q3 2018 financial results & 2021 strategy update · lean six sigma procurement excellence world...

Tom K. Schäbinger (CEO)

Q3 2018

financial results

& 2021 strategy

update

Investor presentation

H1 2018

Tom K. Schäbinger (CEO)

Dirk Hardow (COO)

Dr. Nico Reiner (CFO)

Ivo Schintz (CCO)

Financialresults

Investor presentation

Market

Financial results

Strategy update

Outlook The World Academy TWA | King Abdullah Economic City

Duropal HPL | Duropal HPL magnet | DecoBoard

© Paul Ott, Graz

Key developments

Key developments

Exhibition stand Pfleiderer Interzum 2017 | Cologne | Germany

Highlights

4

€

*Adjusted EBITDA = EBITDA adjusted for clearly identifiable material true one-offs and exceptional items. Please refer to appendix for more details

STRATEGY

• We have conducted a bottom-up strategy

analysis across all business areas together

with one of the TOP 3 strategy consulting firms,

validating our plan

• As a result of this process, we are revising our

2021 target upwards

• 2021 top line target raised to

>EUR 1,300m

• 2021 EBITDA margin target >16%

confirmed

• Strategic plan is driven by systemic top and

bottom line initiatives

FINANCIALS & OPS

• 9M revenues up 6.5% to EUR 799.7m,

driven by price increases;

• Reported EBITDA up 8.7% y/y to EUR 104.6m

• Adjusted EBITDA* up 15.0% y/y to EUR

107.4m

• Strict cost control and active sales management

• Operating cost reductions actively being

implemented in H2’18

• Expect significant deleveraging over coming

quarters following successful Q3 share buyback

Market

Q3’18


Glue (EUR/to)

Electricity (EUR/KWh)

Wood (EUR/to)

Q1, 2016 = 100%

6

Raw materials prices still rising

Paper

Q1, 2016 = 100%

Q1, 2016 = 100%Q1, 2016 = 100%

100%

89% 92% 94%

117%121%

107%

113%116%117%

127%

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Wood Chemicals

PaperEnergy

Material cost structure

100%

93%91% 90%

93%92% 92% 94%

99% 97% 98%

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

100%99%

99%96%

98% 98% 97%99%101%

103%105%

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

100% 96%98%

102%

115%

106%106%106%

115%112%111%

Q12016

Q22016

Q32016

Q42016

Q12017

Q22017

Q32017

Q42017

Q12018

Q22018

Q32018

Active price management in place

7* Base on January 2016 =100

90

95

100

105

110

115

120

125

Raw chipboard

80

85

90

95

100

105

110

115

120

125

MDF raw HDF raw

85

90

95

100

105

110

MFC

80

85

90

95

100

105

110

HPL Worktops

1.9%

DACH

Macro outlook supporting future

growth of Pfleiderer Group

3.7%

Poland

1.9%

Germany

GDP growth on main markets (2019 est.)*

3.7%

1.9%

2.1%

EU-27

*Source: European Commission, IMF 8

Financial results


Q3’18

Product price increases

support top line growth

Revenue Q3’18 (EUR m)

244.9266.5

Q3 2017 Q3 2018

+8.8%

10

750.9799.7

9M 2017 9M 2018

+6.5%

Revenue 9M’18 (EUR m)

• Q3 growth of revenues the strongest in 2018

Revenue breakdown

by products & markets

Revenue breakdown

by products (9M’18)

11

Revenue breakdown

by market (9M’18)

48%

16%

19%

11%6%

Laminated/lacquered board

HPL & elements

Raw PB

Raw MDF/HDF

Other

46%

22%

24%

6%2%

DACH

Other Western Europe

Poland

Other Eastern Europe

Beyond Europe

• DACH & other Western European markets account for 68% of Group sales

• 64% of revenue generated by growing sales of value-added products

Higher profitability delivered

12

31.4

37.3

Q3 2017 Q3 2018

Adjusted EBITDA* (EUR m)

93.4

107.4

9M 2017 9M 2018

+15.0%+18.8%

* Reconciliation of adjusted EBITDA is available in the appendix.

• Q3 growth of EBITDA the strongest in 2018

Q3’18 EBITDA bridge

13

11.4

2.71.6

37.3

31.4

10.7

(24.2)*

1.6

(EUR m)

* Includes price & volume effects

Reconciliation to reported EBITDA is presented in the appendix

• Improved volumes, prices & product mix nearly offset visible increase in raw material costs

• Early innings of cost saving plan initiated in H2’18 already visible; full year effect to manifest itself in 2019

2.1

9M’18 EBITDA bridge

14

38.3

5.5 3.4

69.4

107.4

93.4

10.1

(41.3)*

(4.9)

(EUR m)

* Includes price & volume effects

Reconciliation to reported EBITDA is presented in the appendix

• Strong focus on pricing in order to offset increase of raw materials cost

• Increase of production costs mainly driven by inflation

• Early innings of cost saving plan initiated in H2’18 already visible; full year effect to manifest itself in 2019

2.9

15

Continuous profitable growth

* – y/y changes in net profit resulting mainly from impact of FX valuations (non-cash event)

(EUR m) Q3’17 Q3’18 Δ 9M’17 9M’18 Δ

Revenue 244.9 266.5 +8.8% 750.9 799.7 +6.5%

Gross profit 54.9 60.5 +10.2% 174.6 183.2 +4.9%

Gross profit margin (%) 22.4 22.7 +0.3 p.p. 23.3 22.9 (0.4 p.p.)

