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PHAROL, SGPS, S.A.

Quarterly Report May 15, 2008

1925_10-q_2008-05-15_7e82908d-d3c8-492a-9ecf-3605bb649ad7.pdf

Quarterly Report

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CONSOLIDATED AND INDIVIDUAL INTERIM REPORT (Unaudited)

1st Quarter 2008

Semapa – Sociedade de Investimento e Gestão, SGPS, SA. Public Limited Company Av. Fontes Pereira de Melo, 14 – 10º 1050-121 Lisboa Tel. (351) 213 184 700 Fax (351) 213 521 748 Lisbon Companies Registry and Corporate Person no. 502 593 130 Share Capital 118.332.445 Euros

CONSOLIDATED QUARTERLY REPORT (Unaudited)
(applicable to entities subject to the IAS/IFRS accounting standards)
Company: SEMAPA - SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A. SOCIEDADE ABERTA
Registered offices: AV. FONTES PEREIRA DE MELO, 14 - 10º 1600 - 079 LISBOA Corp. no.: 502 593 130
Period: Figures in Euros
1st Quarter
3rd Quarter
5th Quarter (1)
Start: 01/01/2008 End: 31/03/2008
IFRS Consolidated
Balance sheet items 31-03-2008 31-12-2007 Var. (%)
ASSETS (2)
Fixed assets (net)
Tangible fixed assets 1.641.216.078 1.621.494.019 1,22%
Goodwill 285.143.839 285.675.118 (0,19%)
Intangible assets (3) 152.845.432 152.963.362 (0,08%)
Investments in associates 1.877.731 1.878.882 (0,06%)
Financial instr. held to maturity - -
Financial assets available for sale 1.154.989 1.427.137 (19,07%)
Accounts receivable (net) 363.924.516 375.324.637 (3,04%)
SHAREHOLDERS' EQUITY
Share capital (in euros) 118.332.445 118.332.445 0,00%
No. ordinary shares 118.332.445 118.332.445 0,00%
No. other shares
Treasury stock (in euros) 5.447.975 5.447.975 0,00%
No. voting shares 5.447.975 5.447.975 0,00%
No. non-voting preference shares
Adjustments included in shareholders' equity (4) (5.996.748) (16.576.730) (63,82%)
Minority interests 293.162.666 304.873.080 (3,84%)
LIABILITIES
Provisions 46.560.242 46.454.921 0,23%
Accounts payable (business activities) 360.142.771 316.026.889 13,96%
Other financial liabilities 1.264.051.536 1.326.608.003 (4,72%)
TOTAL ASSETS (net) 3.225.614.688 3.257.139.769 (0,97%)
TOTAL SHAREHOLDERS' EQUITY 1.025.288.676 1.050.698.103 (2,42%)
TOTAL LIABILITIES 2.200.326.012
-
2.206.441.666
-
(0,28%)
IFRS Consolidated
Income Statement Items 31-03-2008 31-03-2007 Var. (%)
Earnings 372.992.290 342.357.359 8,95%
Cost of sales or services rendered (144.438.457) (112.599.756) 28,28%
Gross profit 228.553.833 229.757.603 (0,52%)
Profit before financial costs, taxes,
depreciation and amortisation 94.472.503 122.580.130 (22,93%)
Financial costs (16.135.052) (14.115.746) 14,31%
Tax costs (18.041.046) (19.801.567) (8,89%)
Minority interests 8.975.541 (9.777.426) (191,80%)
Net profit for the quarter (6) 24.356.816 47.169.053 (48,36%)
Basic net profit for the quarter per share (7) 0,21 0,41 (48,36%)
Diluted net profit for the quarter per share (7) 0,21 0,41 (48,36%)

1) Applicable to the first financial year of companies that adopt a financial year different from the calendar year (Article 65-A of the Companies Code).

(2) These are examples of assets accounts, which will be published. The list does not include all asset items, meaning that the order does not necessarily follow the current/non-current distinction or order of liquidity format.

(3) Includes all items covered by IAS 38 – Intangible assets, and therefore does not include goodwill, indicated separately. (4) All income and expense items that, under IAS/IFRS or resulting interpretations, are recognized directly in equity.

(5) The date should be identified and the respective items should contain the accrued amounts up to the reference date (3 months, 9 months or, under particular

circumstances, 15 months. See (1)).

(6) The net profit for the quarter refers to the accrued figure up to the reporting date. In the case of the 3rd quarter, this will be the amount accrued over the 9 months of the financial year, after minority interests.

(7) Calculated in accordance with IAS 33.

SEMAPA Group – Consolidated operations up to March 2008

The SEMAPA Group recorded positive performance in the 1st quarter of 2008, as reflected in consolidated turnover of 373.0 million euros, EBITDA of 94.7 million euros and net profits of 24.4 million euros, permitting it to reduce its net borrowing by 26.4 million euros.

