ANTALIS: 2019 full-year results and Q1 2020

Press release

Boulogne-Billancourt, 20 May 2020

Resilient operating performances in 2019 in very tough market conditions,

aggravated by Antalis' specific circumstances regarding its ownership structure

and the demise of certain suppliers

Sales down 8.6% to €2,074 million on a comparable basis; EBITDA margin at 2.6%

• Sales down 8.6% to €2,074 million on a comparable basis (down 10.3% as reported)
• Gross margin down 8.4% to €506 million on a comparable basis (down 9.7% as reported); slight improvement in the gross margin rate to 24.4% (up 0.2 points)
• Packaging and Visual Communication's contribution to Antalis' consolidated gross margin up 2 points to 39%
• EBITDA down 27% to €54 million on both a comparable and reported basis; EBITDA margin of 2.6% (down 0.6 points)
• Net debt of €346 million
• Net loss of €72 million

Financial indicators after first-time application of IFRS 16

• EBITDA of €96 million; EBITDA margin at 4.6%
• Net loss of €76 million, including non-recurring expenses of €58 million
• Net debt of €460 million

Q1 2020 operating performances before application of IFRS 16

• Impact of Covid-19 crisis from March, mainly in Southern Europe, France, UK and Asia
• Sales down 12.8% to €481 million on a comparable basis
• EBITDA down €7.7 million to €7.4 million; EBITDA margin at 1.5%, despite an improvement in the gross margin rate to 24.7% and an 8.2% cost reduction over the period.

Commenting on the full-year results, Hervé Poncin, Chief Executive Officer of Antalis said: "The business environment was very turbulent in 2019 in the many countries in which Antalis is present (UK, Chile, France, Hong Kong, etc.). There was also a sharp 8% contraction in the European paper market against the backdrop of the liquidation of Antalis' controlling shareholder and the demise of certain suppliers. However, the Group managed to protect its margin rate thanks to the increase in the contribution of Packaging and Visual Communication to gross margin to 39% and greater flexibility in the cost base. Our sales declined to €2,074 million and our EBITDA margin came in at 2.6%. Q1 2020 sales were also down due to the negative impact of the Covid-19 crisis on demand in Southern and Western European countries, offset by a number of cost-cutting initiatives. EBITDA came in at €7.4 million."

Consolidated income statement (operating indicators at constant accounting methods)

Antalis' Board of Directors meeting on 19 May 2019 examined and approved the 2019 consolidated financial statements.

	2019 before IFRS 16	2018	Δ	Δ		2019 after IFRS 16	2018
			as reported	on a comparable basis(1)
(in € millions)
Sales	2,074.0	2,311.0	-10.3%	-8.6%		2,074.0	2,311.0
Gross margin	505.6	560.2	-9.7%	-8.4%		505.6	560.2
Gross margin rate (% of sales)	24.4%	24.2%	0.2 points	-		24.4%	24.2%
EBITDA	54.1	74.7	-27.6%	-27.2%		96.1	74.7
EBITDA margin (% of sales)	2.6%	3.2%	-0.6 points			4.6%	3.2%
Current operating income	31.2	52.6	-40.7%	-40.9%		35.7	52.6
Current operating margin (% of sales)	1.5%	2.3%	-0.3 points			1.7%	2.3%
Net income (loss) attributable to owners						(75.9)	(29.8)
Diluted earnings (loss) per share in euros						(1.08)	(0.42)
Average number of shares after dilution						70,506,985	70,951,156

(1) Changes in comparable figures reflect calendar, FX and perimeter impacts (in particular the negative €44 million sales impact from the divestment of the Southern African business in October 2018).

The following table shows the full-year impact of first-time application of IFRS 16 on key operating indicators:

(in € millions)	2019 before IFRS 16	Cancellation of lease payments	Depreciation of right-of-use assets	Finance costs related to lease liabilities	2019 after IFRS 16
Sales	2,074.0				2,074.0
Gross margin	505.6				505.6
Gross margin rate (% of sales)	24.4%				24.4%
EBITDA	54.1	42.0	-	-	96.1
EBITDA margin (% of sales)	2.6%				4.6%
Current operating income	31.2	42.0	(37.5)	-	35.7
Current operating margin (% of sales)	1.5%				1.7%
Net income (loss) attributable to owners	(72.0)	42.0	(37.5)	(8.3)	(75.9)
Net debt	345.7			114.6	460.3

Sales were down by 10.3% year-on-year to €2,074 million (down 8.6% on a comparable basis). This drop mainly reflects the 8% decline in European Paper volumes, compounded by the negative impact of the liquidation of one of Antalis' major graphic and recycled papers suppliers, which accounted for approximately 4% of the Group's paper purchases. It also includes the negative impact of the sale of the Group's South African subsidiaries which contributed sales of €44 million in 2018. There was a slightly favourable forex impact amounting to €4 million, mainly attributable to the appreciation of the Swiss franc and sterling against the euro.

