SIF Trading update Q3 2017  Expansion program completed, efficiency improved

SIF Trading update Q3 2017 Expansion program completed, efficiency improved

11 Nov. 2017

Highlights and Key Figures for Q3 2017

Highlights:

  • Official opening of the new production plant at Maasvlakte 2 in Rotterdam
  • Contract awards for Tritan Knoll (offshore wind) and Peregrino (oil & gas)
  • Timely delivery of monopiles and transition pieces for Hohe See and Rentel offshore wind parks
  • Timely delivery of pin - piles for Oseberg and Sverdrup oil & gas jacket foundation

Key figures:

  • Contribution Year to Date increased by 6.2 % to € 104.7 million (€ 98.6 million YTD 2016)
  • Normalized EBITDA Year to Date decreased by 1 8.2 % to € 44.9 million ( € 54.9 million YTD 2016)
  • Operating Working Capital at end of Q3 2017 € 6,5 million ( € 18.1 million at end of Q2 2017 )
  • Net Debt at end of Q3 2017 € 32.1 million ( € 47.7 million at end of Q2 2017 )
  • Throughput of 59 Kton brings Year to Date production to 167 Kton (142 Kton YTD Q3 2016)
    o 90% for offshore wind
    o 10% for offshore oil & gas

Orderbook 53 Kt on for Q4 2017, 122 Kt on for 2018 and 60 Kton for 2019

SIF Trading update Q3 2017  Expansion program completed, efficiency improved

Jan Bruggenthijs, CEO of Sif-group, comments:

Q3 has been a quarter with strong, timely delivery of structures for our c li e n ts; S i f is on track fo r a year of record production at approximately 220 Kton. Looking to the future, we have been encouraged by winning Triton Knoll, the first major offshore wind award for 201 9 , and Peregrino, the only significant oil & gas contract in the period.

Sif is now a significantly b igger and more capable business. Our new production p lant at Maasvlakte, is Europe ’ s premier manufacturing facility for major-scale off shore installa tions. After the successful start- up, both production lines are already running at maximum capacity (150 Kton pa). With group annual maximum capaci ty of 300 Kton, we now have the industrial capability to meet the energy industry’s demand through the next decade. And at Rotterdam, it is ideally located close to customer’s preferred sites in the North Sea.

While servicing clients and buildi ng strategic capacit y, t he man a gement team has also focused on t he sales challenge of 2018, next to our focus on efficiency improvement. Key areas of at tention have been the start-up of the second production line in Rotterdam, upgrade of production capacity in Roermond for cans and cones and alignement between the Roermond and Rotterdam Facilities.

 I’m pleased to say that measures to increase efficiency have resulted in higher output . This will partly compensate for the pressure on EBI TDA from increased labor costs. Costs associated with training and the new facility start - up are non - recurring and will be spent be fore the first quarter of 2018. Given the muted demand outlook for 2018, we have made contingency plans to optimize our utilization of resources.   

Q3 2017 Results development

Contribution

Contribution is not impacted by fluctuations in the cost of steel and the level of subcontracted services that are passed on to the client at no or limited margins . It is therefore a more accurate performance indicator than Revenues.

Contribution in Q3 2017 amounted to € 30.3 million (€ 33.3 million in Q3 20 16 ) . In Q3 2017 Sif produced 59 Kton, compared to 45 Kton in the same p eriod in 2016. This results in C ontribution of € 627 per K ton YTD 2017 compared to € 694 per K ton for the comparable period 2016 .

Contribution is calculated as revenu es minus cost of raw materials, subcontracted work, logistic and other external project r elated charges and is a key financial indicator for Sif.

EBITDA (normalized)

EBITDA (normalized) in Q3 2017 amounted to € 11.2 mil lion compared to € 18.0 million in Q3 2016. The essential character of Sif’s business model is reflected in EBITDA - variance over the reporting periods. 2016 in that respect was a highly efficient year resulting in exceptional earnings.

YTD‘s EBITDA suffered from inc reased labor costs that could only be partly compensated by better efficiency. The set - up of the new production lines in Rotterdam had both recurring (security) and non - recurring (set - up and training) cost effects that put pressure on EBITDA. In Q3 the second production line was close to complet ion . From Q4 the costs with a non - recurring nature will fade.

EBITDA (normalized) is calculated as profit before finance expenses, tax, depreciation, amortization and IPO related costs.

Net debt

Net debt decreased from € 4 7.7 million at the end of Q2 2017 to € 32.1 million at the end of Q 3 2017. With the completion of the production expansion program of approximately € 90 million, Sif will return to maintenance Capex with levels of between € 6 and € 8 million on an annual b asis .

Outlook

For the Full Year 2017 we anticipate total production of 22 0 Kton, which is approximately 5% lower than our output forecast at the release of interim results. This is due to a shift of production into 2018. The ful l year 2017 EBITDA effect hereof will be a shortfall of approximately 8% on our latest outlook . As previously stated, we an ticipate a slower 2018, with 1 22 Kt on currently in the order book. Accordingly, we are reviewing short - term costs aggressively, while mindful of the need to preserve critical skills capacity for what is fundamentally a growth market through the next decade.

The completion of our investment program at Maasvla k te has ramp ed up S if ’s annual maximum manufacturing capacity from 225 Kton to 300 Kton. We can now comfortably cater for growth in modern monopiles with diameters up to 11 meters and over 120 meters in height. S if can benefit from the anticipated growth in offshore wind activities in the North Sea from 2019 when capacity additions will average more than 3 GigaWatts per annum.

Looking to 2019, the first projects have been booked fro m a well - filled ord er pipeline. Our confidence in our future positioning of S if rests on our own visibility of the contract pipe - line, and third party projections for European offshore wind indicating compound annual growth in the mid - single digits for the period 2015 - 2025.

2018 Financial Calendar

15 March 2018 Q4 and FY 2017 results

29 March 2018 2017 annual report

3 May 2018 Q1 trading update

3 May 2018 Annual General Meeting of Shareholders 2018

24 August 2018 Q2 and 2018 interim results

8 November 2018 Q3 trading update   


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