Glaston Corporation’s Interim Report for January-March 2019

Glaston Corporation Q1/2019: Net sales and EBIT declined as expected – the company agreed on historic acquisition

FIRST QUARTER 2019 IN BRIE

  •  Orders received totalled 22.9 (26.5, taking into account divested business operations* 25.5) million EUR.  
  •  Net sales totalled 20.8 (24.8, taking into account divested business operations* 23.7) million EUR.
  •  The operating result was -0.8 (0.9 profit) million EUR.  
  •  The comparable operating result was 0.1 (1.1) million EUR, i.e. 0.4 (4.4) percent of net sales.
  •  Earnings per share were -0.029 (0.009) EUR.
  •  The comparable earnings per share were -0.008 (0.013) EUR.  
  •  Cash flow from business operations was 1.8 (-6.6) million EUR.

HIGHLIGHTS DURING AND AFTER THE REVIEW PERIOD

  •  On 25 January 2019, Glaston signed an agreement to acquire Bystronic glass, a Swiss-German global provider of high quality machinery, systems and services for glass processing, for an enterprise value of 68 million EUR. In 2018, Bystronic glass’ net sales totalled 115.5 million EUR and comparable operating result margin was 5.7 percent**. The acquisition was completed on 1 April 2019.
  •  The Extraordinary General Meeting held on 26 February 2019 resolved to reduce the number of the company’s shares by combining the shares in a ratio of 5:1 (‘reverse split’). Trading with the new number of shares, 38,726,627, began on 1 March 2019.
  •  At the end of March, Glaston signed a new long-term financing agreement, which will be used for financing the transaction, refinancing Glaston’s existing loan facilities as well as the Group’s general working capital and guarantee needs.
  •  Authorized by the Extraordinary Annual General Meeting, the Board of Directors resolved to issue a total of 7,407,405 new shares at a subscription price of 2.025 EUR in a directed share issue to anchor investors. The proceeds of the directed share issue, a total of 15 million EUR, will be used to finance part of the acquisition of Bystronic glass. The new shares were entered in the Trade Register on 9 April 2019.
  •  In connection with the completion of the acquisition, Glaston made the following changes to the Executive Management Group. As of 1 April 2019, the Executive Management Group consists of CEO Arto Metsänen, COO and integration lead Sasu Koivumäki, Burghard Schneider, who is responsible for the operations of Bystronic glass, and as of 1 May 2019 Juha Liettyä, who will be responsible for Glaston Technologies. Päivi Lindqvist continues in her position as CFO and member of the Executive Management Group.

Glaston has applied the new IFRS 16 Leases fully retrospectively from 1 January 2019, and therefore the interim report 1 January – 31 March 2019 is reported with respect to 2018 comparison data both in accordance with actual data and the new standard. Restated comparison figures presented in the tables of the review refer to IFRS 16 adjustments.

* In December 2018, Glaston sold its Tools business in Italy and the USA.
** The financial information of Bystronic glass, which consists of Bystronic glass’ segment information included in the financial statements of Conzzeta AG for the financial year 2018, has been prepared in accordance with the Swiss GAAP FER. The financial information for Bystronic Glass has been converted into euros using the European Central Bank’s EUR/CHF average exchange rate for the period 1 January – 31 December 2018 (1.15491).

GLASTON’S OUTLOOK FOR 2019
Bystronic glass will be consolidated as part of Glaston Corporation from 1 April 2019 and consequently, Glaston will have two reporting segments: Glaston and Bystronic glass. The Company estimates the acquisition to be earnings enhancing, also in terms of comparable earnings per share when compared to the situation excluding the acquisition. As stated in the stock exchange release, published on 12 February 2019, the Company will disclose information regarding its 2019 full-year outlook at a later stage. In addition, Glaston plans to publish Glaston’s and Bystronic glass’ unaudited combined financial information for 2018 and the first quarter of 2019 at the latest in connection with the planned rights issue, which is expected to begin during the second quarter of 2019.

Some of Glaston’s (excluding Bystronic glass) orders received in the latter part of 2018 will be delivered in the second half of the year, which will shift net sales and operating result to later than normal.

PRESIDENT & CEO ARTO METSÄNEN:
“The first quarter of 2019 quarter has been historic for Glaston thanks to the acquisition of Bystronic glass. The acquisition complements our offering significantly and we will be able to offer products to our architectural and automotive industry customers on a comprehensive basis. We are shifting into a completely new size class, which will bring us economies of scale and opportunities to develop our operations for our customers’ benefit. Customers have responded very well to the acquisition and are looking forward to new, broader practical cooperation opportunities.

“As we anticipated in our financial statement 2018 bulletin, first-quarter net sales and comparable operating result were low. This was primarily due to the low number of new orders in the third quarter and early fourth quarter of last year but also to, among other things, the protracted Brexit negotiations and other uncertainties reflected in Europe as a whole, which led to a slightly quieter than expected first quarter. Our sales were down 12 percent on a comparable basis and the comparable operating result was low. Orders received also declined slightly from the previous year, reflecting the high ordering activity at the end of 2018.

“In our strategy, we are focusing on our Services business, and I am particularly satisfied with how services for our heat treatment machines developed in the first quarter. Orders received, net sales and profitability of service operations all improved during the review period.

“The activity in the Emerging Technologies unit picked up at the beginning of the year and we are in negotiations regarding several interesting projects in both Asia and the US. During the beginning of the year, two small projects in value but strategically important, translated into orders. They are the Emerging Technologies unit’s first orders for the automotive and aviation industries.

“The formalities of the Bystronic acquisition have been completed, all official permits have been obtained, and we can now start the integration process. In our integration work, we will focus primarily on effectively integrating our sales and service functions, while ensuring that we achieve our cost synergies within the set time-frame. Work on pro forma figures is well under way and we will publish an updated strategy, and financial objectives as soon possible.”

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