Gross margin came in at €506 million, down 9.7% (down 8.4% on a comparable basis). This was mainly attributable to the decline in European Paper volumes, coupled with a decrease in selling prices over the year resulting from a sharp drop in the cost of paper pulp. The gross margin rate rose by 0.2 points thanks to a combination of resilient rates in the Papers business and an increase in the Packaging and Visual Communication margin rate, together with a 2 point increase in the contribution of Packaging and Visual Communication to the Group's consolidated margin to 39%.

EBITDA declined by 27.6% over the year to €54 million before the application of IFRS 16 (down 27.2% on a comparable basis). The gross margin rate was 2.6%, 0.6 points lower than in 2018. The lower gross margin was partially offset by lower fixed and variable costs.

Recurring operating income was €31.2 million before application of IFRS 16 (i.e., down 40.7%).

Other operating income and expenses totalled €58 million and mainly consisted of restructuring costs, impairment losses and the costs involved in setting up the Group's new ownership structure.

After factoring in the full-year impact of first-time application of IFRS 16 (-€3.9 million), net finance costs and income taxes, the net loss for the year amounted to €75.9 million, compared with a net loss of €29.8 million for 2018.

Excluding lease liabilities, net debt stood at €346 million at 31 December 2019, €58 million higher than at 31 December 2018. This increase reflects the drop in EBITDA, high borrowing costs, restructuring costs and the unfavourable impact of accounts payable on working capital requirements with a year-on-year decline of approximately six days.

The audit progress has been completed and the audit reports relating to the certification of the accounts are in the process of being issued.

Key figures by geography (at constant accounting methods)

(in € millions)	2019	2018	Δ
Sales
Main European Geographies	1,063,7	1,179.4	-9.8%
UK & Ireland Germany & Austria France	542.2 283.4 238.4	594.8 309.3 275.3	-8.8% -8.4% -13.5%
Rest of Europe	865.4	929.6	-6.9%
Rest of the World	145.1	202.0	-28.2%
Total	2,074.0	2,311.0	-10.3%
Gross margin Main European Geographies Rest of Europe Rest of the World	242.6 220.7 42.3	267.8 235.4 57.0	-9.4% -6.2% -25.8%
Total	505.6	560.2	-9.7%
EBITDA
Main European Geographies EBITDA margin	27.6 2.6%	38.4 3.3%	-28.1% -0.7 points
Rest of Europe EBITDA margin	22.1 2.6%	28.2 3.0%	-21.6% -0.4 points
Rest of the World EBITDA margin	4.3 3.0%	8.1 4.0%	-47.3% -1.0 point
Total	54.1	74.7	-27.6%

• Main European Geographies

The Main European Geographies generated sales of €1,064 million, down 9.8% year-on year, reflecting the 8%-10% contraction in Paper volumes, the negative impact - especially in France - of the liquidation of one of Antalis' major graphic and recycled papers suppliers, and a more difficult second-half for Packaging.

Brexit continued to weigh upon demand throughout 2019, especially in Visual Communication with its dependence on the retail trade.

Gross margin declined by 9.4% to €243 million, giving a gross margin rate of 22.8% which was stable year-on-year.

EBITDA for the Main European Geographies fell by 28.1% to €27.6 million (down 8.2% on a comparable basis) with a gross margin rate of 2.6% (0.7 points lower than in 2018), reflecting lower margins, partially offset by lower costs and notably the continued drive for greater flexibility in logistics overheads in the UK.

• Rest of Europe

Full-year sales for the Rest of Europe declined by 6.9% to €865 million, which also reflected the decline in Papers volumes coupled with the erosion of selling prices for papers.

Gross margin was down 6.2% to €221 million, giving a gross margin rate of 25.5%, a slight year-on-year improvement of 0.2 points.

