Cham Paper Group Holding AG / Key word(s): Half Year Results
17.08.2011 07:00

Release of an ad hoc announcement pursuant to Art. 72 KR

---

- Net revenue increase of 8.8% in local currencies substantially above market growth
- Positive effects through price increases, stringent cost control and optimisation of product mix
- Strong Swiss franc reduces EBIT to CHF 2.2 million - Introduction of standardised ERP system throughout the Group
During the first six months of 2011, the Cham Paper Group recorded net revenues of CHF 171 million. This corresponds to an increase of 8.8% in local currencies, yet a reduction of 3.3% in terms of Swiss francs as compared to the same period of 2010. The Group's operating profit of CHF 2.2 million in no way does justice to its operating performance. Substantial improvement in procurement figures, price increases and sales successes combined with a systematic optimisation of the Group's portfolio mix have been almost completely negated by the erosion in the value of the EUR and USD as compared to the Swiss franc. Introducing a standardised ERP solution has enabled the IT systems throughout the Group to be harmonised.
Despite price increases and growing competitive and price pressure, demand for the Cham Paper Group's products has continued to grow. Nevertheless the Group's internal operating result is still unsatisfactory. With an export share of almost 100%, of which 85% is accounted for by euro zone countries, the Cham Paper Group's parent mill in Cham - producing approximately half of the Group's specialty paper products - is confronted with an increasingly difficult situation caused by its cost portion of 40% in Swiss francs, a figure that cannot be further reduced for all intents and purposes. Even though many customers are prepared to accept paying a premium for the products from Cham, it is difficult to achieve the Group's added value target in light of today's exchange rates. Continued improvements were achieved during the first six months, however they proved virtually incapable of keeping pace with the development of the value of the Swiss franc. To be sure, the Group succeeded in keeping its operating result in the black despite an average exchange rate of CHF 1.27 to the euro, which is more than 12% lower as compared to the same period in 2010. This results in an overall net loss of CHF 1.0 million, due in particular to the non-cash yet nonetheless currency effect-induced depreciation of recognised tax losses carried forward.

Gradual optimisation of the Group's product mix
We are pleased to note that the development of market demand for the Cham Paper Group's products continued to be positive during the first half of 2011. The excellent capacity utilisation in all mills enabled the targeted, step-by-step optimisation of the Group's product mix to be continued. On balance this meant an average sales price increase of 7.9% per tonne specialty paper with a sales volume increase of 1.2%. This result is due to the larger share of 'lighter', higher-margin products and concomitant price increases of existing products. The price increases correspond for the most part to the increase in raw material costs, the latter being significantly above those abounding during the same period last year; fortunately they appear to have stabilised in the meantime.

Consumer Goods continues to grow
The Consumer Goods product range continues to drive the Group's growth. After the double-digit growth recorded during both reporting periods in 2010, sales quantities increased again by approximately 10%. The Group's strong market position in flexible food packaging in particular is paying off. However, this market is attracting an increasing number of new participants, resulting in increased price pressure in the lower product segment. The Consumer Goods segment will also benefit in the medium term from the desire of end users for an accelerated deployment of ecologically sound packaging solutions. Consequently, the rapid market introduction and the envisaged success of the new barrier papers are of central importance.
Industrial Release regrouping
As for silicone-base papers for release liners in graphical applications, adhesive tapes and labels, sales during the first half of 2011 lagged behind last year's figure by approximately 8%. In order to create additional capacity for the intriguing Consumer Goods segment, restraint was exercised in serving the markets for lower-margin products like labels and graphic release liners. On the other hand, the marketing and sales development teams have continued to invest in canvassing markets for the newly developed products like the Silico Premium, which has successfully completed the test phases at key customers and will be used on a regular basis starting in the second half of the year. Profitability development remains ambitious in the Industrial Release market segment.
Digital Imaging focused on innovations
The shifts in the product lines in the course of profitability optimisation affected the Digital Imaging segment as well. Since papers for CAD and inkjet graphics (poster papers) in the indoor area do not exhibit any 'Cham Paper exclusivity', the Group is engaged in a stiff struggle with competitors in the euro area. However, the textile graphics (Transjet) and outdoor poster (Visualjet) products have proven competitive, again succeeding in achieving double-digit sales increases. On the whole, sales of Digital Imaging products decreased by approximately 8% in terms of volume, however sales revenue in local currencies lagged behind the 2010 figure for the same period only slightly.

