Heurtey Petrochem: 2017 Half-Year Results

  • Half-year results down significantly compared to 2016 on the back of a continued acute market slowdown
  • FY 2017 profit warning

VINCENNES, France--()--Regulatory News:

Heurtey Petrochem (Paris:ALHPC) announces its consolidated results for the first half of 2017.

The Board of Directors of Heurtey Petrochem met on 14 September 2017 and approved the Group's first-half 2017 financial statements, which were subject to a limited audit by the Statutory Auditors.

€m

(IFRS)

  H1 2017   H1 2016   Change
Revenues   130.0   177.4   -26%
Cost of sales   (120.6)   (157.0)   -23%
Gross margin

% of revenues

  9.1

7.0%

  20.4

11.5%

  -55%
Administrative and commercial expenses   (16.9)   (18.9)   -11%
EBITDA*   (5.4)   3.6   ns
Current operating income

% of revenues

  (7.8)   1.5

0.9%

  ns
Other operating income and expenses   0   (5.3)    
Operating income   (7.8)   (3.7)    
Financial profit   (1.9)   (2.6)    
Income before tax   (10.4)   (6.3)    
Tax   0.7   1.0    
Consolidated net income   (9.6)   (5.3)    
Net income, Group share   (9.6)   (5.3)    

*EBITDA: Current operating income before amortization, depreciation and provisions.

First-half 2017 revenues of €130 million

Heurtey Petrochem generated revenues of €130 million in the first half of 2017, down 26% compared to the first half of 2016 (-28% at constant exchange rates). The Furnaces segment accounted for 72% of revenues, of which 34% was for refining, 19% for petrochemicals, and 19% for hydrogen, with the remaining 28% generated by Gas Processing.

The regional breakdown was 25% from the Americas, 33% from Asia-Oceania, 31% from the Middle East and Africa and 11% from Europe and Russia.

Current operating income down for our two businesses


€m
  Furnaces   Gas
    H1 2017   H1 2016 H1 2017   H1 2016
Revenues   93.6   134.5 36.2   42.9
Gross margin

% of revenues

  7.0

7.5%

  17.7

13.2%

2.0

5.7%

  2.7

6.3%

Current operating income

% of revenues

  (5.2)

(5.6%)

  4.2

3.1%

(2.6)

(7.2%)

  (2.6)

(6.1)%

The Group's gross margin, which stood at €9.1 million or 7.0% of revenue, was in sharp decline compared to the first half of 2016, given the marked reduction in revenue and cost overrides on projects in the completion phase.
In light of the significant reduction in the order book for the Furnaces branch, and substantial cost overrides on certain contracts, there was more of a downturn in the gross margin than for the Gas Branch, which is holding up better due to the lesser reduction in its volume of activity.

The group's administrative and sales expenses came to €16.9 million, down €2 million over the half-year due to cost-cutting measures taken in 2016.
In these conditions, the Group's current operating income was -€7.8 million.

The Group's financial performance was negative by €1.9 million, of which €0.6 million in interest paid, €0.5 million in financial income, €1.3 million in exchange losses, and €0.5 million in fair-value accounting of financial instruments.

During the period, the Group recorded €0.7 million in tax income following the activation of tax losses for French entities and the readjustment, at the 28% tax rate, of previous deficits for these same entities.
It follows that consolidated net income stood at -€9.6 million.

Financial position

At 30 June 2017, the Group had €27.3 million in medium- and long-term financial debt and €39.7 million in active cash flow, of which €25.3 million in net cash and €76.7 million in equity capital.

During the half-year, the Group consumed €22.6 million in cash to finance its operations, including a €10 million change in working capital requirements due to losses incurred and the completion during the half-year of several projects not yet billed.

Further to the Takeover Bid by Axens, finalized on 6 February 2017, Heurtey Petrochem repaid its banking pool the syndicated credit facility composed of €9 million in medium-term debt and €25 million in revolving credit, with Axens now covering the majority of the Group's financing needs, in the form of a €38 million shareholder advance on 30 June 2017.

