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SKW Metallurgie announces Extraordinary General Meeting as well as additional program to increase earnings

January 29, 2016

  • Provisions for a legal case from the past result in loss of half the registered capital in single-entity accounts (German GAAP) of SKW Stahl-Metallurgie Holding AG
  • Preliminarily operative Group performance 2015 expected to be better than most recently guided
  • Program to increase earning power by additional almost EUR 20 million
  • Management optimistic for discussions with lending banks
Unterneukirchen (Germany), January 29, 2016. Specialty chemical group SKW Metallurgie expects for 2015 in the corporate parent entity a loss in the amount of half the registered capital, and announces an Extraordinary General Meeting. The main reason for the expected loss is a risk-appropriate adjustment of provisions for a legal case re antitrust fines concerning the years 2004 to 2007. Operatively, however, the Management assumes, according to preliminary estimates, that key figures of the Group 2015 (IFRS) will come out slightly above the most recently published guidance. With respect to the massive crisis on the steel market, SKW Metallurgie is accelerating the implementation of its strategic restructuring. Accordingly, additional potential to increase earnings was identified in the amount of almost EUR 20 million (EBITDA), which will be realized within the next three years. This program called ReMaKe 2.0 is a key element of the current discussions with the lenders re loan conditions of the syndicated loan and thus also re the future financing structure. The Company is optimistic to reach a solution that is satisfactory for all involved.

“The massive crisis in the steel and steel consumables markets around the globe has increased in recent months and has offset some of our success so far“, Dr. Kay Michel, CEO of SKW Stahl-Metallurgie Holding AG and long-standing expert for corporate restructuring, explains. “In the current year, the market environment is expected to deteriorate further, before we should see a modest improvement in 2017. Hence, we have enhanced our strategy diligently since autumn of last year, in order to secure a sustainable future for SKW Metallurgie in the interest of all involved. ReMaKe 2.0 will contribute significantly contribution towards this. “

Detailed Guidance for 2016 in March – Long-term Guidance in development

The consolidated accounts (IFRS) for 2015 are currently being prepared. Publication is scheduled, as announced, for March 18. In this context, the Company is going to present, as in previous years, a detailed guidance for business year 2016. Moreover, Management is developing a long term-term guidance on the basis of ReMaKe 2.0, whose presentation is also scheduled in due course.

According to preliminary management judgement, the key figures for the Group should come out above the most recently published guidance, despite the already announced revenue decrease due to the crisis. The measures implemented in the context of ReMaKe 1.0 have yielded a significant contribution to earnings and have compensated the negative effects of the steel crisis at least in part.

According to current judgment, a loss of more than half the registered capital in the meaning of § 92 (1) AktG (German Act on Joint-stock Companies) is to be expected in the single-entity accounts (German GAAP) of the corporate parent for 2015; the main reason is the necessity to risk-appropriately adjust provisions for a legal case about antitrust fines concerning the years 2004 to 2007 at an affiliate company. Equity of the corporate parent is also expected to be influenced by two additional factors: Due to the slump in the steel economy, in particular in the US, and despite massive counter measures, a need for extraordinary impairment of certain intercompany loans and intercompany asset values is in sight. An equity-increasing effect, however, is expected from extraordinary value adjustments due to a Group-internal transaction in the context of the implementation of the growth strategy in India.

According to legal requirements, the Company will call, without undue delay, an Extraordinary General Meeting at which to detail the matter to the shareholders.

ReMaKe 2.0 is a key element in the ongoing bank discussions

The operative implementation of ReMaKe 2.0 has already commenced. The comprehensive program entails concrete measures and detailed controlling tools. Mainly by cost optimization, but also to a lesser degree by increase of sales volumes, it is targeting additional sustainable contributions to earnings of almost EUR 20 million within the next three years. SKW Metallurgie assumes an opposite negative external effect in the amount of roughly half the quoted volume. The reason is the ongoing erosion of margins due to extreme price pressure in key markets. ReMaKe 2.0 has been developed by the management team of the SKW Metallurgie Group since the fall of last year and has been detailed since year-end with the support of a renowned restructuring consultancy.

ReMaKe 2.0 is a key element in the current discussions with the lending banks, in which decisions will be taken re amended conditions for the syndicated loan and thus also re a potential restructuring of corporate financing. The Company is optimistic to reach a solution that is satisfactory for all involved. In addition to the discussions with the lenders, the Executive Board and the Supervisory Board are examining how the capital endowment of the SKW Metallurgie Group as well as the corporate parent SKW Stahl-Metallurgie Holding AG can be strengthened further.

Contact
SKW Stahl-Metallurgie Holding AG
Christian Schunck
Head of IR and Corporate Communications
Rathausplatz 11
84579 Unterneukirchen
Germany

Phone IR/Press: +49 8634 62720-15
Fax: +49 8634 62720-16
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About SKW Stahl-Metallurgie Holding AG and the SKW Metallurgie Group

The SKW Metallurgie Group is a global market leader for chemical additives for hot metal desulphurization and for cored wire and other products for secondary metallurgy. The Group’s products enable steel-makers to efficiently manufacture high-quality steel products. Clients include the world’s leading companies in the steel industry. The SKW Metallurgie Group has more than 50 years of metallurgical know how, and currently operates in more than 40 countries. What is more, the Group is a leading supplier of Quab specialty chemicals, which are mainly used in the global production of industrial starch for the paper industry. The company’s operating business is broken down into the two core segments “Cored Wire” and “Powder and Granules”, and the “Other” segment. The SKW Metallurgie Group is headquartered in Germany with production facilities in France, the US, Canada, Mexico, Brazil, South Korea, Russia, the Peoples’ Republic of China and India (joint venture). The Group reached total revenues of EUR 316 million in 2014 and employs around 900 staff members (as of Dec. 31, 2014).

Shares of SKW Stahl-Metallurgie Holding AG have been listed in Frankfurt Stock Exchange’s Prime Standard since December 1, 2006; since 2011 (conversion to name shares) with ISIN DE000SKWM021.

Disclaimer

This press release may include certain forward-looking statements which are based on currently available assumptions and predictions of the SKW Metallurgie Group‘s management as well as on other currently available information. Various identified as well as unidentified risks and uncertainties as well as other factors may result in a deviation of actual results, financial situation, development or achievement of the company compared to the assessments made herein. SKW Stahl-Metallurgie Holding AG does not intend and assumes no liability to update such forward-looking statements and to adjust them to future events and developments.