Corbion Expects Improvements in Biobased Food Ingredients Segment

13 Aug 2014 --- Corbion has reported a 1.1% organic sales growth for its second quarter, driven primarily by Biochemicals, which grew by 13.3%. The company also said it expects to see volume growth from the Biobased Food Ingredients segment throughout the year.

Corbion reported Q2 2014 sales of €188.3 million, -0.9% compared to Q2 2013. The Biobased Food Ingredients market segment declined organically by 2.2%. EBITDA in Q2 2014 decreased by 2.9% to €26.4 million. Organic EBITDA growth in Q2 2014 amounted to 3.4%. The newly appointed management board will present a strategic update in November.

“Both sales and EBITDA grew organically in the 2nd quarter compared to Q2 2013. Similar to the 1st quarter, a contrasting performance was visible between both market segments: The performance in Biochemicals excelled in volumes and margins, while Biobased Food Ingredients, showing some improvement versus Q1, continued to disappoint. We are currently in the middle of a thorough strategic process, the outcome of which we will present in November. The strategic process is focused on future prospects for growth and value creation for Corbion and its shareholders", comments Tjerk de Ruiter, CEO.

Key financial highlights Q2 2014 and H1 2014:
• Net sales in Q2 decreased by 0.9% to € 188.3 million, 1.1% organic growth
• EBITDA before one-off costs in Q2 was € 26.4 million, an organic increase of 3.4% 
• EBITDA margin before one-off costs was 14.0% in Q2 (Q2 2013: 14.3%)
• Capex in H1 2014 was € 35.1 million
• Net cash at the end of H1 2014 was € 6.4 million (Q4 2013: net cash of €29.4 million)
• One-off costs included in EBIT of € 21.2 million related to partial, non-cash, impairment of Thailand based lactide plant (€17.5 million) and contractual obligations towards theformer Board of Management (€3.7 million)

Net sales

Net sales in Q2 decreased slightly, mostly because of negative currency effect. Organic growth was positive at 1.1% as volume growth was 0.9%. An organic sales decline in the larger Biobased Food Ingredients segment was more than offset by organic sales growth of 13.3% in the smaller 
Biochemicals market segment. 

H1 2014 net sales was on par compared to H1 2013 at € 371.0 million with organic growth of 
2.0%, mainly driven by volume growth. Net sales were negatively impacted by exchange rate effects of € -16.2 million (-4.4%), due to a weaker Japanese yen, Brazilian real and US dollar versus the Euro.

Q2 2014 compared to Q2 2013: 
Major capital expenditure projects in 2014 are the preparation for a full scale, latest technology lactic acid production unit, the installation of a commercial scale succinic acid plant, and the new medical biomaterials plant in the US.

Trade working capital increased by €23.1 million to €102.7 million. This increase is the balance of an increase of €21.8 million before currency effects and a currency effect of € 1.3 million.

A FiberLive milestone payment was made as we entered into a co-development & licensing agreement with a medical device company related to our medical biomaterials business.

Shareholders' equity in the first half-year increased by € 1.0 million to € 506.2 million. The movements were:
• The addition of the positive result after taxes of € 0.4 million;
• A decrease of € 5.6 million related to the dividend for financial year 2013;
• Positive exchange rate differences of € 4.4 million due to the translation of equity denominated in currencies other than the euro;
• Share based remuneration impact of € 2.0 million;
• Positive movement of € 1.2 million in the hedge reserve;
• Negative effects of defined benefit plan and tax effects € 1.4 million

At the half-year end 2014 the ratio between balance sheet total and equity was 1:0.7 (2013 year 
end: 1:0.7).

Cash flow/Financing
Cash flow from continued operating activities increased compared to H1 2013 by € 22.7 million to € 27.0 million. This is the balance of the higher operational cash flow before movements in working capital of € 2.0 million, a positive impact of the movement in working capital and provisions of € 9.8 million, and lower taxes and interest paid of € 10.9 million.

The cash flow required for continuing investment activities increased compared to H1 2013 by € 17.1 million to € 44.7 million. Capital expenditures accounted for most (€ 39.9 million) of this cash outflow. 

The net cash position at the end of June 2014 was € 6.4 million, a decrease of € 23.3 million compared to year end 2013, mainly due to capital expenditures, the increase in working capital compared to the year-end position and the dividend payment, partly compensated by the positive cash flow from operating activities before working capital and provisions. 

At June 30, 2014, the ratio of net debt to EBITDA was negative at -0.1x (end of 2013: -0.2x), reflecting the net cash position. The interest cover for H1 2014 was 23.2x (end of 2013: 13.5x). 
We continue to stay well within the limits of our financing covenants. In June 2014, Corbion announced that the company successfully closed a 5 years syndicated loan facility of EUR 300 million. The new Revolving Credit Facility (RCF) replaces the company’s existing RCF. The main conditions for Corbion’s credit facility are as follows: the net debt/EBITDA ratio may not exceed the factor 3.5 and the interest cover ratio may not be lower than 3.5. These conditions are equal to the conditions of the replaced RCF. 
Strategic update scheduled for November 2014

The newly appointed Board of Management initiated a thorough fact finding tour throughout the Corbion organization over the past few months. During this process, several key strategic questions were identified requiring deeper analysis. To that end, over 50 of our people are currently engaged in this strategic process.

The strategic process will cover all areas, addressing subjects such as our market approach, product strategies, manufacturing footprint, cost structure, and core competencies. 

The board will present their conclusions to the market in a strategic update, scheduled for November 2014. This will include updated financial targets.

Outlook 2014

For the remainder of the year we expect similar market circumstances as in H1 2014. For the Biobased Food Ingredients segment we see some early signs of volume growth improvement, whereas in the Biochemicals segment the comparables versus last year for volume growth will become more challenging as the year progresses. The capex level in H2 is expected to be lower compared to H1 as major capex outlays have been put on hold in view of the strategic process.