.0 million (2017: € 149.7 million) and the other operating income amounting to € 1.0 million (2017: € 0.8 million), the SURTECO Group generated earnings before financial result, income tax and depreciation and amortization (EBITDA) of € 23.5 million (2017: € 19.6 million). The EBITDA margin improved from 11.6 % in the year-earlier period to 12.6 %. Depreciation and amortisation increased primarily on account of the takeover of the Probos Group including the purchase price allocation (PPA) of € -8.9 million in the previous year to € -10.1 million in the first quarter of 2018. Earnings before financial result and income tax (EBIT) were therefore € 13.4 million after € 10.7 million in the previous year (+25 %). Primarily owing to exchange rate effects from the valuation on the balance sheet date, the financial result at € -2.4 million was above the year-earlier value of € -1.8 million. Earnings before income tax (EBT) at € 11.0 million accordingly increased by 23 % compared with the year-earlier value of € 8.9 million. If income tax amounting to € -2.9 million (2017: € -2.7 million) is deducted and taking into account non-controlling interests, an increase in consolidated net profit of 28 % to € 8.0 million (2017: € 6.2 million) results. Based on an unchanged volume of 15,505,731 no-par-value shares, earnings per share of € 0.51 (2017: € 0.40) were generated.

Result of the Strategic Business Units

In the first quarter of 2018, EBIT of the Strategic Business Unit Paper at € 7.1 million was below the year-earlier value of € 7.6 million primarily owing to higher prices for raw materials and shifts in the product mix. Conversely in the Strategic Business Unit Plastics, EBIT increased from € 5.4 million to € 8.2 million thanks to the Probos acquisition and to organic growth.

Q1

Net assets, financial position and results of operations

The balance sheet total of the SURTECO Group rose slightly by 2 % on 31 March 2018 to € 856.4 million (31 December 2017: € 842.6 million). On the assets side of the balance sheet, trade accounts receivable went up by € 32.0 million to € 89.8 million compared with 31 December 2017, whereas cash and cash equivalents came down by € 16.0 million to € 117.4 million. This is attributable to reduced factoring from January 2018. Overall, current assets increased from € 326.2 million at year-end 2017 to € 342.9 million on the balance sheet date of the first quarter of 2018. Non-current assets decreased slightly from € 516.4 million to € 513.5 million. On the liabilities side, current liabilities went up to € 116.0 million on 31 March 2018 (31 December 2017: € 106.4 million) essentially due to a rise in trade accounts payable (€ 69.7 million on the balance sheet date for the quarter after € 63.2 million at year-end 2017) and on account of higher other current financial liabilities amounting to € 29.7 million after € 26.2 million. Non-current liabilities at € 390.5 million on 31 March 2018 only underwent a slight rise compared with 31 December 2017 (€ 386.9 million). Equity at € 349.9 million was approximately at the level of the annual financial statements for 2017. Owing to the increased balance sheet total, the equity ratio of 41.4 % on 31 December 2017 eased slightly to 40.9 % on 31 March 2018. Mainly on account of the effects described above, the net financial debt rose to € 205.2 million (31 December 2017: € 190.00 million) and the level of debt (gearing) therefore increased from 54 % to 59 %. The increased business volume and the change in factoring activity exerted an impact on the change in net assets and liabilities, and hence on the cash flow derived from current business activities. Consequently, the latter at € -3.7 million was below the year-earlier value of € 16.8 million. If the cash flow from investment activities amounting to € -9.2 million (2017: € -6.1 million) is deducted, free cash flow of € -12.9 million results after € 10.7 million in the year-earlier period.

CALCULATION OF FREE CASH FLOW

€ million 1/1/-31/3/
2017
1/1/-31/3/
2018
Cash flow from current
business operations
16.8 -3.7
Purchase of property, plant
and equipment
-5.8 -9.0
Purchase of intangible
assets
-0.3 -0.4
Dividend received 0.0 0.2
Cash flow from investment
activities
-6.1 -9.2
Free cash flow 10.7 -12.9

Q1

Risk and opportunities report

SURTECO SE with its Strategic Business Units Plastics and Paper is exposed to a large number of risks on account of global activities and intensification of competition. The detailed description of the Risk Management System is provided in the Risk and Opportunities Report given in our Annual Report 2017. The identified individual risks are also allocated to damage and probability classes on account of their expected gross financial burden to EBT for the current and subsequent years on the basis of the following tables.

