Antalis sales and profits slip

By Rhys Handley, Friday 29 March 2019

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Paper merchanting group Antalis has posted its year-end results, with a perfect storm of Brexit uncertainty, currency fluctuations and declining paper volumes heavily impacting profitability.

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The figures to 31 December showed sales across the group had slipped 2.8% to €2.31bn (£1.98bn. 2017: €2.38bn), while EBITDA fell 11.5% to €74.7m.

The group's report attributed weaker revenue to a 7% decline in paper volumes across Europe, as well as negative impact from the decline of the pound and the Swiss franc and the offloading of its €24m combined turnover subsidiaries in South Africa and Botswana.

However, David Hunter, UK and Ireland managing director, said the results were in line with expectations, and held “no surprises”. He described many of the factors that hit the 2018 results as “big, non-recurring events” that would not echo into 2019.

A gross profit of €560.2m (2017: €582.4) pointed to the company’s continued health, he said.

“I think the key message to take is the difference between our EBITDA and what we actually generated,” he said. “Across the piece, our results were in line with what we expected.”

Leading the charge in Antalis’ growth was its continued moves into the packaging sector, with sales for that wing of the business boosted by 3.1% to €517m.

Hunter said: “Over the past six years we have been quite heavily investing in packaging through both development and acquisitions. We had a clear strategy for which sub-segments we were going to attack and invested in our people and it paid off in dividends.

“Packaging is becoming a lot more sophisticated; clients are engaged with having less of it but making what they take on smart and recyclable. This helped us grow in that field.”

Other target sectors for Antalis did not fare so well, with European paper markets recording a production volume decline of around 7%, largely due to rising pulp prices. With €1.58bn in sales, Antalis’ paper sales were down 4.5%. Its Visual Communication business fell 3.7% to €213m, largely due to a declining retail sector where “signage is refreshed less frequently”, according to Hunter.

Brexit uncertainty was key to the declines felt by Antalis’ UK and Ireland operations, though Hunter stressed that with €594.8m sales (2017: €619.3m) the country was still the single largest division within the group.

“With Brexit still hanging in the air until somebody in Parliament finally decides to do something, the economy has been held back and there’s been a slowness to investment,” he said. “Some time ago, we formed a Brexit committee to look at purchasing, procurement and logistics, and we are working with our supply chain to find pinch points.

“There is a detailed plan in place of what we are going to do and we are keeping robust levels of stock too. We are taking this very seriously.”

Another key factor that is likely to temper expectations for the year ahead is the administration of Arjowiggins’ UK plants, impacting its Graphic and Creative Papers businesses, which supply products to Antalis.

PrintWeek reported on Wednesday (27 March) that administrators for Arjowiggins Creative Papers were now working with a preferred bidder on a sale likely to complete in April, though Graphic remains in limbo. Hunter said the latest from Creative Papers was a “positive development” and Antalis would “hope for the best” at Graphic while exploring alternative supply sources.

Hunter was also keen to point out the strides made in health and safety, with the company recently marking one million hours without a lost-time incident and recently picking up another gold medal from the RoSPA Health and Safety Awards.

“We are as proud of that as any of our financial results,” he said.

Antalis is due to post its operating results for Q1 2019 shortly, with 24 April earmarked as the publication date. Hunter said once again that results were “in line” with what investors had been told to expect.

The group is also currently working on a restructuring of its shareholding structure, which would see the sale of majority shareholder Sequana’s 75% share as it goes through its administration process. Without a clear timeline, Hunter said the “situation will resolve itself within 2019”.

Following the results announcement, Antalis' share price was at €1.097, down 3% on yesterday's close.

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