EQS-News: SIG Combibloc Group AG: SIG reports strong growth and cash generation in 2018

MEDIA RELEASE

26.02.2019
SIG Combibloc Group ("SIG")

SIG reports strong growth and cash generation

Full year 2018 highlights

• Core revenue up 6.4% at constant currencies to EUR1.64bn
• Adjusted EBITDA margin increased to 27.5%
• Significant increase in adjusted net income to EUR149m (2017: EUR106m)
• Strong cash flow generation: adjusted free cash flow EUR257m (2017: EUR202m)
• Proposed dividend of CHF 0.35 per share to be paid from capital contribution reserves

Full year performance

Fourth quarter performance

¹ At constant currencies
² Core revenue represents revenue to external customers and excludes (i) sales of laminated board ("LB") to the Middle East joint venture and (ii) sales of folding box board ("FBB") to third parties
³ Includes translation and transaction effects

Rolf Stangl, CEO of SIG, said: "In 2018 we successfully continued our growth strategy and achieved core revenue growth of 6.4% at constant currencies, slightly exceeding our target range of 4-6%. We saw growth across our global footprint and are reaping the rewards of our steady expansion into markets outside Europe, where growth in aseptic carton packaging is being driven by mega-trends including demographics, rising disposable income and urbanisation. The Asia Pacific region in particular delivered a strong performance during the year, with robust growth in the liquid dairy segment and growing demand for premium products.

"Our broad international presence continues to provide us with promising growth opportunities. These opportunities come with exposure to currency fluctuations, which in 2018 dampened growth in adjusted EBITDA. At constant currencies, adjusted EBITDA increased by 8%. The adjusted EBITDA margin increased to 27.5%, reflecting a positive business mix and ongoing cost efficiency measures. We achieved a significant increase in adjusted free cash flow, while continuing to expand our filler base in growth markets. The cash generative nature of our business underpins our intended mid-term dividend payout ratio of 50-60% of adjusted net income. For 2018, we are proposing a Swiss franc dividend payout in 2019 equivalent to around EUR100m."

Business Performance

Revenue

Core revenue rose by 6.4% at constant currencies (+3.4% at reported rates), which was ahead of the target range of 4 - 6%. Growth was driven in particular by the Asia Pacific region which, after an exceptional first half, continued to show good momentum throughout the second half. Sales in EMEA were lower owing to instability in some Middle Eastern markets, which affected sales to the joint venture there, more than offsetting underlying growth in the European business. The Americas achieved growth at constant exchange rates despite political and economic uncertainty in Brazil in the second half.

Total revenue increased by 0.7% at reported rates. Total revenue includes sales of laminated board to the Middle East joint venture, which ceased in the second quarter of the year as part of our internal supply chain strategy, and sales of folding box board to third parties, which will be phased out.

Adjusted EBITDA

At constant currencies, adjusted EBITDA increased by 8%. At reported rates, adjusted EBITDA was 1% higher. The adjusted EBITDA margin increased to 27.5% despite the negative impact from currencies, notably the Brazilian Real, as well as higher raw material costs. The improvement reflects strong top line growth, production efficiencies and lower SG&A costs following the launch of combismile in 2017. In addition, the opening of a new regional Tech Center in China is allowing the company to conduct R&D closer to the market at a lower cost. Significant savings have also been achieved by locating a Business Service Center in Romania, amongst other re-organization measures.

Adjusted net income and earnings per share

Adjusted net income increased from EUR106 million in 2017 to EUR149 million in 2018. Adjusted earnings per share were EUR0.62 compared with EUR0.49 in 2017.

On a pro forma basis, adjusting for the reduction in interest expense post IPO and related tax effects, net income increased from EUR198 million to EUR213 million in 2018. Pro forma adjusted earnings per share were EUR0.66 compared with EUR0.62 in 2017.

Capital expenditure

Gross capital expenditure was EUR214 million in 2018. Net capital expenditure (net capex), after deduction of upfront cash for fillers received from customers, was EUR143 million compared with EUR164 million in 2017, which was a year of high filler investments.

The ratio of net capex to revenue was reduced from 9.9% in 2017 to 8.5% in 2018. The adjusted EBITDA less net capex margin increased from 17.5% in 2017 to 19.0% in 2018.

