Earnings Release • Jul 29, 2009
Earnings Release
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| (in thousands of euros) | 2009 | 2008 | % variation |
|---|---|---|---|
| First quarter | 36 840 | 45 877 | - 19.7 % |
| Including Pharmaceutical Synthesis |
27 070 | 26 467 | 2.3 % |
| Including Fine Speciality Chemicals |
9 770 | 19 410 | - 49.7 % |
| Second quarter | 38 525 | 46 621 | - 17.4 % |
| including Pharmaceutical Synthesis |
28 241 | 27 200 | 3.8 % |
| including Fine Speciality Chemicals |
10 284 | 19 421 | - 47.0 % |
| Total as of 30th June 2009 | 75 365 | 92 498 | -18.5 % |
| including Pharmaceutical Synthesis |
55 311 | 53 667 | 3.1 % |
| including Fine Speciality Chemicals |
20 054 | 38 831 | - 48.4 % |
(not audited)
As of 30th June 2009, PCAS Group's consolidated net sales declined by 18.5% as compared to the same period of the previous financial year. Nevertheless the Group has recorded a significant improvement in its sales levels since June 2009 as compared to previous months.
Despite the economic crisis which has led our customers to be extremely cautious when developing and launching new products, Pharmaceutical Synthesis sales are progressing slightly.
Fine Chemicals, excluding Pharmaceutical Synthesis, was considerably impacted by the effects of the economic crisis in the first half year, and was accentuated by our customers' sudden destocking policy. The majority of our markets have been hit and in particular those linked to perfumery-cosmetics, automobile, construction, metal industry and microelectronics.
The complete consolidated half year accounts will be reviewed and closed on the 16th September 2009. It will include the costs of the restructuring plan, put into place within PCAS SA and described hereafter.
It is nevertheless possible at this stage to estimate the impact of the decline in sales on the PCAS Group's current operating income as of 30th June 2009. As such, after a first quarter in deficit and a second quarter in profit, the first half year's current operating income should be slightly negative. After having mainly taken into account the costs of the restructuring plan as well as the costs of the net debt, the Group's net loss as of the first half year 2009 should be between 6.5 and 7 million euros.
Despite this, the PCAS Group continued its debt reduction efforts, reducing debt to 58.4 million euros (as compared to 62.4 million euros as of 31st December 2008), thanks to its anticipated fiscal debt reimbursements (see hereafter) and to the initial results of a more active management policy in its working capital needs.
Facing a deterioration in sales, observed since the end of 2008, notably in the Fine Speciality Chemicals field and less so in the Pharmaceutical Fine Chemicals segment, a plan adapting to the situation was put in place within PCAS SA, the main company affected by the economic crisis.
This plan, implemented at the end of June and the cost of which can be estimated at approximately 4.2 million euros, affects around one hundred posts and includes economies in purchasing excluding production, and general costs. This represents a reduction in charges of around 6.5 million euros for a full year, of which 50% for the 2009 financial year.
Measures adapting to the situation were also taken in Finland and Canada and represent estimated economies totalling around 1.5 million euros for a full year.
At the beginning of the financial year, PCAS SA benefited from governmental measures in terms of anticipated reimbursements of various fiscal debt (Research Tax Credit and Carry-Back), representing almost 7 M€.
The contract between VLG and its main customer was renewed for a period of several years and demonstrates this world leader's confidence in PCAS' technological capabilities. At the same time, PCAS SA's stake in VLG equity was increased to 100%.
PCAS also continued its policy of niche activity development with high added value, and international development in buoyant markets:
. the acquisition of a Kilo Lab in California with an American partner Nanosyn, finalised in mid July, in the scope of a joint company (50/50). The aim being to obtain contracts in the USA with production being assured at the Group's current manufacturing sites in Europe.
. the creation of a subsidiary in Canada in partnership with Matrix Innovation, in the scope of a project developing its sales in solid support markets for peptide synthesis for manufacture initially at the Group's Canadian site.
In this context and continuing the steps taken at the end of 2008, the Group's management consulted with its banking partners and obtained the following :
. the abolition of the ratio test as of 30th June 2009,
. a modification in the ratio threshold for the 31st December 2009, 30th June and 31st December 2010 as follows :
| 2009 | 2010 | ||
|---|---|---|---|
| S2 | S1 | S2 | |
| Leverage Ratio | 4,75 | 4,25 | 3,75 |
| Interest Cover Ratio | 2,25 | 2,75 | 3,25 |
| Gearing Ratio | 1,00 | 1,00 | 1,00 |
Moreover, PCAS was convicted of alleged contractual breaches by the Marseilles Commercial Courts in the execution of a commercial contract (conviction carrying up to 1.2 million euros in compensation demands for the alleged wrongs amounting to a total of 8.4 million euros, this sentence being enforceable up to 0.8 million euros). PCAS SA has of course decided to appeal against this sentence. At this stage in the proceedings and following legal analysis of the case closely with company advisors, it has been decided not to book any provision on this account.
No other significant event which could have an important influence on sales or the company situation intervened during the first quarter 2009.
The current context of the world-wide financial and economic crisis makes it particularly difficult to establish forecasts. The following trends seem however to be outlined :
. the Pharmaceutical Synthesis pole's sales should continue to improve as compared to 2008
. in Fine Speciality Chemicals, where visibility remains weak, the noted decline of the first quarter has stabilised and the situation should see progressive improvement in the coming months as witnessed in sales recorded from June.
As a whole, the Group's 2009 sales should however remain inferior to that of 2008.
In this context, the restructuring plan implemented in mid 2009 should enable the Group to significantly improve its results in the second half year and to fully benefit from the economic recovery when it occurs, as well as returning to its profitability objective as quickly as possible.
Taking into account the first half year losses, the Group's results for the whole of the 2009 financial year should remain significantly negative.
Next meeting: consolidated half yearly results 16th September 2009
PCAS is a Group listed on the Nyse Euronext compartment C, specialising in Fine and Speciality Chemicals.
It develops and manufactures molecules of high added-value or of strong technological content for Pharmaceuticals, Perfumery, Cosmetics and Industry. The PCAS Group employs around 900 employees, has 8 production sites (4 of which are cGMP, FDA inspected), invests around 12 million euros each year in R&D and achieves more than two thirds of its net sales in export.
Longjumeau, 29th July 2009
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