Introduction of a standardised ERP system
With the introduction of a Group-wide ERP system, a labour-intensive and ambitious optimisation project was completed in all mills by the end of June. The new system provides for more efficient processes, a direct link to the operations of key customers and enhanced visibility at all levels.
Sound balance sheet in spite of an increase in net working capital The Cham Paper Group is able to operate on a sound financial basis despite the current difficult environment. The increase in net working capital due to higher sales levels and the slight rise in inventories has led to a negative free cash flow of CHF 12.0 million, an unsatisfactory development. Management's designated objective is to return to a positive free cash flow by the end of the year. The equity ratio amounted to 58.5% as of 30 June 2011.

Additions to the Group's management structure
At the end of the reporting period, two changes occurred at the organisational level: Dr. Rainer Kürschner (born 1952) assumed management of the Carmignano mill as of 1 July 2011. He had been at Carmignano since the beginning of 2011, succeeding Johann Boog, who had managed the mill for two years on an interim basis. The sales management of the entire Group has been transferred to Christine Arnet. She returned to the Cham Paper Group on 1 April 2011, having previously been a member of the Consumer Goods unit. CEO Peter Studer had headed Sales from 2009. The change in management in this area marks the completion of the modifications initiated in 2009 in the group management structure.

Outlook
We are reckoning with a continued favourable development of demand for our products. At the same time we will continue our efforts to maintain our profitability through product portfolio optimisation and price increases. The current forex effects are causing the Group to be confronted with substantial challenges. As previously announced, the Board of Directors and the Executive Management Board will be informing you about sustainable strategic course corrections for securing the Group's economic future in the course of the second half of the year.

For the full semi-annual report (German only), please go to our website: www.cham-group.com, Investor Relations/Financial Reports.
Please note: Today, 17 August 2011, at 11:00 CEST, there will an analyst conference call with CEO Peter Studer and CFO Patrick Schmid to discuss the half-year results. To take part, call: +41 22 592 73 12.

For further information please contact
Media and IR office Cham Paper Group Holding AG
c/o Dynamics Group
Edwin van der Geest / Philippe Blangey
E-Mail media@cham-group.com and/or investor@cham-group.com Phone +41 43 268 32 32
Swiss Security Number / ISIN / Ticker
Registered Share Cham Paper Group Holding AG 193 185 / CH0001931853 / CPGN
Cham Paper Group
Cham Paper Group is a leading manufacturer of coated speciality papers. The group generates value added for its customers by providing finishing-based functional capabilities. Founded in 1657, at its three locations in Switzerland and Italy the company develops and manufactures speciality papers for use in the consumer goods, industrial release and digital imaging sectors. The consumer goods sector encompasses papers for flexible packaging and base papers for label printing in the food, non-food, tobacco, beverage and pharmaceutical industries. In terms of the industrial release sector, Cham Paper Group supplies silicone-base papers for release liners used in graphical applications and for adhesive tapes and labels. The company also supplies base papers for process liners used in industrial casting and laminating process applications. Facestock papers for the self-adhesive industry round off the range. In addition to large-format inkjet papers for indoor and outdoor applications, the digital imaging sector also includes sublimation papers for digital textile printing. Cham Paper Group has benefited from the trend for sustainable products and is well established on the market thanks to the company's technological innovation. Cham Paper Group (stock exchange symbol: CPGN) is listed on the SIX Swiss Exchange as an independent company.




17.08.2011 News transmitted by EquityStory AG. 
The issuer is responsible for the contents of the release.
EquityStory publishes regulatory releases, media releases on the capital market and press releases.
The EquityStory Group distributes authentic and real-time financial news for over 1'300 listed companies. 
The Swiss news archive can be found at www.equitystory.ch/news

---

 
Language:               English
Company: Cham Paper Group Holding AG                         Fabrikstrasse
                        6330 Cham
                        Switzerland
Phone:                  +41 41 785 33 33   
Fax:                    +41 41 785 31 50
E-mail: mail.cham@cham-group.com Internet:               www.cham-group.com  
ISIN:                   CH0001931853
Swiss Security Number:  -
Listed:                  SIX
 
End of Announcement EquityStory News-Service  

---