DGAP-News: SKW Stahl-Metallurgie Holding AG

SKW Metallurgie exceeds its own expectations during the first six months, financial restructuring remains necessary

- Operating EBITDA during the first six months improved by EUR 1.4 million compared to last year

- Debt-ratio, despite profit improvements, remains significantly too high

- Financial restructuring as final element of corporate restructuring has been set up

Munich (Germany), August 30, 2017. Revenues of SKW group of companies during the first six months of 2017 amounted to EUR 135.6 million, thus significantly higher than the corresponding first six months of 2016 (EUR 121.8 million) and therefore exceeded expectations. With EUR 7.1 million (2016 EUR 5.7 million) the operating EBITDA after six months is in line with the guidance path given for the whole year 2017, as published in March 2017. Despite considerable cash-effective non-recurring restructuring expenditures, SKW group achieved a slightly positive gross cash-flow of approximately EUR 0.9 million (first six months 2016: EUR - 0.4 million) and thus confirmed the path of operative restructuring which it has embarked on.

"We have managed to continue last year's accomplishments of our continuous improvement program 'ReMaKe' and have, overall, started positively in the first six months of 2017. With the double-digit increase in revenues, we have certainly been given some tailwinds form the overall industry developments. Nevertheless, it must be emphasized that our operative result could only have been achieved by consistent implementation of the package of measures by the whole team" says Dr. Kay Michel, CEO of SKW Stahl-Metallurgie Holding AG. "All our segments - North America, Europe and Asia, as well as South America- have managed to increase tonnages by 5.3% compared to last year. The latter is further proof for the attractiveness and capacity of SKW in the market. Admittedly, these positive developments are clouded by the still immense competitive pressure, which has partially lead to further declines in margins."

Overall positive development of operative segments
The segment "North America" develops as expected according to the positive trend of the first quarter, whereby towards the end of the second quarter a minor downturn has become apparent. Total revenues increased by 6.8% from EUR 61.6 million in the first six months 2016 to now EUR 65.8 million during the first six months of 2017. The corresponding EBITDA of this segment has increased from EUR 2.0 million to 3.5 million. This increase reflects not only the strong first quarter 2017, but also the already decreasing regional steel market in May and June 2017. Competitive pressure in the relevant cored wire market in North America is still very strong.

The segment "Europe and Asia" has also been evolving positively during the first six months of 2017. In this segment, total revenues during the first six months amount to EUR 42.5 million and are therefore also above last year's results (EUR 37.2 million). The corresponding EBITDA of this segment has increased slightly by EUR 0.1 million to EUR 1.5 million during the relevant period. To the benefit of SKW, the European steel-industry has recovered slightly. The Company has seized the opportunity and participated above average from this development and has thus managed to gain further market shares. However, due to unabated hard competition and pressure on margins in this segment, these achievements are not mirrored accordingly in the EBITDA.

Business performance of the segment "South America" is working completely in opposite direction to all macroeconomic developments in its key-market Brazil and is thus significantly better than expected. Especially, the steel market has disconnected from this development. Therefore, during the first six months of 2017, compared to last year, this segment realizes total revenues of EUR 13.7 million, constituting an increase of one third, compared to last year. The EBITDA has increased from EUR 2.0 million during the first six months 2016 to EUR 3.9 million in 2017. Next to the good competitive position and the market development, this positive trend can predominantly be attributed to extraordinary high margin transactions, which in the future might only partially be repeatable. This partially incalculable trend proves again how volatile and hard to predict the developments in this segment are.

The reported (unadjusted) period result of the group during the first six months 2017 is characterized by one-time effects, such as proceeds derived from the divestment of an investment in Bhutan, which had entered into insolvency in 2015, (EUR 1,9 million) or the amicable settlement with the former management (EUR 2.0 million). Furthermore, in comparison with the previous year, the ceasing of depreciations or the unfavorable exchange rate development should to be mentioned. The current equity situation and the corresponding rating of SKW group of companies burdens the conditions which SKW can negotiate in its bilateral business relations and thus inhibits further growth as well as strategic progress in business.

Financial restructuring necessary
Group liquidity of SKW Stahl-Metallurgie Holding AG is predominantly secured by a syndicated loan agreement in the amount of EUR 86 million (whereof EUR 46 million are a redeemable loan), concluded in the beginning of 2015. The loan terminates on January 31, 2018. Hence, the Company's positive continuance prognosis and thus the connected going concern beyond January 31, 2018 is dependent on a successful implementation of the financial restructuring - as communicated on August 25, 2017.

"The tireless commitment in our continuous improvement program aimed at long-term improvement of efficiency, revenues, proceeds and cash-flow is bearing initial fruit. Yet, it has to be said that the harvest will not be sufficient to obtain a sustainable recovery of the whole group", explains Michel. "The figures for the first six months - especially the gross cash-flow - show that proceeds as well as liquidity are improving. Even with this improvement, our debt - which has been incurred in the past - is significantly too high considering the operative business attainable in the long-run. Thus, a financial restructuring, especially a significant reduction of financial indebtedness is crucial. For this purpose, we have found a solution with our strategic partner Speyside Equity. It is only in this way that the question of refinancing, due on January 31, 2018, can be solved."

The invitation to the annual shareholders meeting on October 10, 2017, which has been announced in this context, will be published on September 1, 2017.

Contact

Thomas Schulz
Telefon: +49 171 86 86 482
E-Mail: tsc@tsc-komm.de
Internet: www.skw-steel.com

About SKW Stahl-Metallurgie Holding AG and the SKW Metallurgie Group
The SKW Metallurgie Group is a global market leader for chemical additives for hot metal desulphurization and for cored wire and other products for secondary metallurgy. The Group's products enable steel-makers to efficiently manufacture high-quality steel products. Clients include the world's leading companies in the steel industry. The SKW Metallurgie Group has more than 50 years of metallurgical know how, and currently operates in more than 40 countries. What is more, the Group is a leading supplier of Quab specialty chemicals, which are mainly used in the global production of industrial starch for the paper industry. The SKW Metallurgie Group is headquartered in Germany with production facilities in France, the US, Canada, Mexico, Brazil, South Korea, Russia, the Peoples' Republic of China and India (joint venture). Shares of SKW Stahl-Metallurgie Holding AG have been listed in Frankfurt Stock Exchange's Prime Standard since December 1, 2006; since 2011 (conversion to name shares) with ISIN DE000SKWM021.

Disclaimer

This press release may include certain forward-looking statements which are based on currently available assumptions and predictions of the SKW Metallurgie Group's management as well as on other currently available information. Various identified as well as unidentified risks and uncertainties as well as other factors may result in a deviation of actual results, financial situation, development or achievement of the company compared to the assessments made herein. SKW Stahl-Metallurgie Holding AG does not intend and assumes no liability to update such forward-looking statements and to adjust them to future events and developments.