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Gerresheimer expecting recovery in second half of 2017

Gerresheimer AG expects revenues to recover in the second half of the year.

After a moderate second quarter, Gerresheimer AG expects revenues to recover in the second half of the year. “Revenues decreased slightly in the second quarter as anticipated. We expect that our business will visibly pick up again, especially in the fourth quarter,” said Uwe Röhrhoff, CEO of Gerresheimer AG.

  • Revenues in second quarter of 2017 down 2.2% to EUR 339.5m as expected
  • Adjusted EBITDA margin 22.3%, versus 23.2% in prior-year quarter
  • Slight increase in Adjusted EBITDA leverage to 2.7 due to dividend payout and bond interest
  • More specific guidance for the financial year 2017

In the second quarter of the financial year 2017 (March 1, 2017 to May 31, 2017), Gerresheimer generated revenues of EUR 339.5m, 2.2% lower than the EUR 347.3m recorded in the prior-year quarter. On an organic basis – meaning at constant exchange rates and adjusted for acquisitions and divestments – revenues decreased by 3.7%.
In line with expectations, there was lower demand for medical plastic systems from a number of pharma customers where Gerresheimer is the sole supplier. This effect was amplified by postponements of customer orders in the inhalation business from the first to the second half-year. Engineering and tooling for medical plastic systems also generated lower revenues in the second quarter than in the prior-year quarter. Temporary intra-year fluctuations are normal and essentially track the billing of large-scale customer projects. Sales of plastic packaging for solid and liquid drugs, on the other hand, grew positively.
Second-quarter revenues with primary packaging glass virtually matched the prior-year figure. Revenues here were down in North America, where the current uncertainty led to reticence among a number of pharma customers to place orders. Outside of North America, revenues with primary packaging glass increased slightly as expected.

As a consequence of the revenue performance, adjusted EBITDA decreased from EUR 80.7m in the prior-year quarter to EUR 75.8m in the second quarter of 2017. Adjusted EBITDA on a constant exchange rate basis similarly stood at EUR 75.8m. The adjusted EBITDA margin was 22.3% in the second quarter, down on the 23.2% margin in the comparative prior-year period. The margin in Plastics & Devices mirrored the prior-year level of 27%, despite significantly lower revenues. In primary packaging glass, the margin came down to 20.4%, adjusted for the Life Science Research Division as a discontinued operation.

Largely due to the favourable long-term growth prospects and driven by initiatives to boost productivity and quality, the Company continues to anticipate that capital expenditure will likely amount to around 8% of revenues at constant exchange rates in the financial year 2017.

The Company’s expectations through to the end of 2018 are as follows:

  • Gerresheimer aims for average organic revenue growth of between 4% and 5%.
  • For the adjusted EBITDA margin, the Group has set a target of around 23% for financial year 2018.
  • In order to meet these targets, Gerresheimer will in all probability have to incur annual capital expenditure amounting to around 8% of revenues at constant exchange rates.
  • Going forward, the Company therefore continues to anticipate that average net working capital as a percentage of revenues will be approximately 16%.
  • The operating cash flow margin is expected to be around 13%.

The Group’s long-term target is as follows:

  • As before, attainment of at least 12% ROCE.
  • Gerresheimer considers a net financial debt to adjusted EBITDA ratio of around 2.5 to be appropriate, with temporary variation above or below this tolerated because expedient M&A activity cannot be planned in detail.

The quarterly report is available here: www.gerresheimer.com/en/investor-relations/reports

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