Semperit suspends outlook after tough first half

VIENNA—With guidance from a new management team, Semperit Group took the first steps in a transition phase intended to restore the profitability of key business segments.

"We will not leave any stone untouched in the organization," new Semperit Group CEO Martin Fuellenbach said. "To establish profitable growth in our corporate DNA, we will need to review core technology and processes."

The comments accompanied Semperit's first-half results statement, which reported "productivity gains" at Sempermed—a major international supplier of medical and industrial gloves and the group's largest business segment—through reducing costs in production, marketing and sales. The measures included a 14 percent reduction in employee numbers.

The six months also saw impairment costs of $30.6 million at Sempermed, restructuring expenses at Sempertrans in France of $8 million and $4.7 million valuation adjustments of capitalized IT costs at the group's corporate center segment.

All segments, except conveyor belts unit Sempertrans, contributed to the 5.2 percent year-on-year increase in first-half revenue that was "largely driven by strong sales and higher volumes."

Semperit's earnings for the period included a one-off gain of $99.1 million from the closing of the joint venture with Sri Trang of Thailand as well as negative one-off effects of $43.1 million. Excluding one-off effects, though, operating earnings (EBIT) slumped 81.6 percent year-on-year to $7.2 million

While Semperflex and Semperform made positive contributions, operating EBIT at Sempermed improved but was still negative, while Sempertrans was adversely affected.

Within its Industrial sector—Semperflex, Sempertrans and Semperform—revenue increased in all segments except Sempertrans, taking total revenue up 4.2 percent to $329.4 million. However, higher raw materials prices meant profitability (EBITDA) fell 49.6 percent year-on-year to $31 million and EBIT by 61.1 percent to $19.5 million.

In terms of EBIT, earnings were particularly impacted by the restructuring expenses of $8 million at Sempertrans in France, the group noted.

The group's sole Medical Sector unit Sempermed faced "a very difficult market environment, driven by price pressure and excess capacities," during the first half. Revenue there increased by 6.9 percent year-on-year to $213.2 million on slightly higher volumes and price increases. Expansion and capacity optimization at Sempermed's plant in Malaysia continued while further cost reduction measures included 450 job losses—14 percent of the workforce.

Excluding one-off effects, operating EBITDA at Sempermed was down to $2 million from $6.2 million in the prior-year first half.

In its outlook for the full year, Semperit said it continued to have "limited visibility during the transition phase while, at the same time, volatility in raw material prices makes any attempt to provide reasonable guidance even more difficult."

The group did, however, conclude that earnings for 2017 "will be significantly below the 2016 result and that outlook remains suspended for the financial year 2017."