Selling expenses (34.5) (32.0) (7.2%) (103.5) (98.2) (5.1%)

Administrative expenses (12.0) (10.8) (10.0%) (37.0) (35.8) (3.2%)

R&D (0.5) (0.4) (20.0%) (1.6) (1.3) (18.8%)

SG&A (% of sales) 19.2 16.2 (3.0 p.p.) 18.9 16.9 (2.0 p.p.)

Reported EBITDA 30.1 35.2 +16.9% 96.2 104.6 +8.7%

Adjusted EBITDA 31.4 37.3 +18.8% 93.4 107.4 +15.0%

Adj. EBITDA margin (%) 12.8 14.0 +1.2 p.p. 12.4 13.4 +1.0 p.p.

D&A 18.3 20.0 +9.3% 55.2 57.5 +4.2%

EBIT 11.8 15.2 28.8% 41.1 47.1 +14.6%

EBIT margin (%) 4.8 5.7 0.9 p.p. 5.5 5.9 0.4 p.p.

Net income 0.4 9.8 +2088%* 19.1 15.6 (18.3%)*

Strong growth of quarterly

adjusted EBITDA*

20.4

31.4

25.4

32.632.1 29.9

31.432.8

36.5

33.6

37.3

Q12016

Q12017

Q12018

Q22016

Q22017

Q22018

Q32016

Q32017

Q32018

Q42016

Q42017

(EUR m)

16

* EBIDTA reconcilliation in the appendix

40.0 30.9

19.6 21.1

-10,0%

50,0%

-10,0

90,0

Q3 2015 Q3 2016 Q3 2017 Q3 2018

Net working capital after factoring % of quarterly sales

16.4%

13.0%

8.0%7.9%

Efficient working capital

managementWorking capital after factoring (EUR m)

77.2

38.1 35.324.6

94.0

99.2 104.6114.0

-82.3-97.4

-120.3 -117.5

Q3 2015 Q3 2016 Q3 2017 Q3 2018

Trade receivables Inventories Trade payables

88.9

40.0 19.6 21.1

17

• Further improvement in working capital as % of sales

Share buy-back program completed

Balance Sheet influenced by share buy-back program

(EUR m) 9M 20179M 2018

excl. SBB9M 2018

Net debt 251.4 261.0 385.4

Net leverage 1.95 1.90 2.80

Equity ratio 28.4% 26.1% 16.1%

No. of shares Capital share Value (EUR k)

Q4 2017 3.235.050 5.00% 35.643

Q1 2018 2.161.883 3.34% 18.609

Q3 2018 7.543.268 11.66% 70.491

Total 12.940.201 20.00% 124.743

18

• Expect material deleveraging over the coming quarters

• Expected net leverage for end-2019: between 2.0- 2.5x

Attractive valuation vs. peers

19

EV / EBITDA MEDIAN

2017A 2018E

Consensus

estimatesPfleiderer Group 5.2x 4.9x

EV / EBITDA MEDIAN

2017A 2018E

Comparable listed

stocks

Western Europe wood stocks 9.0x 9.3x

DACH construction materials stocks 9.1x 7.9x

EV / EBITDA AVERAGE

2017A 2018E

Comparable listed

stocks

Western Europe wood stocks 8.9x 9.1x

DACH construction materials stocks 10.3x 9.5x

Source: Bloomberg, Pfleiderer calculations

• Pfleiderer stock is materially undervalued compared to its international peers

Strategyupdate


Q3’18

Pfleiderer Strategy –

the Diamond approach

21

SHAREHOLDER VALUE▪ Lean organization

▪ Sound financial basis

▪ Active investor relations

▪ Attractive dividend policy

▪ Available net cash will be distributed to shareholders

OPERATIONS

PEOPLE▪ Target oriented leadership (MBO)

▪ New Management Team

▪ Lean organization

▪ People recruitment and development

▪ Talent program

▪ Succession plan

COMMERCIAL

Sales & Marketing▪ Market segmentation & strategy

▪ Organic growth & value-added

product strategy

▪ Sales excellence program

▪ New Design Collection

▪ Target group marketing

▪ PFL Academy

PFLDIAMOND

APPROACH

CORPORATE CULTURE ▪ Empowerment

▪ Cost consciousness

▪ Diversified workforce

▪ International management

approach

▪ Employee survey

Mid-term programs

▪ Lean Six Sigma

▪ Procurement excellence

▪ World class manufacturing

Next 12 months

▪ Uptime & productivity

▪ Capacity ext. / debottlenecking

▪ Value-added technologies

▪ Procurement savings

▪ NWC optimization

▪ Continuous Improvement

program

Presented in

Sept. 2017

What we’ve achieved so far

22

New capacities: launch of lacquering line in Leutkirch

Cost optimisation: increased share of recycled wood at Neumarkt

Identification of prospective market segments, geographies, products

Shareholder value – cash generation and sharing profit

Cost optimisation – visible in Q3 2018 P&L

Launch of sales effectiveness improvement programme

• Implementation of the Diamond Strategy has already delivered significant shareholder value

