Press Release

Bauwerk Boen Group achieves encouraging results in fiscal 2017

Bauwerk Boen Group can look back on a very encouraging financial year 2017. The main reasons for this were sustainably effective efficiency improvements at all production stages, consistently implemented price increases to compensate for rising material costs, further product mix improvements towards large-format and higher-margin planks, and the elimination of unprofitable businesses and product groups. Regarding the latter, a decline in volumes to 9.2 million square meters of parquet sold (-3.8%) was deliberately accepted in the year under review. Sales growth amounted to 2%, while the Group increased EBITDA and EBITA over-proportionately by 28% and 35%, respectively. Net profit of CHF 6.1 million was also significantly above the previous year (2016: CHF 2.7 million; +127%). The Bauwerk Boen Group is confident that the measures now sustainably taking effect will enable it to grow turnover to above CHF 295 million and further increase earnings in the current financial year.

St. Margrethen, 24 April 2018 - Consolidated net turnover of the Bauwerk Boen Group reached CHF 285.1 million during the financial year 2017, compared to CHF 279.4 million in the previous year (+2%). Adjusted for exchange rate differences by applying the previous year's exchange rates, net turnover amounted to CHF 282.2 million. The operating result EBITDA could thereby be increased significantly from CHF 25.5 million in the previous year to CHF 32.6 million in 2017, which corresponds to an improvement of the EBITDA margin from 9.1% to 11.4%.

Declining volumes deliberately accepted
In the year under review, the volume of floor coverings sold under the Bauwerk Parkett and Boen brands decreased by 3.8% overall to 9.2 million square meters. This was particularly due to the Group's strategy of foregoing unprofitable customers and markets as well as streamlining the product range. In Europe, sales increased by 1.5% to CHF 262.4 million in 2017. In the demanding Swiss market, sales growth of 1.6% could be realized, while the German market saw a slight decline. The Norwegian market developed well, while sales in Sweden declined because unprofitable trade relationships with high volumes were deliberately replaced by profitable ones with lower volumes. Turnover in Asia and the USA rose by 10% to CHF 23 million compared to 2016. Thus, the export markets outside Europe contributed around 8% to overall revenues (previous year 7%), with Asia accounting for the major proportion.

Build-up and expansion of the parquet factory in Croatia
In the year under review, the new production facility in Croatia was built up and a first milestone was reached with the commissioning of the modernized sawmill in early summer. In September, the manufacturing of prefabricated products of the St. Margrethen plant was taken over and the newly built capacities in the area of 3-layer parquet semi-finished products were ramped up as a relief for the plant in Lithuania. In May 2018, with the completion of the new surface and finishing line, the first 3-layer parquet finished products are to be produced and delivered to customers. Overall, the new facility will provide the Group with additional production capacities of 1 million square meters or a good 10% of its current capacity. In addition, production in Lithuania can be reduced to a more efficient 3-shift operation as planned.

Efficiency programs having a lasting impact
The efficiency measures implemented in recent years, and in particular in 2017, are beginning to have a lasting effect at all production stages. As such, Bauwerk Boen Group succeeded in significantly increasing the operating result EBITDA to CHF 32.6 million in the 2017 financial year, compared to CHF 25.5 million in the previous year (+28%). The EBITDA margin increased from 9.1% in the previous year to 11.4%. The result was, amongst other things, also positively influenced by price increases and further product mix improvements towards large-format and higher-margin planks. Adjusted for non-recurring effects, mainly costs in connection with the efficiency enhancement program in Lithuania and the build-up of the facility in Croatia as well as currency effects, the adjusted operating result EBITDA amounted to CHF 34.6 million, corresponding to a margin of 12.3% (9.6%). The operating result after depreciation and before amortization EBITA amounted to CHF 22.0 million or 7.7% of net turnover, compared to CHF 16.3 million or a 5.8% EBITA margin in the previous year. Adjusted for the above-mentioned non-recurring and currency effects, EBITA amounted to CHF 24.2 million or 8.6% of net turnover. Despite higher financial and extraordinary costs and a slightly higher tax rate of 13.5% vs. 12.6% in the previous year (as measured against earnings before taxes adjusted for goodwill amortization), the 2017 net income of CHF 6.1 million is significantly above the previous year (CHF 2.7 million).