Adjusted free cash flow

Adjusted free cash flow increased from EUR202 million in 2017 to EUR257 million in 2018, reflecting an increase in net cash from operating activities, including a positive contribution from net working capital. Cash conversion increased from 64% in 2017 to 69% in 2018.

Adjusted free cash flow per share was EUR0.80 per share compared with EUR0.63 in 2017.

Net debt and balance sheet

The use of the primary proceeds from the IPO in September 2018 to pay down debt has resulted in a significant reduction in the net leverage ratio. Concurrently with the IPO, the company repaid its senior unsecured notes and re-financed its senior secured loans on attractive terms.

Dividend distribution payable out of capital contribution reserves

The Board of Directors proposes a distribution out of capital contribution reserves of CHF 0.35 per registered share in cash for the 2018 financial year. The payment of the cash distribution is scheduled for 25 April, 2019.

2019 outlook

Rolf Stangl, CEO of SIG, said: "For 2019, we are targeting core revenue growth of 4 - 6% at constant currencies. We also target an adjusted EBITDA margin of 27 - 28%, taking account of a lower dividend payment by our Middle East joint venture in view of the challenging conditions in some of its markets. Net capital expenditure is forecast to be in the range of 8 -10% of revenue and we expect to generate substantial free cash flow.

"In the mid-term we expect our business to continue to demonstrate its resilience. This is underpinned by our exposure to non-discretionary consumption of food and beverages, our ongoing expansion in growth markets and the excellent environmental profile of our products. We maintain our medium-term targets of core revenue growth of 4 - 6% at constant currencies and an adjusted EBITDA margin of around 29 percent. Net capital expenditure is expected to remain within the 8 -10% of revenue range. We plan a dividend payout ratio of 50 - 60% of adjusted net income for years after 2018, while reducing net leverage towards 2x."

2018 Annual Report

SIG today published its 2018 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://investor.sig.biz/en-gb/home/ and hard copies can be ordered free of charge at: Laufengasse 18, 8212 Neuhausen am Rheinfall, Switzerland.

Annual General Meeting and Agenda Items

The ordinary annual shareholders' meeting of SIG ("Annual General Meeting") will take place:

• Date: Thursday, 11 April 2019
• Time: 14:30 (CEST)
• Location: BBC Arena, Schweizersbildstrasse 10, 8207 Schaffhausen, Switzerland

The Board of Directors of SIG proposes that the agenda for the Annual General Meeting shall include, among other items:

• Proposal for a distribution to shareholders out of capital contribution reserves of CHF 0.35 per registered share in cash for the 2018 financial year
• Approval of the compensation of the Board of Directors and the Group Executive Board and consultative vote on the 2018 Compensation Report
• Proposal for re-election of the Chairman and all other members of the Board of Directors of SIG for a term until the end of the next Annual General Meeting, except for David Mansell who will not stand for re-election to the Board of Directors of SIG at the Annual General Meeting.

The full invitation for the Annual General Meeting, including all agenda items, is expected to be published on 19 March in the SHAB (Schweizerisches Handelsamtsblatt) and on the website of SIG at: https://investor.sig.biz/en-gb/home/

Investor contact:

Jennifer Gough +41 52 674 6508
Director Investor Relations
SIG Combibloc Group AG
Neuhausen am Rheinfall, Switzerland
jennifer.gough@sig.biz

Media contact:

Lemongrass Communications
Andreas Hildenbrand +41 44 202 5238
andreas.hildenbrand@lemongrass.agency

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 5,000 employees worldwide enable us to respond quickly and effectively to the needs of our customers in over 60 countries. In 2018, SIG produced more than 35 billion carton packs and generated EUR1.7 billion in revenue. For more information, visit www.sig.biz.

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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.

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In this media release, we utilise certain non-IFRS financial measures, including core revenue, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, pro forma earnings per share, net capital expenditures, adjusted free cash flow, adjusted free cash flow per share and cash conversion that in each case are not recognised under 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 measures stated above may not be comparable to other similarly titled measures of other companies and are not measurements under IFRS, as issued by the IASB 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 non-IFRS measures and ratios included in this media release. Refer to the attached "Financial review" for SIG's definitions of the above non-IFRS measures.

Summary financial information

Performance measures

The table below presents an overview of our performance in 2018 and 2017. Additional details about the performance measures used by management, including definitions, are provided in the 2018 Annual Report.

Summary consolidated statement of profit and loss and other comprehensive income

Summary consolidated statement of financial position