Semperit reports declines amid ‘difficult market environment’

Vienna – Semperit Group has reported a weak performance for the first nine months of 2023, amid a challenging trading environment and continued economic headwinds.

The Austrian group has recently divested its medical gloves unit but said it was still affected by discontinued operations at the third-quarter stage.

For the first three quarters, Semperit reported a 7.7% year-on-year decline in revenue to €547.6 million, while earnings (EBITDA) from continued operations fell 28% to €56.8 million.

Earnings, said Semperit, were impacted by one-time effects of €6.6 million from its acquisition of Rico Group as well as one-time severance payments for changes to the executive board and headcount reductions.

At €15.7 million, earnings after tax from continued operations were positive, while earnings from the discontinued Sempermed gloves segment developed negatively.

This, said the group, brought the group's total 'earnings loss' to €26.8 million, compared to losses of €34.6 million for the same period last year.

With the divestment of Sempermed, the Vienna-based group said it had streamlined its organisation and introduced divisional structures based on its two main business models (ERJ report).

The Semperit Industrial Applications (SIA) division is concentrated on industrial applications, including hydraulic and industrial hoses as well as elastomer and sealing profiles.

The Semperit Engineered Applications (SEA) division, meanwhile, focuses on more specialised areas, such as conveyor belts for mining, as well as the newly added Rico Group (ERJ report).

By segment, Semperit said the SIA division reported a 43% year-on-year decline in earnings to €43 million over the first nine months of the year, on 24% lower sales of €264 million.

The division, it said, faced a “challenging economic environment” as the effects of recession “intensified over the course of the year”.

Demand for hydraulic and industrial hoses as well as order-intake were also affected by high inventory levels and ongoing inventory-reductions by customers.

“Ordering behaviour is restrained, and customers are under no pressure to order well in advance due to short delivery times,” Semperit noted.

Demand for elastomer and sealing profiles also declined as a result of the weak construction sector.

The lower order intake, according to Semperit, has led to “a persistently declining order book” for the first nine months of 2023.

The division has already completed some adjustments to personnel capacities and has identified “further savings” as part of an overhead cost project.

The SEA division, by contrast, reported a 46% year-on-year increase in earnings to €36 million, on 22% higher sales of €255 million.

SEA benefited from the “ongoing favourable economic situation” for mining products and, as a result, from the high demand for conveyor belts.

Higher price sales levels compared to last year and first-time consolidation of Rico Group also helped push up sales, Semperit added.

Rico Group contributed €16.0 million in revenue and €3.6 million in earnings for the months of August and September 2023, according to Semperit.

Overall, Semperit noted “good capacity utilisation” and higher operating leverage, which led to an increase in margins in the first nine quarters of the year.

The division was particularly buoyed by higher demand in the conveyor belts business, with order intake exceeding the high level of the same period in 2022.

For the full year, Semperit said it expected the market environment to remain challenging in the coming months.

For SIA, the group sees “no significant recovery in demand” in the short term, as the reduction of increased customer inventories will extend into the first half of 2024.

Furthermore, leading indicators for the construction industry, such as building permits in Germany, continue to decline.

For SEA, good demand from the mining industry, healthcare and food sectors as well as the railway sector 'should continue', while demand for products linked to the construction industry and related sectors will be lower.

With €10 million savings expected from restructuring measures, Semperit said it anticipated full-year earnings for the group as a whole to come in at the lower end of its original guidance range at €70 million.