Damage
class
Qualitative Quantitative
1 Minor > € 0.5-0.75 million
2 Moderate > € 0.75-1.5 million
3 Major > € 1.5-3.0 million
4 Threat to
existence
as a going
concern
> € 3.0 million
Probability
class
Qualitative Quantitative
1 Slight 0 % - 24 %
2 Moderate 25 % - 49 %
3 Likely 50 % - 74 %
4 Very likely 75 % - 100 %

In the months January to March 2018, two new market risks, one procurement risk and a currency risk were identified in the Strategic Business Unit Paper. The market risks were assigned to damage class 2 and probability class 3 and 4 respectively. The procurement risk was identified in damage class 2 and probability class 4, and the currency risk in damage class 1 and probability class 4. In the Strategic Business Unit Plastics, one further market risk was identified compared with year-end 2017 in damage class 2 and probability class 2.

Outlook for fiscal year 2018

The Board of Management is still assuming that sales revenues for the SURTECO Group will be in the range from € 725 million to € 750 million. In this scenario, sales for the Strategic Business Unit Paper are likely to rise slightly and the sales of the Strategic Business Unit Plastics – including the Probos Group – look set to increase significantly. Furthermore, the EBIT of the Strategic Business Unit Paper is projected to undergo a significant increase, whereas EBIT of the Strategic Business Unit Plastics is expected to rise substantially compared with 2017. The consolidated EBIT for the SURTECO Group is expected to be in the range between € 49 million and € 53 million.

Q1

SURTECO shares

During the first quarter of 2018, the SURTECO share was unable to entirely shake off the uncertainties in the capital markets relating to concerns about rising interest rates and the threat of an impending global trade war. While the leading German DAX index posted a drop of 6 %, SURTECO shares only fell back by around 4 %. This meant that after the exceptionally successful year on the stock exchange in 2017, when shareholders were able to enjoy a rise of 17 % including the dividend, the share paused to catch its breath. On 2 January, SURTECO started the year at € 26.40 and reached its high for the quarter at € 28.55 on 19 January. The generally weaker and increasingly more volatile stock exchanges led to profit-taking and the price eased to € 24.25. The announcement of preliminary annual figures for 2017 and the associated confirmation of the reliable forecasts previously made ensured that the SURTECO share ended the quarter on 29 March at a price of € 25.20.

At the end of March 2018, the market capitalization based on an unchanged number of shares amounting to some 15.5 million no-par-value shares was € 390.7 million. The free float remains unchanged at around 44.5 % while the other shares continue to be in the hands of the company's founding shareholders.

January - March 2018

Number of shares 15,505,731
Free float in % 44.5
Price on 2/1/2018 in € 26.40
Price on 29/3/2018 in € 25.20
High in € 28.55
Low in € 24.25
Market capitalization as
at 29/3/2018 in € million
390.7

Q1

Share price performance January – March 2018 in €

Quarterly financial statements Income statement (Short version)

SURTECO GROUP

€ 000s 1/1/-31/03/

Sales revenues 169,722 186,748

Changes in inventories -2,265 -495

Own work capitalized 1,146 1,252

Total output 168,603 187,505

Cost of materials -80,532 -91,411

Personnel expenses -43,891 -46,691

Other operating expenses -25,289 -26,900

Other operating income 756 952

EBITDA 19,647 23,455

Depreciation and amortization -8,907 -10,050

EBIT 10,740 13,405

Financial result -1,840 -2,435

EBT 8,900 10,970

Income tax -2,670 -2,928

Net income 6,230 8,042

Of which

Owners of the parent (consolidated net profit) 6,212 7,980

Non-controlling interests 18 62

Basic and diluted earnings per share in € 0.40 0.51

Number of shares 15,505,731 15,505,731

1/1/-31/03/ 1/1/-31/03/
2018 2017
186,748 169,722
-495 -2,265
1,252 1,146
187,505 168,603
-91,411 -80,532
-46,691 -43,891
-26,900 -25,289
952 756
23,455 19,647
-10,050 -8,907
13,405 10,740
-2,435 -1,840
10,970 8,900
-2,928 -2,670
8,042 6,230
7,980 6,212
62 18
0.51 0.40
15,505,731 15,505,731