EBITDA fell by 21.6% to €22 million. There were improved performances in Italy, Eastern Europe and in particular the Baltic countries, notably driven by growth in Packaging. EBITDA margin was 2.6%, 0.4 points lower than in 2018.

• Rest of the World

Sales for the Rest of the World were down by 28.2% to €145 million, reflecting the negative €44 million sales impact from the divestment of the Southern African business, the severe impact of civil unrest on demand and on currencies in Latin America in Q4 2019 (Chile, Bolivia and Peru) as well as civil unrest in Hong Kong. However, the Latin American Packaging business continued to deliver profitable growth.

Gross margin declined by 25.8% to €42 million, also reflecting the sale of the Southern African subsidiaries, giving a gross margin rate of 29.1%, 0.9 points more than in 2018.

EBITDA dropped 47.3% to €4.3 million, reflecting the impact from the divestment of the Southern African business and exchange rates, giving an EBITDA margin of 3%, down one point year-on-year.

Key figures by business sector

	Sales			Gross margin			Gross margin/sales
(€ millions)	2019	2018	Δ	2019	2018	Δ	2019	2018	Δ
Papers	1,374.8	1,580.7	-13.0%	307.3	355.9	-13.7%	22.4%	22.5%	-0.1 point
Packaging	497.9	517.2	-3.7%	140.8	144.4	-2.5%	28.3%	27.9%	0.4 points
Visual Communication	201.3	213.1	-5.5%	57.5	59.9	-4.0%	28.6%	28.1%	0.5 points
TOTAL	2,074.0	2,311.0	-10.3%	505.6	560.2	-9.7%	24.4%	24.2%	0.2 points

• Papers

In 2019, the European paper market recorded an 8% decline in volumes and was also hit by a drop of around 6% in prices between the first and fourth quarters, attributable to the sharp contraction in paper pulp prices. In this deflationary context, Antalis' sales contracted by 13% year-on-year to €1,375 million. This decline reflected the negative impact of the liquidation of a French graphic and recycled papers supplier as well as the bankruptcy of a second supplier of fine papers which was ultimately taken over by its management team.

Gross margin dropped by 13.7% to €307 million, however, the gross margin rate remained stable at 22.4% despite the challenging context described previously.

• Packaging

The European packaging market continued to perform strongly in the first-half of the year before growth tailed off in the second-half, notably in Germany with "Dieselgate" and the general slowdown in Asia and then in Europe, particularly in the UK due to the impact of Brexit. Antalis delivered sales of €498 million in this market in 2019, down 3.7% year-on-year, and it improved its gross margin rate by 0.4 points. This improvement reflects the deployment of our strategy focused on products and services and on adding value for local and international customers.

Gross margin for packaging amounted to €141 million and represented 28% of the Group's consolidated margin.

• Visual Communication

The Visual Communication sector reported full-year sales of €201 million, down 5.5%, reflecting the general slowdown in 2019, especially in the UK.

Gross margin was down 4% year-on-year to €58 million, reflecting a 0.5 point improvement in the gross margin rate due to a focus on higher-margin, large-format printing media. Visual Communication contributes 11% of Antalis' consolidated gross margin.

• e-commerce

Antalis generated sales of €308 million via its e-platforms (e-commerce websites, EDI). The e?penetration rate in terms of stock lines ordered via the e-platforms was 37% (a 1.4 point year-on-year increase for e-commerce websites).

In 2019, Antalis continued to roll out its new-look e-commerce website in the Main European Geographies. Increased availability of digital services and presence on social networks boosts customer satisfaction and marketing possibilities.

Key operating indicators at 31 March 2020

(in € millions)	Q1 2020	Q1 2019	Δ as reported	Δ on a comparable basis(1)
Sales	480.8	551.3	-12.8%	-13.5%
Gross margin	118.7	134.5	-11.7%	-12.6%
Gross margin rate (% of sales)	24.7%	24.4%	+0.3 points
EBITDA	7.4	15.1	-51.0%	-56.6%
EBITDA margin (% of sales)	1.5%	2.7%	-1.2 points

(1) Changes in comparable figures reflect FX, calendar and perimeter impacts

The following table shows the impact of application of IFRS 16 on key operating indicators at 31 March 2020:

