25.02.2020 – SIG Combibloc Group AG

SIG Combibloc Group AG: Strong revenue growth and cash generation

SIG Combibloc Group AG / Key word(s): Annual Results
SIG Combibloc Group AG: Strong revenue growth and cash generation

25.02.2020 / 07:00



25 February 2020
SIG Combibloc Group ("SIG")

Strong revenue growth and cash generation

2019 highlights

- Core revenue up 5.2% at constant currency; up 7.5% as reported

- Adjusted EBITDA margin 27.2% (2018: 27.5%)

- Significant increase in adjusted net income to €217 million (€149 million)

- Free cash flow €267 million; proposed dividend increased to CHF 0.38 per

- Net leverage reduced from 3.2x to 2.8x

Key performance indicators:1 2019

                                             Year     Year   Change
                                            ended    ended
                                           31 Dec.  31 Dec.
                                             2019     2018
  (In € million or %)                      Reported Constant
                                           currency currency
  Core revenue                              1,766.9   1,644.3    7.5%  5.2%
  Adjusted EBITDA                             485.4     461.5    5.2%
  Adjusted EBITDA margin                      27.2%     27.5%
  Adjusted EBITDA less net capex margin       21.0%     19.0%
  Adjusted net income                         217.4     148.9
  Adjusted earnings per share (€)              0.68      0.62
  Free cash flow                              266.8      68.2
  Cash conversion                               77%       69%
Reported measures: 2019

                                                         Year     Year   C-
                                                        ended    ended   h-
                                                       31 Dec.  31 Dec.  a-
                                                         2019     2018   n-
  (In € million or %)                                  Reporte- Constan-
                                                          d        t
                                                       currenc- currenc-
                                                          y        y
  Total revenue                                         1,783.9   1,676.1  6-  4-
                                                                           .-  .-
                                                                           4-  2-
                                                                            %   %
  EBITDA                                                  479.7     395.1  2-
  Net income                                              106.9    (83.9)
  1 For additional information about alternative
  performance measures used by management that are
  not defined in IFRS, including definitions and
  reconciliations to measures defined in IFRS,
  refer to the link below:
  ey-figures  1.
Key performance indicators:1 Q4 2019

                               Three    Three   Change
                               months   months
                               ended    ended
                              31 Dec.  31 Dec.
                                2019     2018
    (In € million or %)       Reported Constant
                              currency currency
    Core revenue                 531.3     497.9    6.7%  4.3%
    Adjusted EBITDA              156.1     150.9    3.4%
    Adjusted EBITDA margin       29.2%     30.0%
    Adjusted net income           83.1      74.1
Reported measures: Q4 2019

                                                                   Three  T- C-
                                                                   month- h- h-
                                                                     s    r- a-
                                                                   ended  e- n-
                                                                     31   e  g-
                                                                    Dec.  m- e
                                                                    2019  o-
  (In € million or %)                                              Repor- C-
                                                                    ted   o-
                                                                   curre- n-
                                                                    ncy   s-
  Total revenue                                                     535.2  5-  6-  4-
                                                                           0-  .-  .-
                                                                           3-  3-  0-
                                                                           .-   %   %
  EBITDA                                                            158.1  1-  5-
                                                                           0-  7-
                                                                           0-  .-
                                                                           .-  5-
                                                                            3   %
  Net income                                                         55.2  (-
  1 For additional information about alternative performance
  measures used by management that are not defined in IFRS,
  including definitions and reconciliations to measures
  defined in IFRS, refer to the link below:

Rolf Stangl, CEO of SIG, said: "Our top line performance in 2019
demonstrates the success of our growth strategy, which for many years has
focused on building up markets outside Europe. At the same time, we are
proving our ability to grow in the EMEA region through share gain in Europe
and our presence in the Middle East and Africa, which in 2019 saw an
improved economic environment in a number of countries.

We are maintaining best in class profitability while continuing to invest in
innovation and to expand into new markets and categories. Our strong cash
flow generation is enabling us to invest in the business while paying an
attractive dividend and reducing net leverage. In 2019, we announced the
construction of a new plant in China which will underpin growth across the
Asia Pacific region. The acquisition of Visy Cartons has given us a
promising footprint in Australia and New Zealand, which further increases
the potential of this region for us.

Our business is sustained by key fundamentals including growing end markets
driven by demographics, urbanisation and rising disposable incomes;
proprietary technology and engineering know-how supporting longstanding
customer relationships; and the unmatched environmental profile of our
packs, which are made largely of renewable materials and are fully
recyclable. In 2020, we shall continue to seize the many opportunities that
our industry offers and to pursue our objective of above market growth."