Leading Business Indicators (IFRS)

106
Euros
IFRS
Accrued
Mar-08
IFRS
Accrued
Mar-07
% Var.
08/07
Sales 373,0 342,4 9%
Other income 6,1 32,9 (81%)
Costs and losses (284,4) (251,8) 13%
Total EBITDA 94,7 123,5 (23,3%)
Recurrent EBITDA 94,7 97,7 (3%)
Depreciation and impairment losses (27,0) (31,7) (15%)
Provisions (increases and reversals) (0,3) (0,9) (70%)
EBIT 67,5 90,9 (26%)
Net financial profit (16,1) (14,1) 14%
Pre-tax profit 51,4 76,7 (33%)
Tax on profits (18,0) (19,8) (9%)
Retained profits for the period 33,3 56,9 (41%)
Attributable to Semapa shareholders 24,4 47,2 (48%)
Attributable to minority interests 9,0 9,8 (0,1)
Cash flow 60,6 89,6 (32%)
EBITDA margin (% Sales) 25,4% 36,1% (30%)
Recurrent EBITDA margin (% Sales) 25,4% 28,5% (11%)
EBIT margin (% Sales) 18,1% 26,5% (32%)

Notes:

  • Total EBITDA = operating profit + depreciation and impairment losses + provisions reversal of provisions
  • Net debt = non-current interest bearing debt (net of loan issue charges) + current interest-bearing debt (including debts to shareholders) – cash and cash equivalents; in line with IFRS rules.
106
Euros
March
2008
December
2007
% Var.
08/07
Total net assets 3.225,6 3.257,1 (1%)
Net debt 861,4 887,9 (3%)

Segment Reporting (IFRS)

106
Euros
Paper and
pulp
Cement Holdings Consolidated
Sales 300,6 72,4 - 373,0
Total EBITDA 78,1 20,7 (4,0) 94,7
Recurrent EBITDA 78,0 20,7 (4,0) 94,7
Depreciation and impairment losses (21,8) (5,1) (0,0) (27,0)
Provisions (increases and reversals) (0,3) 0,1 (0,1) (0,3)
EBIT 55,9 15,8 (4,1) 67,5
Net financial profit (6,1) (3,2) (6,9) (16,1)
Pre-tax profit 49,8 12,6 (11,0) 51,4
Tax on profits (14,8) (3,2) (0,0) (18,0)
Retained profits for the period 35,0 9,4 (11,0) 33,3
Attributable to Semapa shareholders 26,5 8,9 (11,0) 24,4
Attributable to minority interests 8,5 0,4 - 9,0
Cash flow 57,2 14,3 (10,9) 60,6
EBITDA margin (% turnover) 26,0% 28,6% - 25,4%
EBIT margin (% turnover) 18,6% 21,8% - 18,1%
Total net assets 2.526,0 471,3 228,4 3.225,6
Net debt 339,3 72,1 450,0 861,4

NB: Figures for business segment indicators may differ from those presented individually by each Group, as a result of consolidation adjustments.

Consolidated Sales: 373,0 million euros

Paper and Paper Pulp (PORTUCEL SOPORCEL Group)

The Portucel Soporcel Group's contribution in the 1st quarter of 2008 totalled 300.6 million euros, representing an increase of 7.5% over the same period in 2007.

This positive performance was achieved thanks to increased sales, of both paper and pulp, and to positive evolution in the respective prices.

Paper Sales (261.9 thousand tons, up by 2.4% on the same period in 2007) and the respective average sales price (up by 3.6%, in line with the PIX A4 B-Copy price index) both performed well, with the result that total sales in this segment recorded year-on-year growth of 6.1%, accounting for 70% of the Portucel Soporcel Group's total turnover.

The PIX index for eucalyptus pulp prices in USD was up by 17.6% in relation to the first quarter of 2007. However, this increase was not reflected in the pulp price in euros, due to the depreciation of the USD against the euro. As a result, the Group's average sales price in euros was only 2.4% higher than in the first quarter of the previous year.

Pulp output totalled 343.8 thousand tons, corresponding to an increase of 10.8 thousand tons (+ 3.2%) on the first quarter of 2007. Due to increased incorporation of pulp in paper production, the increase in sales was smaller than the increase in production (+ 5.5 thousand tons).

These factors contributed to an increase in total pulp sales of approximately 6.5% in relation to the same period in 2007 (+ 67.5 million euros).

Pulp Sales accounted for 23% of the Portucel Soporcel Group's total turnover.

The remaining 7% of the Portucel Soporcel Group's turnover was generated by the energy sector and other services.