Solid financing
The balance sheet and financial ratios of the Bauwerk Boen Group as at 31 December 2017 are solid. Including the subordinated shareholder loan, the equity ratio as at the reporting date was 46.1% (43.7% as at 31 December 2016). The increase of total assets to CHF 292.6 million (CHF 269.0 million) is due in particular to currency effects due to a higher euro exchange rate on the balance sheet date (CHF/EUR 1.17 vs. 1.07 in the previous year) and the build-up of the parquet facility in Croatia with the associated insourcing of production steps and the resulting increase in current assets.

The corporate bonds of Bauwerk Parkett AG in the amount of CHF 80 million will mature on
22 May 2018. On 23 April 2018, Bauwerk Boen AG signed a bond purchase agreement with the syndicate banks Neue Helvetische Bank AG, Zurich, and Raiffeisen Schweiz Genossenschaft, St. Gallen, for the firm underwriting of a new bond issue of Bauwerk Boen AG, which is to be used 100% to refinance the maturing bonds of Bauwerk Parkett AG. Thus, the solid balance sheet ratios after the bond issue remain unchanged.

Capital expenditure and cash flow
In 2017, CHF 13.3 million was spent on investments in the build-up and expansion of the plant and infrastructure in Durdevac/Croatia. Automation solutions to increase productivity in Kietaviskes/ Lithuania accounted for CHF 4.3 million. Annual savings in the upper single-digit million range are expected from total investments of CHF 21.5 million in 2017. A partial area of 21,500 square meters of land in St. Margrethen that was no longer required after the relocation of top-layer-lamella production to the site in Croatia was sold in 2017. Overall, Bauwerk Boen Group generated a positive free cash flow of CHF 3.1 million in 2017, after a negative CHF 10.1 million in the previous year.

Outlook 2018
Following the consolidation of products and markets in 2017, the Bauwerk Boen Group is confident that it will be able to return to its growth course also in parquet flooring volumes and increase turnover to at least CHF 295 million in 2018. Thanks to the implemented efficiency improvement measures and the new production site in Croatia, the Group has created the pre-conditions for further improvements in earnings. The goal is to achieve an EBITDA margin of more than 11% in 2018 despite the fact that the Group continues to expect material prices for large-size parquet planks to rise in the short to medium term.

Further, the Board of Directors of Bauwerk Boen Group has decided that the previous accounting practice regarding the capitalization of goodwill will be adjusted and that goodwill be offset against equity. Accordingly, an EBIT margin of over 7% is expected for 2018.

In addition, the investment cycle in Croatia is coming to an end. The Bauwerk Boen Group is therefore confident that investments in 2018 will not exceed CHF 20 million and that, as a consequence, a free cash flow of at least CHF 3.0 million can be achieved and that the net debt / EBITDA ratio will not exceed 3.0.

Contact
Peter Schmitter, CFO Bauwerk Boen Group
Email: peter.schmitter@bauwerk-boen.com, Telefon +41 71 747 72 94

About Bauwerk Boen Group
Bauwerk Boen Group is, according to the assessment of the Bauwerk Boen management, Europe's leading developer, manufacturer and supplier of parquet flooring in the premium segment as well as the second-largest market participant in wood flooring. With sold volumes of over 9.2 million square meters annually, the Group offers a complementary portfolio of two- and three-layer parquets as well as wooden sports flooring under the two brands Bauwerk and Boen. The key markets Switzerland, Norway and Germany as well as Austria, the UK, France, China and the US are being served by local subsidiaries. Administrative headquarters of the Group are located in St. Margrethen, Switzerland. The production locations are currently concentrated in St. Margrethen and Kietaviškės, Lithuania and Durdevac/Croatia. During the financial year 2017, the Bauwerk Boen Group generated a net turnover of CHF 285 million and employed around 1'800 people.

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