Revenue by region: 2019

                                    Year ended 31 Year ended 31 Cha-
                                      Dec. 2019     Dec. 2018   nge
  (In € million or %)                 Reported      Constant
                                      currency      currency
  EMEA                                      755.1          733.3  3.0-  2.-
                                                                     %   8%
  APAC                                      666.8          598.4  11.-  6.-
                                                                    4%   0%
  Americas                                  329.5          297.3  10.-  9.-
                                                                    8%   7%
  Group Functions                            15.5           15.3
  Core revenue from transactions          1,766.9        1,644.3  7.5-  5.-
  with external customers                                            %   2%
  Revenue from sales of folding              17.0           31.8
  box board
  Total revenue                           1,783.9        1,676.1  6.4-  4.-
                                                                     %   2%
Core revenue of €1.77bn includes the consolidation of Visy Cartons for one
month. Excluding Visy, core revenue growth was 5.0% at constant currency.
The robust organic growth performance was accompanied by a significant
benefit from exchange rate movements, with all major currencies except for
the Brazilian Real appreciating against the Euro over the year. Growth was
driven mainly by Asia Pacific and the Americas, driven by favourable market
fundamentals and the expansion of the filler base in recent years. In the
EMEA region, sales to the Middle East increased while in Europe sales
accelerated in the fourth quarter.

Revenue by region: Q4 2019

                                  Three months  Three months  Cha-
                                  ended 31 Dec. ended 31 Dec. nge
                                      2019          2018
    (In € million or %)             Reported      Constant
                                    currency      currency
    EMEA                                  207.3          195.1  6.3-  6.-
                                                                   %   2%
    APAC                                  211.3          194.4  8.7-  2.-
                                                                   %   4%
    Americas                              107.9          102.0  5.7-  6.-
                                                                   %   5%
    Group Functions                         4.8            6.4
    Core revenue from                     531.3          497.9  6.7-  4.-
    transactions with external                                     %   3%
    Revenue from sales of                   3.9            5.4
    folding box board
    Total revenue                         535.2          503.3  6.3-  4.-
                                                                   %   0%
EBITDA and adjusted EBITDA

               Year ended 31           Year ended 31
               December 2019           December 2018
    (In €        Adjusted    Adjuste-   Adjusted    Adjuste- Reported
    million    EBITDA margin    d     EBITDA margin    d     currency
    or %)                     EBITDA                 EBITDA   change
    EMEA               32.1%     242.2          33.5%     245.4    (1.3%)
    APAC               33.5%     228.9          30.3%     191.1     19.8%
    Americas           25.5%      84.1          27.2%      81.0      3.8%
    Group                       (69.8)                   (56.0)
    Total              27.2%     485.4          27.5%     461.5      5.2%
Adjusted EBITDA increased by 5.2% to €485 million despite a small negative
impact from the Middle East joint venture dividend, which was €3m lower than
in 2018. The adjusted EBITDA margin was 27.2% (2018: 27.5%). Revenue growth
and currencies made a positive contribution to adjusted EBITDA, offsetting
higher SG&A costs, which include investments in growth markets and
additional costs as a result of being a listed company.

EBITDA increased by 21.4% to €480 million. The increase compared with
adjusted EBITDA was largely due to an unrealised gain on derivatives,
compared with a loss in 2018, and to lower transaction-related costs.

Net income and adjusted net income

Adjusted net income increased to €217 million compared with €149 million in
2018. The improvement is a consequence of higher profit from operating
activities and a lower net finance expense following the reduction and
re-financing of debt in connection with the IPO. In addition, the adjusted
effective tax rate was lower at 25.9% (2018: 32.9%).

Net income moved from a loss of €84 million in 2018 to a profit of €107
million in 2019.

Capital expenditure

Gross capital expenditure was €182 million in 2019 (2018: €214 million).
Gross filler capex was lower after a period of significant filler investment
in Asia Pacific following the launch of combismile. Net capital expenditure
(net capex), after deduction of upfront cash for fillers received from
customers, was €110 million compared with €143 million in 2018. The ratio of
net capex to revenue was 6.2%, below the target range of 8-10%.

Capacity expansion

In July 2019, SIG announced an expansion of its production network in the
Asia Pacific region with the construction of a second sleeves plant located
at the Suzhou Industrial Park in China. The plant will benefit from
operational and overhead synergies with SIG's existing facility in Suzhou
and is expected to achieve world class environmental and safety performance
and productivity. A total investment of €180 million will be partly
lease-financed with a Chinese partner. Guidance for net capex of 8-10% of
revenue in 2020 and over the mid-term is unchanged. The plant is expected to
come onstream early in 2021.

