The M.J.Maillis Group announced today the results for the financial year 2008 as follows:
- Sales: Net sales were 340.5 m€, decreased by 7,5% compared to 2007.
- EBITDA: Adjusted earnings before Interest, Taxation, Depreciation and Amortization (adjusted EBITDA) 15.3 m€, (vs adjusted EBITDA 18.9 m€ in 2007) and reported EBITDA -2.1 m€ (vs 7.0 m€ in 2007)
The 2008 EBITDA has been significantly impacted by one-off expenses, foreign exchange losses, inventory write-down as well as increased provision for inventory de-valuation and receivables write-off.
- Profit After Tax: Loss after tax for 2008 amounted to 42.9 m€ (vs loss 38.6 m€ in 2007).
Mr John Kourouglos, CEO of the Group, commented:
The year of 2008 was a year of mixed performance. The first eight months of the year were successively better in terms of profitability and cash flow; since then, however, as a consequence of the global financial crisis and collapse of commodity prices the entire supply chain (metals and plastics) has been caught with high levels of and highly priced inventories. An abrupt and vertical de-stocking process has commenced that negatively affected demand and manufacturing activity.
Group’s 2008 operational cash flow was positive. Management’s efforts to reduce cost, manage expenditures, improve working capital as well as decreased operating expenses (8,9% or 7.9 m€ compared to 2007) contributed to this achievement.
In the markets served where we are present, we have not detected any significant change in relative market share. We believe the impact from lower demand and customers de-stocking has been felt proportionally by us and our competitors alike. In addition, adjacent markets were impacted similarly.
Volume and operating profits are expected to continue to be adversely impacted by the global economic downturn. More than ever, we are focused on reducing costs and managing the business under significantly greater economic uncertainty.
The Group’s lenders are very supportive of management’s re-engineering plan and are working closely with us towards a long term solution.
The timing of any recovery is virtually impossible to predict. We do, however, see signs of a bottom forming in terms of our sales volume in Q12009 and an upward trend emerging.
Over all, we have taken decisive and aggressive actions to reduce cost, improve productivity and sustain liquidity. We believe that the Group is currently well positioned to further improve its performance as market conditions improve.
Analyzing the reported financial statements of the period, Mr Victor Papaconstantinou, Group CFO, noted:
Following the trend already noticed, since September, and mentioned in the announcement as of 27.11.2008, sales of the fourth quarter were significantly affected by the economic crisis and the slow down in demand. All products categories were affected. Sales of fourth quarter amounted to 66.9 m€, decreased by 27,6% compared to the respective period of 2007. On an annual basis, the impact of the crisis was more material on steel products (sales drop by 10,2% compared to 2007), while machines and tools had the lowest impact among the Group products (decrease 3,4% compared to 2007).
The decrease of the production volume in the last quarter, as well as the accounting entries for inventory devaluation, had negative impact on the gross profit margin. Overall in 2008 it was 17,5%, vs 19,8% in 2007.
According to our announcement at 27 November 2008, the Group made provision for inventory devaluation in Q4 of 2008 that amounted to aprox. 3.6 m€. The provision includes inventory devaluation of the Greek companies due to decreased activity in the global market of industrial products during the last quarter of 2008. During that period, the net realizable value of the produced inventories was affected by both the slow down trend in sale prices as well as the increase in the conversion cost per unit due to reduced production volume.
During the last quarter Group’s profitability was negatively impacted by significant fluctuations in exchange rates. The total exchange loss in 2008 amounted to aprox. 8.5 m€.
The net financial expenses amounted to 21.9 m€ in 2008 vs 9.0 m€ in 2007. This increase reflects the overall increase in the loan interest rate as well as the expenses related to the debt restructuring process, which is in progress.
During Q4 the working capital was significantly decreased by 26.0 m€. Comparing to 31.12.2007 and on a comparable basis (excluding the reverse forfeiting liabilities which were reclassed as borrowing during the year), the working capital decreased by 24.0 m€. This reduction is a result of reduced sales volume, decreased raw material and sales prices as well as the intense effort to effectively manage all working capital components.
As a percentage on sales, on a comparable basis, the working capital ratio was 29,3% at the end of 2008 vs 33,7% at the end of 2007.
Total capital expenditure in 2008 amounted to 8.6 m€ vs 15.9 m€ in 2007.
Operational Recovery Program
The Recovery plan is in progress and is anticipated to be completed by 30 June 2009, consistent with the initial timetable. The targets of this program had been presented and announced to the investors on 12 May 2008 and included:
- Profitability recovery at levels higher than the average of the industrial sector.
- The strengthening of management team globally.
Within the fourth quarter of 2008 and the first quarter of 2009 the following actions have taken place:
a. Temporary lay offs in the production units of Greece, Columbia (Italy) and Canada.
b. Restructuring of back office and warehouse in Central Europe.
c. Reduction of headcount in UK.
d. Discontinue production of automated machines in Germany and transfer of activity in Italy and Canada.
e. Suspension of Spain production. The Spanish affiliate will continue to operate as a commercial unit, while the Group’s management will be monitoring the development of the Spanish market in order to take proper action if there is a change in the market and financial circumstances.
f. Re-design of the Austria operations. The sales of Austria will be operated by the German affiliate while the local management will be significantly reduced, and the affiliate will act as an agent of the German one.
The annualized saving of the above actions has been calculated at 5.8 m€. The greatest part of the benefits will be visible, gradually, within 2009.
The total cost of these actions is estimated at approximately 3.3 m€, out of which 1.6 m€ concerns mostly severance payments and directly affect the Group’s cash flow, while the remaining of 1.7 m€ refer to accounting write offs and adjustments. Out of the total cost approximately 2.9 m€ has been posted in 2008 and the rest of 0.4 m€ will be posted in 2009.
From the activities initially considered, the implementation of the last one is pending and will be completed by the end of June 2009. An announcement will be released when the final action plan is finalized.
After the completion of the above mentioned plans and actions and by the end of June 2009, the total headcount in the Group is estimated to be reduced by approximately 300 or 14% compared to the beginning of 2008.
Completion of Tax audit in the Parent Company
The tax authorities examination of M.J.Maillis S.A for the financial years 2005, 2006 and 2007 was completed. The additional taxes imposed amounted to 1,355 k€ while the amount that had already provided was 1,200 k€. The difference of 155 k€ was posted against the results of 2008. The additional taxes were netted off with the prepayment of 2007 of 861 k€. The remaining amount of 494 k€ is a net liability towards the Greek State and will be paid in 11 equal monthly installments beginning on 30/4/2010.