Estimates of consolidated financial results for Q1 2022
Due to completion of the process of initial aggregation of financial data for the 1st quarter 2022, the Management Board of Apator SA took the decision to make public the estimated data in relation to the possible shape of financial results at the levels differing from average levels obtained historically.
According to estimates, the key financial figures for Q1 2021 will be as follows:
- consolidated revenue from sales - approximately PLN 237 million,
- consolidated EBITDA - approximately PLN 16 million,
- consolidated net loss - about PLN 4 million.
The factors that affect financial performance are as follows:
1) Inflation and lack of component availability
The continued dynamic increase in the cost of materials, energy, fuel and raw materials, as in Q4, negatively impacted the margins generated. Additionally, the war in Ukraine has exacerbated existing supply chain disruptions and is causing further difficulties in sourcing ordered components and extended lead times. Cost inflation is being felt across all segments, but Electricity continues to be the most affected.
For several months the Apator Group has been conducting negotiations in the scope of transfer of increase of costs of materials to the customers, gradually adjusting the contract prices. However, the sales model, particularly related to long term contracts causes that the effects of the revaluation will be visible with delay of several months. At the same time, the Group actively counteracts the effects of increasing costs by implementing a number of optimization measures, including work on improving operational efficiency in the plant in Ostaszewo, changes in the product mix to be more advantageous in terms of profitability, introduction of a dynamic pricing policy for partners and distributors and reducing payment terms. As a result of the changes, management expects the situation to stabilize in Q2 2022 and gradually improve from subsequent quarters.
2) Write-downs on receivables and inventories
- establishment of the revaluation allowances for receivables from Ukraine in amount of PLN 2.2 million.
Due to armed aggression of Russia in Ukraine the Apator Group took the decision to create the revaluation allowances for the majority of receivables from Ukraine. However, at present, due to the willingness and declaration of counterparties to pay receivables in longer time frame, the write down can be gradually reversed.
- establishment of the write downs on inventories in Apator S.A. in amount of PLN 2.2 million.
Higher weight of working capital and longer, but corresponding to current market conditions, time of outstanding inventories - mainly electronic components - cause the necessity to create the write downs in accordance with accounting policy adopted in the Apator Group. They are statistical write downs and they are charged to costs of basic activity. However, when components are used in production, the write-downs will be reversed at a later date. The Executive Board estimates that this will stabilize as the situation in supply chains stabilizes.
3) High financing costs
Maintaining higher working capital in turn necessitates higher financing and net debt levels. Higher financial costs are additionally influenced by a significant increase in interest rates (with dynamics higher than expected). The Executive Board expects a further increase in borrowing costs, but within the safe level of the net debt/EBITDA ratio below 2x.
4) Unstable situation on currency markets
The first quarter results were also adversely affected by the unstable level of foreign exchange rates in that period (especially USD), which translated into a negative result on the financial activity level.
The Executive Board of Apator SA at the same time indicates that presented estimates of consolidated financial results:
- are preliminary results,
- have been prepared to the best of our knowledge at the date of their preparation,
- are based on the assumption that no circumstances will come to light that could materially affect the financial results after the date of publication of the estimates.
The consolidated report for Q1 2022 will be released to the public on May 19, 2022.
CONTACT ON INVESTOR RELATIONS
Frequently asked questions and answers.