€85 million order book for the half-year

Heurtey Petrochem had an order book of €85 million in the first half, down €34 million compared to the first half of 2016. The following key contracts were signed during the first six months of 2017:

  • A €27 million contract for the creation of two gas dehydration units for the Karachaganak oil and gas complex in Kazakhstan;
  • A €16.5 million contract for the creation of a steam reforming furnace for hydrogen production, for the Deok Yang Company in Korea.
  • A €12.5 million contract for the creation of refinery furnaces in Saudi Arabia.

FY 2017 profit warning

The offset in sales prospects and the market shrinkage that the Group must constantly confront in both of its branches of activity are sharply reducing the load in some of the group's entities. This situation, as well as unexpected cost overrides on delivered projects, will further erode current operating income compared to what was reported to the market on 14 June 2017.
As such, the Group anticipates revenue will be in the bottom of the announced range of €250-€290 million, with current operating income at -5% to -7% of this revenue.

Group governance

Heurtey Petrochem is moving forward with its consolidation with the Axens group, an 89.4% shareholder, to establish a new organization starting on 1 October 2017.

Accordingly, the Board of Directors, in agreement with Dominique Henri, has chosen to align the company's governance with this consolidated organization.

Therefore, it has been decided that Dominique Henri will step down as Chairman and CEO of Heurtey Petrochem on 1 October, to be replaced:
- as Chairman of the Board, by Jean Sentenac, Chairman and CEO of Axens Group
- as Chief Executive Officer, by Jacques Moulin, currently Deputy CEO.

Next press release: Q3 2017 revenue on 14 November 2017 after market close.

About Heurtey Petrochem (www.heurtey.com)
Heurtey Petrochem is a global oil and gas engineering group operating across two market segments:

  • Process furnaces for refining, petrochemicals and hydrogen production. Petrochem is one of the global leaders in this segment.
  • Natural gas processing via its Prosernat subsidiary. In this sector, the Group operates in both EPC engineering and as a technology licensor.

Heurtey Petrochem operates via a large international subsidiary network, with a presence in Brazil, China, India, Korea, Malaysia, Romania, Russia and the United States. The group generated revenues of €319 million in 2016. Heurtey Petrochem is listed on the Euronext Paris Alternext market. (ISIN: FR0010343186, Ticker: ALHPC). Heurtey Petrochem is a subsidiary of Axens, which holds an 89.9% stake.

Forward-looking statements and information concerning the activities of Heurtey Petrochem are included in the press release above. They notably include information relative to the financial situation, results and activities of Heurtey Petrochem. They are based on the expectations and estimates of the management of Heurtey Petrochem.
These forward-looking statements and information are associated with a certain degree of risk and uncertainty and are likely to be affected by known or unknown factors, many of which cannot be controlled by Heurtey Petrochem and cannot be easily anticipated. They may yield results that are substantially different from those expected or suggested by these statements. These risks include: uncertainty about changes in relationships with the clientele, suppliers and strategic partners; and generally any unfavorable change in the economic situation, the intensification of competition or modification of the regulatory environment which could affect the activities of Heurtey Petrochem. This list of factors should not be considered as exhaustive.

ANNEXES

Income statement (IFRS)

(in € thousands)   H1 2017   H1 2016
   
Revenues 129 736 177 372
 
Cost of sales (120 624) (156 926)
 
Gross margin 9 112 20 446
 
Administrative and commercial expenses (16 933) (18 899)
         
Current operating income   (7 821)   1 547
 
Other operating income 963 71
Other operating income and expenses   (928)   (5 331)
Operating income   (7 786)   (3 713)
 
Share of net income from equity-accounted joint ventures   (63)   (14)

Operating income including the share of net income from equity-
accounted joint ventures

  (7 849)   (3 727)
 
Income from cash and cash equivalents 151 199
Cost of gross financial debt   (795)   (551)
Cost of net financial debt   (644)   (352)
 
Other financial income 468 1 776
 
Other financial expenses   (2 384)   (4 004)
Other financial income and expenses   (1 917)   (2 228)
         
Income before tax   (10 409)   (6 308)
 
Tax on income   775   1 016
Consolidated net income   (9 634)   (5 292)
 
Net income attributable to non-controlling interests (minority interests) 9 36
Net income, Group share   (9 643)   (5 328)