Cement (SECIL Group)

The contribution from Secil's turnover stood at 72.4 million euros, with accrued sales up by 16% over the same period in 2007. Growth in sales was sustained by good performance by the Portugal-Cement, Tunisia-Cement and Angola-Cement business units.

Over the period in question, business in the Secil Group's main market (the Portuguese cement market) grew by 12.2% (including exports) over the same period in 2007.

Consolidated Recurrent EBITDA: 94.7 million euros

The Semapa Group recorded recurrent consolidated EBITDA in line with the figures recorded in the 1st quarter of 2007, down by 3.1%.

  • Paper and Paper Pulp: recurrent EBITDA contributed 78.0 million euros, down by 9.8% on the first quarter of 2007. Despite growing turnover in the paper and pulp segments, the fall in EBITDA was due to sharp increases in certain factors of production, especially timber and chemicals. Rising timber costs were exacerbated by the need to import significant quantities of this raw material, with the corresponding impact on transport operations.
  • Cement: total accrued recurrent EBITDA contributed 20.7 million euros, representing an increase of 29.3% over the same period in 2007, thanks to good performance in the business units referred to in connection with growth in turnover.

Special mention should be made of the fact that, in the first quarter of 2008, the Portugal-Cement business unit recorded EBITDA of 26.3 million euros (51% of which is appropriated by the Semapa Group), representing an increase of 32% on the same period in 2007.

These successful figures were achieved thanks to growth in sales in quantity and rising prices in the internal and foreign markets, offsetting the adverse effects of rising thermal fuel prices, which climbed even more steeply during the 1st quarter of this year.

The Tunisia-Cement business unit also recorded improved sales and plant performance, generating EBITDA of 4.9 million euros (of which 51% is appropriated by the SEMAPA Group).

Semapa SGPS and Sub-holdings: total accrued recurrent EBITDA at 31 March 2008 stood at -4,0 million euros, reflecting the structural costs of Semapa SGPS and its instrumental sub-holdings.

Consolidated EBITDA: 94.7 million euros

The Semapa Group recorded consolidated EBITDA in the first quarter of 2008 of 94.7 million euros, 23.3% less than in the same period in the previous year. This was due to the fact that in the first quarter of 2007 EBITDA was influenced by the non-recurrent capital gain of 25.6 million euros on the disposal of 19.2 million shares in EDP.

Consolidated Recurrent EBITDA Margin: 25.4%

  • Paper and Paper Pulp: down by 4.9 percentage points from the first quarter of 2007, at 26.0%, for the reasons explained above.
  • Cement: the EBITDA margin improved by 2.9 percentage points over the same period in 2007, standing at 28.6%.

Consolidated EBIT: 67.5 million euros

  • Paper and Paper Pulp: contribution of 55.9 million euros, i.e. down by 6.1% on the figures recorded in the first quarter of 2007.
  • Cement: contribution of 15.8 million euros, 50.5% up on the accrued figure at March 2007.
  • Holdings: negative contribution of 4.1 million euros.

Consolidated Net Debt: 861.4 million euros

The SEMAPA Group's Net borrowing decreased by 26.4 million euros from year-end 2007, illustrating the Group's good performance in terms of cash flow generation.

  • Paper and Paper Pulp: net debt stood at 339.3 million euros, down by 28.4 million on year-end 2007. This reduction in the net debt of the Portucel Soporcel Groups is evidence of the Group's impressive capacity to generate cash flow, in view of the investment in fixed assets over the period (51.2 million euros).
  • Cement: The Secil Group's net debt was down by 4.7 million euros from 31 December 2007.

Semapa SGPS and Sub-holdings: net debt increased by approximately 6.6 million euros in relation to 31 December 2007, to a total of 450.0 million euros at the end of the first quarter of 2008.

The following factors contributed to the increased indebtedness of Semapa SGPS and its sub-holdings: (i) acquisition on the stock exchange of shares in Portucel for a total price of 3.18 million euros, and (ii) payment of financial and structural costs.

Consolidated Net Profits after minority interests: 24.4 million euros

The company recorded a consolidated net profit before minority interests of 33.3 million euros, of which 24.4 million euros is attributable to SEMAPA shareholders. These figures compare unfavourably with those recorded at the end of the first quarter of 2007 (consolidated net profits of 47.2 million euros), due fundamentally to the one-off capital gain of 25.6 million euros recorded in this quarter in 2007 on disposal of shares in EDP.