Free cash flow

     (In € million)                                  Year     Year
                                                     ended    ended
                                                    31 Dec.  31 Dec.
                                                     2019     2018
     Net cash from operating activities               438.1      260.2
     Dividends received from joint ventures            20.7       23.7
     Acquisition of PP&E and intangible assets      (182.2)    (213.9)
     Payment of lease liabilities                     (9.8)      (1.8)
     Free cash flow                                   266.8       68.2
Free cash flow increased from €68 million in 2018 to €267 million in 2019,
reflecting higher profits from operating activities, lower financing costs
and lower net capital expenditure, partially offset by higher working

Acquisition of Visy Cartons

On 29 November 2019, SIG acquired Visy Cartons Pty Ltd. ("Visy Cartons")
from VisyPak Operations Pty Ltd., a subsidiary of Pratt Consolidated
Holdings Pty Ltd., for AU$70 million (around €43 million). Visy Cartons will
become part of SIG's business in the Asia Pacific region. The acquisition is
expected to generate significant synergies in the coming years, arising from
supply chain optimisation and access to SIG's latest technologies and

Visy Cartons is one of the leading players in the Australian beverage carton
market and there is significant scope to expand the business in New Zealand.
Growth in these markets is being driven by dairies that are investing to
export to China and other Asian countries, where demand for premium milk is
growing rapidly.

Net debt and leverage

     (In € million)                          As of    As of
                                 31 Dec.  31 Dec.
                                  2019     2018
     Gross total debt                         1,614.4    1,618.7
     Cash and cash equivalents1                 261.0      157.1
     Net total debt                           1,353.4    1,461.6
     Total net leverage ratio2                   2.8x       3.2x

1 Includes restricted cash
2 Net total debt divided by adjusted EBITDA

Strong cash flow generation in 2019 contributed to a reduction in net
leverage from 3.2x at the end of 2018 to 2.8x, after financing of the Visy
Cartons acquisition.

In October 2019, Moody's upgraded their corporate family rating of SIG
Combibloc Group AG to Ba2 from Ba3. In December, S&P raised their outlook to
Positive with an unchanged issuer rating of BB+.

The Company will assess opportunities to further improve its financing
structure depending on market conditions.


At the Annual General Meeting to be held on Tuesday 7 April 2020, the Board
of Directors will propose a dividend distribution out of the capital
contribution reserve of CHF 0.38 per share for the year 2019 (2018: CHF 0.35
per share).

2020 outlook

For 2020, the Company expects core revenue growth at constant currency
towards the lower end of a 6-8% range, including the full year consolidation
of Visy Cartons. The adjusted EBITDA margin is expected to be towards the
lower end of a 27-28% range, taking into account continued investments in
geographic expansion and innovation and a lower level of profitability at
Visy Cartons prior to the realisation of synergies.

As construction of the new plant in China proceeds, net capital expenditure
is forecast to be at the upper end of the targeted 8-10% of revenue range in
2020. Free cash flow may therefore be somewhat lower than in 2019.

The Company maintains its medium-term guidance of core revenue growth of
4-6% at constant currency and an adjusted EBITDA margin of around 29%. Net
capital expenditure should remain within 8-10% of revenue. The Company plans
to maintain a dividend payout ratio of 50-60% of adjusted net income while
reducing net leverage towards 2x.

2019 Annual Report

SIG today published its 2019 Annual Report, which includes the Group's
operating and financial results accompanied by SIG's audited consolidated
and statutory annual financial statements, the Compensation Report outlining
the compensation policies of the Group and the Corporate Governance Report.
All publications are available for download from 07:00 CET today at
https://www.sig.biz/investors/en/performance/annual-reports. Hard copies can
be ordered free of charge from SIG Combibloc Group AG, Laufengasse 18, 8212
Neuhausen am Rheinfall, Switzerland.

An update to the Corporate Responsibility Report will be published on 31
March 2020.

Investor contact:

Jennifer Gough +41 52 674 6508
Director Investor Relations
SIG Combibloc Group AG
Neuhausen am Rheinfall, Switzerland

Media contact:

Lemongrass Communications
Andreas Hildenbrand +41 44 202 5238

About SIG
SIG is a leading systems and solutions provider for aseptic carton
packaging. We work in partnership with our customers to bring food and
beverage products to consumers around the world in a safe, sustainable and
affordable way. Our unique technology and outstanding innovation capacity
enable us to provide our customers with end-to-end solutions for
differentiated products, smarter factories and connected packs, all to
address the ever-changing needs of consumers.

Founded 1853, SIG is headquartered in Neuhausen, Switzerland. The skills and
experience of our approximately 5,500 employees worldwide enable us to
respond quickly and effectively to the needs of our customers in over 60
countries. In 2019, SIG produced more than 38 billion carton packs and
generated €1.8 billion in revenue. For more information, visit www.sig.biz.