Statement of Comprehensive Income

SURTECO GROUP

€ 000s 1/1/-31/03/

Net income 6,230 8,042

Components of comprehensive income not to be reclassified to the income statement 0 0

Net gains/losses from hedging of net investment in a foreign operation 48 -534

Exchange differences for translation of foreign operations 1,547 -2,354

Financial instruments available-for-sale 223 0

Components of comprehensive income that may be reclassified to the income statement 1,818 -2,888

Other comprehensive income for the period 1,818 -2,888

Comprehensive income 8,048 5,154

Owners of the parent (consolidated net profit) 8,032 5,092 Non-controlling interests 16 62

1/1/-31/03/
2018
1/1/-31/03/
2017
8,042 6,230
0 0
-534 48
-2,354 1,547
0 223
-2,888 1,818
-2,888 1,818
5,154 8,048
5,092 8,032
62 16

Consolidated Balance Sheet

SURTECO GROUP

€ 000s 31/12/2017 31/03/2018

ASSETS

Cash and cash equivalents 133,373 117,402

Trade accounts receivable 57,826 89,793

Receivables from affiliated enterprises 731 961

Inventories 119,732 122,442

Current income tax assets 1,377 1,154

Other current non-financial assets 9,457 6,790

Other current financial assets 3,666 4,378

Currents assets 326,162 342,920

Property, plant and equipment 258,208 257,802

Intangible assets 66,676 64,674

Goodwill 163,303 162,640

Investments accounted for using the equity method 1,988 2,090

Financial assets 830 830

Other non-current non-financial assets 69 0

Other non-current financial assets 6,333 6,529

Deferred taxes 19,027 18,934

Non-current assets 516,434 513,499

please turn over

31/03/2018 31/12/2017
117,402 133,373
89,793 57,826
961 731
122,442 119,732
1,154 1,377
6,790 9,457
4,378 3,666
342,920 326,162
257,802 258,208
64,674 66,676
162,640 163,303
2,090 1,988
830 830
69
6,529 6,333
18,934 19,027
513,499 516,434
856,419 842,596

Consolidated Balance Sheet

SURTECO GROUP

€ 000s 31/12/2017 31/03/2018

LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term financial liabilities
Trade accounts payable
Liabilities to affiliated companies
Income tax liabilities
Short-term provisions
Other current non-financial liabilities
Other current financial liabilities
Current liabilities

Long-term financial liabilities 317,662 316,790

Pensions and other personnel-related obligations 12,814 12,816

Other non-current non-financial liabilities 41 39

Other non-current financial liabilities 4,372 4,431

Deferred taxes 52,043 56,390

Non-current liabilities 386,932 390,466

Capital stock 15,506 15,506

Capital reserve 122,755 122,755

Retained earnings 181,861 200,692

Consolidated net profit 26,192 7,980

Capital attributable to owners of the parent 346,314 346,933

Non-controlling interests 2,922 2,984

Equity 349,236 349,917

31/12/2017 31/03/2018
5,656 5,769
63,174 69,715
3 0
3,154 3,855
3,966 3,611
4,241 3,426
26,234 29,660
106,428 116,036
317,662 316,790
12,814 12,816
41 39
4,372 4,431
52,043 56,390
386,932 390,466
15,506 15,506
122,755 122,755
181,861 200,692
26,192 7,980
346,314 346,933
2,922 2,984
349,236 349,917
842,596 856,419

Consolidated Cash Flow Statement

SURTECO GROUP

€ 000s 1/1/-31/03/

Earnings before income tax 8,900 10,970

Reconciliation to cash flow from current business operations 11,228 14,013

Internal financing 20,128 24,983

Changes in assets and liabilities (net) -3,299 -28,667

Cash flow from current business operations 16,829 -3,684

Cash flow from investment activities -6,090 -9,232

Cash flow from financial activities -3,324 -2,518

Change in cash and cash equivalents 7,415 -15,434 Cash and cash equivalents

1 January 60,416 133,373

Effect of changes in exchange rate on cash and cash equivalents -287 -537

31 March 67,544 117,402

1/1/-31/03/
2018
1/1/-31/03/
2017
10,970 8,900
14,013 11,228
24,983 20,128
-28,667 -3,299
-3,684 16,829
-9,232 -6,090
-2,518 -3,324
-15,434 7,415
133,373 60,416
-537 -287
117,402 67,544