• Initiatives are already translating into EBITDA growth in FY2018. Expect to see material EBITDA benefit in

FY2019 and FY2020

Diamond Strategy confirmed

23

We have conducted a bottom-up detailing of the Diamond Strategy

Together with one of TOP 3 strategy consulting firms

we have uncovered further possible upside

2021 Revenue target raised to >EUR 1.3B

2021 EBITDA margin target >16% confirmed

Currently we are delivering 13.5% EBITDA margin

With the implementaton of the diamond strategy we plan to close the

gap to best-in-class peers that deliver 16–17% EBITDA margin

Clear goals for strategy defined

24

Strengthen sales and market position

Increase production capacity and efficiency

Increase EBITDA margin

Focus on High Value-Added Products

Sustainable progress

on strategy implementation

25

12 key initiatives were identified across the organisation,

allocated to three workstreams on three areas:

COMMERCIAL OPERATIONS POLAND

Improve direct and raw material

cost efficiencyIncrease revenues w/ existing

customers

Silekol growth plan

Improve plant performanceNew customer acquisition Improved customisation services

Optimize procurement spending

Enter new geographies

Incremental volume growth

Enter new market segments

New product development

Increase price and margin

discipline

1

2

3

4

5

6

7

8

9

10

11

12

Outlook


Q3’18

Positive outlook drives future profits

27

Cutting-edge

products

Pricing

approach• Smart pricing strategy to mitigate higher prices of raw materials with pass through to customers

• Pfleiderer to monetise new products and segments with higher margins (e.g. successful launch of

kitchen top line in Poland)

• Continuous improvement of cost structure and cost-cutting initiatives will result in additional

savings

• Optimisation of plant performance on output increase, improved cost monitoring thanks to IT tools

Cost &

performance

optimisation

• Pfleiderer is ideally positioned with its capacity to benefit from a growing demand of customers

in premium products within its strategic core markets

• Entering new customer segments, new geographies

Customer

demand

Market trends

• Growth of furniture and construction markets to boost order book and future earnings

• New initiatives in Poland to address expansion of capacities by competitors & wood market

changes (e.g. reducing costs through increased use of recycled wood, expanding Silekol’s

outside sales)

EBITDA outlook

109.8120.0

129.1143.0

FY 2016 FY 2017 FY 2017 excl. OCCPPenalty¹

FY 2018 Marketconsensus²

EBITDA (EUR m)

1 Reported EBITDA adjusted for EUR 9.1m of one-off provision for OCCP penalty and related cost 2 Bloomberg consensus 28

• Expect to meet or outperform FY2018 market consensus

Key takeaways

29

Enhanced 2021 strategy thanks to bottom-up account analysis2

Improving profitability and cost structure; maintaining cost discipline1

Clear management inititiaves addressing new capacities in Poland3

Raw material prices increase successfuly passed through to customers6

Smart pricing strategy provides future upside5

Cont’d strong focus on value-added products with superior profitability4

Positive market environment in DACH and Poland7

The Management Board

Dirk HardowChief Operating Officer

Ivo SchintzChief Commercial Officer

Tom K. SchäbingerChief Executive Officer

Dr. Nico ReinerChief Financial Officer

Reported & adjusted EBITDA

reconciliation

32

(EUR m) 2017 2017 2017 2018 2018 2018

Reconciliation Q1 Q2 Q3 Q1 Q2 Q3

Reported EBITDA 30.8 35.3 30.1 36.5 32.9 35.2

Add/deduct derecognition of EEG

liabilities1.0 -5.4

Add back anti-trust related

expenses0.3 1.3 0.2 0.1

Add back strategy consulting costs 2.0

Add back ALNO provision 0.6

Adjusted EBITDA 32.1 29.9 31.4 36.5 33.6 37.3

Quarterly reported EBITDA

development

20.4

31.4

25.4

32.630.8

35.3

30.1

23.7

36.5

32.935.2

Q12016

Q12017

Q12018

Q22016

Q22017

Q22018

Q32016

Q32017

Q32018

Q42016

Q42017

(EUR m)

33

www.pfleiderer.com

More information

34

Disclaimer

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extent available, the industry, market and competitive position data contained in this Presentation come from official or third party sources. Third party industry

publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no

guarantee of the accuracy or completeness of such data. While the Issuer believes that each of these publications, studies and surveys has been prepared by

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data contained in this Presentation come from the Issuer's own internal estimates based on the knowledge and experience of the Issuer’s management in the

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35

IR Contact

Bartek Godlewski

@: [email protected]

M: +48 795 529 424

Coiffeur Panzerhalle | Salzburg | Austria

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