Resilience and positive cash flows in face of impacts of COVID-19
Material solutions provider Sibelco today announced adjusted EBITDA for the first half of 2020 of EUR 169 million (13% on revenue), down 47% compared to 2019. This reflected a strong start to the year, followed by a second quarter in which the economic impacts of the COVID-19 pandemic were felt in most of Sibelco’s customer segments and particularly at Covia, where year-on-year adjusted EBITDA was 65% lower. Sibelco initiated a range of measures to secure the health of its workforce and to ensure business continuity and cash preservation during the pandemic. These measures underpinned the positive operating cash flow in the first half with Sibelco generating free cash flow before dividend of EUR 32 million.
In June 2020, Covia filed for Chapter 11 protection in the United States. Given this development and the likelihood that Sibelco’s ownership will be significantly or completely diluted following Covia’s financial restructuring, Covia has been deconsolidated from Sibelco’s financial reporting as from 30 June. A net gain of EUR 35 million was booked in P&L as a result. A fuller explanation of this impact can be found on page 4. For this reason, most of the commentary in this financial update relates to Sibelco excluding Covia.
- Revenues excluding Covia decreased by 24% to EUR 772 million. This was partly due to the impact of COVID-19 on the markets served by Sibelco’s activities and to a lesser degree to the absence of revenues from those assets that were sold or discontinued in the past 18 months, notably lime and limestone, magnesia and mineral sands. At constant scope (i.e. excluding the impact of divestments) the reduction in revenue was 12%.
- Adjusted EBITDA excluding Covia decreased by 34% to EUR 122 million. The drop in adjusted EBITDA was mitigated by cost reductions and other measures to safeguard profitability and cash generation. At constant scope (i.e. excluding the impact of divestments) the reduction in adjusted EBITDA was 29% and primarily related to COVID-19.
- Free cash flow before dividends excluding Covia was EUR 61 million, while free operating cash flow excluding Covia was EUR 56 million. The combination of positive operating cash flows, aggressive management of working capital and capex and the inflow of proceeds from sales of assets further reinforced Sibelco’s finances. The Group’s net cash position at 30 June was EUR 104 million
- Despite the challenging economic environment, Sibelco continued to invest in selective organic growth projects and completed three smaller acquisitions in the areas of glass recycling and high-quality clays.
- Sibelco completed the sale of its magnesia operations to Refratechnik in March thereby completing the process of divestment from non-core activities that was started in 2018.
- Given the continuing market uncertainty, and in order to maximise Sibelco’s financial flexibility, the Board of Directors maintains its earlier advice as communicated at the shareholder meeting in April, not to pay an interim dividend for 2020.
Commenting on the results, Sibelco CEO Jean-Luc Deleersnyder said: “The COVID-19 pandemic has caused significant disruption to demand patterns in almost all of Sibelco’s customer segments. Given this highly challenging backdrop, our performance in the first half reflects the resilience of Sibelco and the diversity of our operations. While the developments at Covia have been a significant disappointment, our core activities have a very strong financial base from which to weather the crisis and enhance Sibelco’s competitive position. Although the pick-up in demand during June was followed by a relatively strong performance in July, we remain cautious about the outlook for the remainder of the year. Sibelco’s focus will remain on ensuring the health of its people and safeguarding cash generation in the coming months.”
Read the full report here.