Consolidated Statement of Changes in Equity

SURTECO GROUP

€ 000s Capital
stock
Capital
reserve
Fair value
measure
ment for
financial
instru
ments
1 January 2017 15,506 122,755 86
Net income 0 0 0
Other comprehensive
income
0 0 223
Comprehensive income 0 0 223
Allocation to retained
earnings
Changes in equity 0
0
0
0
0
0
31 March 2017 15,506 122,755 309
1 January 2018 15,506 122,755 0
Net income 0 0 0
Other comprehensive
income
Comprehensive income
0
0
0
0
0
0
Allocation to retained
earnings 0 0 0
Other changes 0 0 0
Changes in equity 0 0 0
31 March 2018 15,506 122,755 0
Retained earnings Consoli
dated net
Non-con
trolling
Total
Other
compre
hensive
income
Currency
trans
lation
adjust
ments
Other
retained
earnings
profit interests
-1,977 -620 183,947 23,867 2,988 346,552
0 0 0 6,212 18 6,230
0 1,597 0 0 -2 1,818
0 1,597 0 6,212 16 8,048
0 0 23,867 -23,867 0 0
0 0 23,867 -23,867 0 0
-1,977 977 207,814 6,212 3,004 354,600
-1,923 -8,768 192,552 26,192 2,922 349,236
0 0 0 7,980 62 8,042
0 -2,888 0 0 0 -2,888
0 -2,888 0 7,980 62 5,154
0 0 26,192 -26,192 0 0
0 0 -4,473 0 0 -4,473
0 0 21,719 -26,192 0 -4,473
-1,923 -11,656 214,271 7,980 2,984 349,917

Segment Reporting

by Strategic Business Units

SURTECO GROUP

Sales revenues

€ 000s SBU

1/1/-31/3/2018 External sales 95,843 90,905 0 186,748 Internal sales 193 1 -194 0

Total sales 96,036 90,906 -194 186,748

1/1/-31/3/2017 External sales 96,965 72,757 0 169,722 Internal sales 228 2 -230 0

Total sales 97,193 72,759 -230 169,722

Segment earnings

€ 000s SBU
SBU
Recon
SURTECO
1/1/-31/3/2018 Paper
Plastics
ciliation
EBIT 7,088
8,171
-1,854
1/1/-31/3/2017
EBIT 7,562
5,434
-2,256
Recon
ciliation
SBU
Plastics
SBU
Paper
0 90,905 95,843
1
-194
193
-194 90,906 96,036
0 72,757 96,965
2
-230
228
-230 72,759 97,193
Recon
ciliation
SBU
Plastics
SBU
Paper
-1,854 8,171 7,088

Segment Reporting

by regional markets

SURTECO GROUP

Sales revenues SURTECO Group

€ 000s 1/1/-31/3/2017 1/1/-31/3/2018

Germany 46,337 49,005

Rest of Europe 76,383 89,086

America 34,656 33,661

Asia, Australia, Others 12,346 14,996

Sales revenues SBU Paper

€ 000s 1/1/-31/3/2017 1/1/-31/3/2018

Germany 24,446 25,082

Rest of Europe 46,490 50,544

America 23,526 16,682

Asia, Australia, Others 2,503 3,535

Sales revenues SBU Plastics

€ 000s 1/1/-31/3/2017 1/1/-31/3/2018

Germany
Rest of Europe
America
Asia, Australia, Others
1/1/-31/3/2017 1/1/-31/3/2018
46,337 49,005
76,383 89,086
34,656 33,661
12,346 14,996
169,722 186,748
1/1/-31/3/2017 1/1/-31/3/2018
24,446 25,082
46,490 50,544
23,526 16,682
2,503 3,535
96,965 95,843
1/1/-31/3/2017 1/1/-31/3/2018
21,891 23,923
29,893 38,542
11,130 16,979
9,843 11,461
72,757 90,905

Notes to the Consolidated Financial Statements abbreviated

Accounting principles

The consolidated financial statements of the SURTECO Group for the period ended 31 December 2017 were prepared in accordance with the regulations of the International Financial Reporting Standards (IFRS) as they were adopted by the EU, in the version valid on the closing date for the accounting period. As a matter of principle, the same accounting and valuation principles were used for the preparation of this interim report as at 31 March 2018 as in the preparation of the consolidated financial statements for the business year 2017.