  • Paper and Paper Pulp: contribution of net profits attributable to Semapa shareholders of 26.5 million euros, up on the figure of 25.0 million euros recorded in the 1st quarter of 2007 (+ 6.0%). This increase is explained by the improvement of 19.3% in financial results over the previous year (due to a sharp reduction in net debt, more than offsetting the significant increase in interest rates, and also to the positive result on a number of exchange rate and interest rate hedge operations) and by the reduction in taxes on profits of 13.8% in relation to the 1st quarter of 2007.
  • Cement: contribution to the Net profits attributed to Semapa shareholders of 8.9 million euros, 29% up on the figure recorded in the first quarter of 2007 (7.0 million euros). This improvement is explained by the factors described above.
  • Semapa SGPS and Sub-holdings: contribution to the net profits attributable to Semapa shareholders of – 11 million, which compares unfavourably with the figure of 15.2 million euros recorded in the 1st quarter of 2007 and is explained by the capital gain of 25.6 million euros obtained on the sale of shares in EDP in the first quarter of the previous year.

Subsequent Developments

  • On 4 April 2008, the Secil paid dividends for the financial year of 2007 of 19,008,907.20 euros, corresponding to 38 cents per share in issue;
  • On 8 April 2008, the Portucel Soporcel Group paid dividends for the financial year of 2007 of 26,860,382.50 euros, corresponding to 3.5 cents per share in circulation;
  • On 9 April 2008, Semapa SGPS paid dividends for the financial year of 2007 of 29,481,173.48 euros, corresponding to 25.5 cents per share in issue.

Future Prospects

Prospects for the paper and pulp market in 2008 are marked by uncertainty as to how exchange rates will evolve, effective growth in capacity worldwide and whether growth will continue to grow at the current pace. The sector also faces adverse trends in its main cost factors – timber, chemicals, energy and logistical costs.

The Group's performance will therefore continue to be influenced by some of these adverse factors, including persistently high timber costs, aggravated by the need to import significant quantities. Costs will also remain high for other factors of production, notably chemical products, and energy costs continue to rise.

At the same time, the foreign exchange situation will continue to attract growing imports to the European market and to hinder exports, increasing internal competition.

In the cement and derivatives sector, business will develop in line with the situation in the civil construction sector in the countries where Secil operates, and these markets are expected to continue to experience a degree of instability.

INDIVIDUAL QUARTERLY REPORT (Unaudited)
(applicable to entities subject to the IAS/IFRS accounting standards)
Company: SEMAPA - SOCIEDADE DE INVESTIMENTO E GESTÃO, SGPS, S.A. SOCIEDADE ABERTA
Period: Figures in Euros
1st Quarter
3rd Quarter
5th Quarter(1)
Start: 01/01/2008 End: 31/03/2008
Individual
Balance Sheet Items 31-03-2008
POC
31-12-2007
POC
Var. (%)
ASSETS
Fixed assets (net) 1.297.725.043 1.271.390.391 2,07%
Intangible assets - -
Tangible assets 906.811 890.474 1,83%
Financial investments 1.296.818.232 1.270.499.917 2,07%
Accounts receivable (net) 17.557.219 14.785.055 18,75%
Non-current - -
Current 17.557.219 14.785.055 18,75%
SHAREHOLDERS' EQUITY
Value of shareholders' equity 118.332.445 118.332.445 0,00%
No. ordinary shares (4) 118.332.445 118.332.445 0,00%
No. of other shares
Value of treasury stock 2.720.000 2.720.000 0,00%
No. of voting shares 2.720.000 2.720.000 0,00%
No. of non-voting preference shares
Minority interests
LIABILITIES
Provisions 95.373.365 94.399.440 1,03%
Accounts payable 482.436.024 474.718.226 1,63%
Non-current 439.455.083 457.305.084 (3,90%)
Current 42.980.941 17.413.142 146,83%
TOTAL ASSETS (NET) 1.327.193.011 1.325.553.987 0,12%
TOTAL SHAREHOLDERS' EQUITY 732.126.010 745.825.023 (1,84%)
TOTAL LIABILITIES 595.067.001 579.728.964 2,65%
Individual
Income Statement Items 31-03-2008
POC
31-03-2007
POC
Var. (%)
Sales and services rendered 416.640 1.397.088 (70,18%)
Variation in production - -
Cost of merchandise sold and services rendered 550.735 913.150 (39,69%)
Gross profit (134.095) 483.938 (127,71%)
Operating profit (4.007.622) (4.420.206) (9,33%)
Financial profit (net) 28.395.767 28.258.178 0,49%
Current profit 24.388.146 23.837.972 2,31%
Extraordinary profit (29.323) 23.334.581 (99,87%)
Tax on income (2) 2.007 3.500 (42,66%)
Minority interests - -
Net profit for the quarter 24.356.816 47.169.053 (48,36%)
Net profit per share for the quarter 0,21 0,40 (47,15%)
Net cash flow (3) 24.492.028 47.296.265 (48,22%)

(1) Applicable in the first financial year of companies that adopt a financial year different from the

calendar year (Article 65-A of the Companies Code).

(2) Estimate of tax on profits

(3) Net cash flow = Net profit + Depreciation + Provisions

The Directors

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