Disclaimer & cautionary statement

The information contained in this media release and in any link to our
website indicated herein is not for use within any country or jurisdiction
or by any persons where such use would constitute a violation of law. If
this applies to you, you are not authorised to access or use any such

This media release may contain "forward-looking statements" that are based
on our current expectations, assumptions, estimates and projections about us
and our industry. Forward-looking statements include, without limitation,
any statement that may predict, forecast, indicate or imply future results,
performance or achievements, and may contain the words "may", "will",
"should", "continue", "believe", "anticipate", "expect", "estimate",
"intend", "project", "plan", "will likely continue", "will likely result",
or words or phrases with similar meaning. Undue reliance should not be
placed on such statements because, by their nature, forward-looking
statements involve risks and uncertainties, including, without limitation,
economic, competitive, governmental and technological factors outside of the
control of SIG Combibloc Group AG ("SIG", the "Company" or the "Group"),
that may cause SIG's business, strategy or actual results to differ
materially from the forward-looking statements (or from past results). For
any factors that could cause actual results to differ materially from the
forward-looking statements contained in this media release, please see our
offering memorandum for the IPO. SIG undertakes no obligation to publicly
update or revise any of these forward-looking statements, whether to reflect
new information, future events or circumstances or otherwise. It should
further be noted that past performance is not a guide to future performance.
Please also note that interim results are not necessarily indicative of the
full-year results. Persons requiring advice should consult an independent

Some financial information in this media release has been rounded and, as a
result, the figures shown as totals in this presentation may vary slightly
from the exact arithmetic aggregation of the figures that precede them.

The attached information is not an offer to sell or a solicitation of an
offer to purchase any security in the United States or elsewhere and shall
not constitute an offer, solicitation or sale in any state or jurisdiction
in which, or to any person to whom such an offer, solicitation or sale would
be unlawful. No securities may be offered or sold within the United States
or to U.S. persons absent registration or an applicable exemption from
registration requirements. Any public offering of securities to be made in
the United States will be made by means of a prospectus that may be obtained
from any issuer of such securities and that will contain detailed
information about us.

In this media release, we utilise certain alternative performance measures,
including but not limited to core revenue, EBITDA, adjusted EBITDA, adjusted
EBITDA margin, adjusted EBITDA margin less net capex margin, net capex,
adjusted net income, free cash flow, cash conversion and net leverage ratio
that in each case are not defined in International Financial Reporting
Standards ("IFRS"). These measures are presented as we believe that they and
similar measures are widely used in the markets in which we operate as a
means of evaluating a company's operating performance and financing
structure. Our definition of and method of calculating the alternative
performance measures stated above may not be comparable to other similarly
titled measures of other companies and are not measurements under IFRS or
other generally accepted accounting principles, are not measures of
financial condition, liquidity or profitability and should not be considered
as an alternative to profit from operations for the period or operating cash
flows determined in accordance with IFRS, nor should they be considered as
substitutes for the information contained in our consolidated financial
statements. You are cautioned not to place undue reliance on any alternative
performance measures and ratios not defined in IFRS included in this media
release. Refer to the consolidated financial statements in the 2019 Annual
Report for SIG's definitions of alternative performance measures not defined
in IFRS and reconciliations to measures defined in IFRS. For alternative
performance measures that are not included in the 2019 Annual Report but
only in this media release, definitions of such measures are included in
this media release where the measures are presented.

The following table reconciles profit or loss to EBITDA and adjusted EBITDA.

   (In € million)                                             Year       Year
                                                            ended 31   ended 31
                                                            Dec. 2019  Dec. 2018
   Profit / (loss) for the period                             106.9       (83.9)
   Net finance expense                                           44.6        206.4
   Income tax expense                                            41.1          0.9
   Depreciation and amortisation                                287.1        271.7
   EBITDA                                                       479.7        395.1
   Adjustments to EBITDA:
   Replacement of share of profit or loss of                        5.3         14.8
   joint ventures with cash dividends received
   from joint ventures
   Restructuring costs, net of reversals                          1.8          4.3
   Unrealised (gain) / loss on derivatives                     (10.1)         23.1
   Transactionand acquisition-related costs                       4.3         19.7
   Other                                                          4.4          4.5
   Adjusted EBITDA                                              485.4        461.5
The table below is a summary of the reconciliation of profit or loss for the
period to adjusted net income.

   (In € million)                                             Year      Year
                                                            ended 31  ended 31
                                                              Dec.      Dec.
                                                              2019      2018
   Profit / (loss) for the period                            106.9      (83.9)
   Non-cash foreign exchange impact of                           (1.2)      (58.8)
   non-functional currency loans and realised
   foreign exchange impact due to refinancing
   Amortisation of transaction costs                             2.8        11.0
   Net change in fair value of derivatives                       1.5         7.4
   Net effect of early redemption of notes                         -        82.5
   Net effect of early repayment of term loans                     -        56.3
   PPA depreciation and amortisation                           136.5       140.1
   Adjustments to EBITDA                                         5.7        66.4
   Tax effect on above items                                  (34.8)      (72.1)
   Adjusted net income                                       217.4       148.9