Balance sheet (IFRS) – Assets

(in € thousands)   30 June 2017   31 December 2016
Assets    
 
Non-current assets
Goodwill 66 306 68 152
Intangible assets 9 422 9 883
Tangible assets 10 328 10 812
Financial assets 2 136 1 587
Other non-current assets 818 819
Interests in equity-accounted joint ventures 380 338
Derivative financial instruments (0) 11
Deferred tax assets   11 779   11 090
    101 168   102 691
 
Current assets
Inventories 2 306 1 902
Existing construction contracts (assets) 106 890 105 193
Trade receivables and related accounts 101 379 108 294
Current taxes (assets) 5 742 5 643
Other current assets 39 380 37 284
Derivative financial instruments 138 603
Cash and cash equivalents   39 755   39 861
    295 589   298 779
         
TOTAL ASSETS   396 757   401 470

Balance sheet (IFRS) – Liabilities

(in € thousands)   30 June 2017   31 December 2016
Shareholders' equity and liabilities    
Equity capital 16 415 16 415
Issue premiums 35 538 35 538
Consolidated reserves – Group share 31 295 38 418
Profit for the period – Group share (9 643) (7 157)
Translation reserves 3 051 5 988
Shareholders' equity (Group share) 76 657 89 204
Non-controlling interests (minority interests)   387   328
Total shareholders' equity   77 044   89 532
 
Non-current liabilities
Financial debt 9 400 4 741
Provisions 182 500
Provisions for pension liabilities and similar 2 216 1 871
Derivative financial instruments 0 0
Deferred tax liabilities 5 001 5 894
Other non-current liabilities   1 771   1 866
    18 569   14 872
 
Current liabilities
Financial debt 17 891 35 270
Shareholder current account 38 000
Provisions 4 747 8 395
Existing construction contracts (liabilities) 31 273 38 373
Trade payables and related accounts 187 127 190 323
Current tax liabilities 2 551 3 086
Derivative financial instruments 264 432
Other current liabilities   19 292   21 186
    301 145   297 066
         
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   396 757   401 470

Cash flow statement (IFRS)

(in € thousands)   H1 2017   H1 2016
         
Consolidated net income   (9 634)   (5 292)
   
Elimination of income from equity-accounted joint ventures 63 14
Elimination of amortization, depreciation and provisions (2 454) 2 065
Elimination of revaluation gains/losses (fair value) 475 (456)
Elimination of the discounting effect 12 12
Elimination of other items without cash impact
Elimination of income from transfers and dilution losses and profits (2)
Income and expenses in connection with share-based payments        
Self-financing capacity after the cost of net financial debt and tax (11 540) (3 657)
Elimination of tax expenses (income) (775) (1 016)
Elimination of the cost of net financial debt   644   352
Self-financing capacity before the cost of net financial debt and tax (11 672) (4 320)
Impact of changes in WCR (10 105) (12 857)
Taxes paid   (886)   (1 651)
Cash flow from operating activities   (22 663)   (18 829)
 
Impact of changes in scope (184)
Acquisition of tangible and intangible fixed assets (772) (1 235)
Changes in loans and advances granted 50 161
Disposal of tangible and intangible fixed assets 2 265
Other flows from investment   14    
Cash flow from investing activities   (889)   (809)
 
Capital increase - other
Loan issues 8 100 8 589
Loan repayments (9 087) (8 636)
Transactions between shareholders
Net financial interest paid (242) (313)
Dividends paid to Group shareholders
Current account advances made to Axens 38 000
Other flows from financing operations       (26)
Cash flow from financing activities   36 771   (386)
Impact of changes in foreign exchange rates   (1 231)   (31)
Change in cash position   11 988   (20 054)
 
Opening cash position 13 327 33 973
Closing cash position   25 315   13 919
Change in cash position   11 988   (20 054)

Contacts

Heurtey Petrochem
Dominique Henri, Chairman and CEO
Gregory Matouskoff – Group CFO
+33 (0) 1 41 93 80 00
invest@heurtey.com

Contacts

Heurtey Petrochem
Dominique Henri, Chairman and CEO
Gregory Matouskoff – Group CFO
+33 (0) 1 41 93 80 00
invest@heurtey.com