Arla Plast AB Year-end report 2021

Lower margins in the Quarter – Full year in line with financial objectives

OCTOBER – DECEmber 2021

• Sales volume declined by 2% to 5,503 tonnes (5,588).
• Net sales increased by 13% to SEK 240.3 (211.9) million. The organic increase was 12%.
• Operating profit declined by 63% to SEK 10.2 (27.4) million and adjusted operating profit by 69% to SEK 10.2 (33.2) million.
• The operating margin declined to 4.2% (12.9%) and adjusted operating margin declined to 4.2% (15.7%). 
• Profit for the period declined by 58% to SEK 8.4 (19.9) million.
• Earnings per share before dilution amounted to SEK 0.42 (1.00), and after dilution, to SEK 0.40 (0.95).
• Costs of 3.1 MSEK is charged to operating profit and relates to termination costs for the former CEO.
• Cash flow from operating activities decreased to SEK 27.1 million (55.3).
• Christian Krichau has been appointed CEO.

january – DECember 2021

• Sales volume declined by 6% to 22,646 tonnes (23,992 tonnes).
• Net sales increased by 5% to SEK 927.5 (884.7) million. The organic increase was 5%.
• Operating profit declined by 19% to SEK 86.2 (105.9) million, while the adjusted operating profit decreased by 19% to SEK 92.3 (113.5) million.
• The operating margin decreased to 9.3% (12.0%) and the adjusted operating margin decreased to 10.0 % (12.8%). 
• Profit for the period declined by 15% to SEK 68.1 (80.2) million.
• Earnings per share, before dilution, amounted to SEK 3.41 (4.01) and after dilution to SEK 3.25 (3.93).
• Net debt amounted to SEK 44.5 (37.0) million at the end of the period, corresponding to 0.4 times (0.3 times) EBITDA.
• Cash flow from operating activities decreased to SEK 47.7 million (148.8).
• The Board proposes a dividend of SEK 1,50 per share, equivalent to 44 percent of net profit.

Lower margins in the Quarter – Full year in line with financial objectives

Market conditions

For Arla Plast, the pandemic meant new demand in the form of transparent barrier products, which kept our production facilities busy during 2020 and in the beginning of 2021 and we delivered large volumes of these products. As the world and the market gradually have returned to more normal behaviors, demand for this type of products has waned while other application areas have returned or increased in importance.
 

Throughout 2021, we have had a turbulent raw material situation with sharply rising prices that almost doubled during the year. We had expected, in line with previous patterns, that raw material supply would increase by mid-year and prices would thus fall, but they have instead continued to increase, albeit at a slower pace.

Higher net sales with lower margins during the fourth quarter

The fourth quarter is generally the weakest quarter of the year, due to the industry's low activities during Christmas and New Year break, so also this year. In addition, the fourth quarter in 2020 was unusually strong and therefore a tough quarter to compare with. The reason behind this was the high demand for barrier products during the pandemic, which had a strong impact both on net sales as well as on margins. In the fourth quarter of 2021, volumes therefore decreased slightly compared to 2020, while net sales increased organically by 12 percent, as a result of higher prices. Raw material prices have continued to rise, and we have not been able to raise prices fully towards customers, which has had a negative impact on both gross and operating margins during the quarter. In addition, the quarter has been charged with costs for the former CEO of SEK 3.1 million.

Full year in line with financial objectives

In 2020, prior to the IPO, the Board adopted financial objectives: "annual organic net sales growth, over a business cycle, should be 5 percent". This objective was achieved for 2021 when the organic increase in net sales was 5 percent, despite the tough comparison year and slightly reduced volumes. Thus, net sales were positively affected by price increases. The operating margin in 2021 amounted to 9.3 percent and adjusted operating margin to 10 percent, in line with the financial objective of at least 10 percent over a business cycle.  

It is satisfying that we have had good growth in all product areas except, of course, barrier products and that from the second quarter onwards we have seen a persistent demand for "multiwall", which are used for products in home and gardening.

Internal review

In my new position as CEO, in addition to running the day-to-day business, I have made an overview of the organization in order to identify improvement potentials. I see this in the marketing and sales organization. Here we can state that some of the changes implemented in 2020 within the sales organization have not had full effect, which is why we will implement several changes in order to make better use of the organization and the full potential of our employees.

Outlook

The current year 2022 has started as 2021 ended. Raw material prices remain high and we have not seen any clear signs that they will fall, at the same time as competition for market volumes has intensified in certain areas. However, the world is slowly but surely opening up, something we, like everyone else, welcome, and it should mean that demand is coming back from many of the application areas where we have seen modest demand over the past two years. In 2021, we carried out several investments and improvement activities that have significantly increased our production capacity, which paves the way for an even better service to our customers. Together with our talented employees and our increased capacity, we will be able to best meet our customers' demands and expectations, thereby enabling growth. Our internal organization is ready, so the focus will be to provide the best conditions for our sales organization, so that together we can meet our customers with our four cornerstones based on flexibility, speed, quality and service.

Christian Krichau

President and CEO

For further information, please contact:

Christian Krichau, CEO, +46 141 20 38 01
Monica Ljung, CFO, +46 141 20 38 02
Boel Sundvall, IR, +46 705 606018

Forward-looking information
Certain statements in this report are forward-looking and the actual outcome may be significantly different. In addition to the specific mentioned factors, other factors may have material impact on the actual outcome. Such factors include, but are not limited to, the general economic climate, exchange-rate fluctuations and changes in interest rates, political developments, the impact of competing products and the prices of such products, interruptions to the access to raw materials. 

This information is such information that Arla Plast AB is obliged to publish in accordance with the EU Market Abuse Regulation.The information was published by the above mentioned contact persons on 18 February 2022 at 8:00 am CET.

about Arla Plast

Arla Plast is a producer and supplier of extruded sheets made of technical plastics. The plastic sheets are made of polycarbonate (PC), acrylonitrile butadiene styrene (ABS) and glycol-modified polyethylene terephthalate (PETG) and have a large number of areas of application, such as safety products, machine guards, ice hockey rinks, greenhouses, pool covers, sound walls, protective barriers (for COVID-19), suitcases, vehicle components and various construction-related areas of application. The company is headquartered in Borensberg, Sweden, and has production facilities in Borensberg and two in the Czech Republic. Arla Plast has around 260 employees and a turnover of more than SEK 900 million.

More information about Arla Plast is available at www.arlaplastgroup.com.