The objective and purpose of interim reporting is to provide an information tool building on the consolidated financial statements and we therefore refer to the standards and interpretations applied in the valuation and accounting methods used in the preparation of the consolidated statements of the SURTECO Group for the period ending 31 December 2017 for further information. The comments included in this report also apply to the quarterly financial statements and the half-yearly financial statements for the year 2018 if no explicit reference is made to them.

The regulations of the International Accounting Standard (IAS) 34 "Interim Financial Reporting" for abbreviated interim financial statements and the German Accounting Standard (DRS) 16 "Interim Reporting (Zwischenberichterstattung)" were applied for this interim report.

Where the standards adopted by the IASB had to be applied from 1 January 2018, they were taken into account in this interim report if they exert effects on the SURTECO Group. The preparation of the interim report requires assumptions and estimates to be made by the management. This means that there may be deviations between the values reported in the interim report and the actual values achieved. The mandatory standards and interpretations to be applied for the first time in the business year as from 1 January 2018 were taken into account when drawing up the interim financial statements. The application of these IFRS

regulations exerted no material effect on the net assets, financial position and results of the Group. Furthermore, reference is made to the explanations on the applicable standards provided in the notes to the consolidated financial statements on 31 December 2017.

The overall activities of the SURTECO Group are typically not subject to significant seasonal conditions.

The Group currency is denominated in euros (€). All amounts are specified in thousand euros (€ 000s), unless otherwise indicated.

We draw your attention to the fact that differences may occur when using rounded amounts and percentages on account of commercial rounding.

These interim financial statements and the interim report have not been audited and they have not been subject to an audit review by an auditor.

Group of consolidated companies

As at 31 March 2018, the SURTECO Group interim consolidated financial statements include SURTECO SE and all the major companies which are material for the net assets, financial position and results of operations in which SURTECO SE holds a controlling interest.

Report on important transactions with related parties

During the period under review, the companies of the Group undertook no business transactions with related parties that could have exerted a material influence on the net assets, financial position and results of operations of the Group.

Events after the balance sheet date

After 31 March 2018 up to the date when this report went to press, there were no events or developments that would be likely to lead to a significant change in the recognition or valuation of the individual assets or liabilities.

Calculation of indicators

Cost of materials ratio in % Cost of materials/Total output

Earnings per share in € Consolidated net profit/Number of shares

EBIT Earnings before financial result and income tax

EBIT margin in % EBIT/Sales revenues

EBITDA Earnings before financial result, income tax and

EBITDA margin in % EBITDA/Sales revenues

Equity ratio in % Equity/Balance sheet total

Gearing (debt level) in % Net debt/Equity

Market capitalization in € Number of shares x Closing price on the balance

Net debt in € Short-term financial liabilities

36

Personnel expense ratio in % Personnel costs/Total output

Working capital in € Trade accounts receivable + Inventories

Cost of materials ratio in % Cost of materials/Total output

Earnings per share in € Consolidated net profit/Number of shares

EBIT Earnings before financial result and income tax

EBIT margin in % EBIT/Sales revenues

EBITDA Earnings before financial result, income tax and depreciation and amortization

EBITDA margin in % EBITDA/Sales revenues

Equity ratio in % Equity/Balance sheet total

Gearing (debt level) in % Net debt/Equity

Market capitalization in € Number of shares x Closing price on the balance sheet date

Net debt in € Short-term financial liabilities + Long-term financial liabilities

  • Cash and cash equivalents

Personnel expense ratio in % Personnel costs/Total output

Working capital in € Trade accounts receivable + Inventories - Trade accounts payable

Financial calendar

28 June 2018 Annual General Meeting

03 July 2018 Dividend payment

14 August 2018 Six-month report January – June 2018

14 November 2018 Nine-month report January – September 2018

28 June 2018 Annual General Meeting

03 July 2018 Dividend payment

14 August 2018 Six-month report January – June 2018

14 November 2018 Nine-month report January – September 2018

Martin Miller

Investor Relations and Press Office T: +49 (0)8274/9988-508 F: +49 (0)8274/9988-515 [email protected] www.ir.surteco.com

SURTECO SE

Johan-Viktor-Bausch-Straße 2 86647 Buttenwiesen-Pfaffenhofen Germany

Ticker Symbol: SUR ISIN: DE0005176903

The paper used for this Interim Report was produced from cellulose sourced from certified forestry companies that operate responsibily and comply with the regulations of the Forest Stewardship Council.

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