(in € millions)	March 2020 before application of IFRS 16	Cancellation of lease payments	Depreciation of right-of-use assets	March 2020 after application of IFRS 16
Sales	480.8			480.8
Gross margin	118.7			118.7
Gross margin rate (% of sales)	24.7%			24.7%
EBITDA	7.4	6.6	-	14.0
EBITDA margin (% of sales)	1.5%			2.9%

The impact of the economic crisis driven by the Covid-19 pandemic began to kick in from March in all countries and especially in Southern and Western Europe. Asia had been impacted beginning in January. The European paper market contracted by around 7% in the quarter to the end of March and the Visual Communication market was very badly hit by the cancellation of public events and lock-down measures.

In the quarter to the end of March, sales dropped by 13.5% to €481 million on a comparable basis and at constant accounting methods (down 12.8% on a reported basis). The forex impact on sales over the period was negligible.

Gross margin fell 12.6% to €119 million on a comparable basis and at constant accounting methods (down 11.7% on a reported basis). The gross margin rate improved by 0.3 points to 24.7%, thanks partly to the increased contribution of the higher margin Packaging and Visual Communication sectors to Antalis' overall margin.

In spite of continually lower supply chain and marketing costs, EBITDA before application of IFRS 16 declined by 56.6% to €7.4 million on a comparable basis and at constant accounting methods (down 51% on a reported basis). EBITDA margin was 1.5% (down 1.2 points).

Key figures by geography

(in € millions)	Q1 2020	Q1 2019	Δ as reported
Sales
Main European Geographies	248.8	288.1	-13.6%
Rest of Europe	204.1	227.1	-10.1%
Rest of the World	27.9	36.1	-22.7%
TOTAL	480.8	551.3	-12.8%

During the first three months of 2020, the Main European Geographies (UK & Ireland, Germany & Austria, France) generated sales of €249 million, down 13.6% on Q1 2019. This decline reflects the impact of the Covid-19 pandemic, particularly in this geography, together with an unfavourable Q1 2020 comparable effect as the demise of two key Group suppliers began to have a serious impact from the second-half of 2019.

Sales for the Rest of Europe were down by 10.1% to €204 million. At this juncture, business in this geography has been proportionally less impacted by the Covid-19 pandemic.

Sales for the Rest of the World fell 22.7% as reported to €28 million (down 17.7% at constant exchange rates), due to the severe slowdown in Asia linked to the pandemic together with the sharp depreciation in all South American currencies.

Outlook

As the negative economic impacts of the ongoing Covid-19 pandemic continue to weigh upon the Group's activities, there is considerable uncertainty concerning the duration and the extent of the crisis in the various countries as well as solutions for emerging from the crisis. It should be noted that the effects have been quite different across the 39 countries in Europe and the rest of the world in which the Group is present. Therefore, it is not possible at this stage to issue any forecasts for 2020 for Antalis.

As announced on 31 March 2020, the planned transaction with Kokusai Pulp & Paper Co. Ltd. ("KPP") involving the purchase of all Antalis shares held by Sequana and Bpifrance Participations, as well as the simultaneous restructuring of the Group's debt, should provide Antalis with a new platform for deploying its strategy.

Financial disclosures

Antalis did not comply with the bank covenants concerning its syndicated credit facilities when these were tested at 31 December 2019. However, the lenders to the syndicated credit facility agreed to waive their rights under any event of default, potential or actual, until completion of the transaction with KPP.

Net debt / EBITDA = 6.39 (≤ 4.40)

EBIT/Net interest = 1.56 (≥ 2.35)

Upcoming events

30 June 2020: Annual General Meeting

A detailed presentation of its full-year 2019 results is available on the Antalis website at: www.antalis.com.

About Antalis

Antalis (Euronext Paris: ANTA) is the leader in B2B distribution of Papers (number 1 worldwide outside the United States) and industrial Packaging, and number two in the distribution of Visual Communication media in Europe. In 2019, the Group reported sales of €2.1 billion and employed 4,700 people serving over 115,000 customers, companies and printers in 39 countries. Through its 117 distribution centres, Antalis makes around 11,000 deliveries per day worldwide and it distributed 1.1 million tons of paper in 2019.

Analysts & Investors Contact
Steve McCue
[phone]
[e-mail]
www.antalis.com

Media contact
Image Sept
Claire Doligez
[phone]
[e-mail]

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