The FAMUR Group reported revenue of PLN 473.6 million for 1Q19, down on the PLN 501.5 million figure posted for the same period last year. A combination of the diversified product mix supporting revenue, continuous production process improvement and commitment to keeping costs low resulted in improved reported profitability.
The majority of contracts performed in the first three months of 2019 were for customers on the home market, with export sales accounting for 31.1%. The volume of contracts signed since the beginning of 2019 suggests the subsequent quarters of 2019 should deliver a stronger revenue growth.
Net cash flows from operating activities were in excess of PLN 210 million for 1Q19. FAMUR reduced its net debt by PLN 109 million, with the net debt to EBITDA ratio for the first quarter at 0.3x.
“The first quarter results demonstrate our situation is stable, and high effectiveness in the areas of operating model improvement and production cost management translated into year on year profit growth. We successfully exploited favourable market conditions to step up our sales effort. From January - March, we were consistently building up an order book of domestic and foreign contracts, signing a contract with PGG for the supply of conveyors to KWK Piast-Ziemowit and KWK ROW, a contract for the supply of a longwall complex to the Shahtinskaya mine in Kazakhstan, and other contracts,” noted Miroslaw Bendzera, president of the Management Board of FAMUR SA.
The Underground business was the largest contributor to the Group’s revenue. The segment generated PLN 308.9 million in revenue, or 65.2% of the Group’s total revenue, down 13% y/y. The nature of the Group’s business and contracts may give rise to quarterly variations in sales, depending on the manufacturing cycle of long-term contracts. In late 2018 and early 2019, FAMUR signed a series of new contracts, which should feed into the results of future periods.
The Surface business generated PLN 69.5 million in revenue, down 2% y/y. In contrast, Electrical Equipment delivered a 96% revenue growth, to PLN 23.2 million, reflecting a rise in the number of orders for IT and I&C systems, explosion-proof equipment and methane measurement equipment. The Mining Services business recorded an 18% y/y revenue growth, to PLN 71.9 million.
“We consistently deliver on the objectives set in our five year strategy that focuses on growing export sales, expanding the aftermarket business and pursuing market diversification. At the same time, we constantly expand our portfolio with smart solutions and improve our operational efficiency in order to be able to flexibly respond to the changing market. After the first quarter ended, an agreement to sell PBSz S.A. to JSW was signed on 20 May 2019. The transaction marked the completion of a one-and-a-half year divestment process that was already planned at the time of signing the Restructuring Agreement by the Kopex Group. All proceeds from the sale of PBSz were allocated to early repayment of the debt in Tranche B of the Restructuring Agreement, of approximately PLN 210 million,” Bendzera added.
First-quarter export sales totalled PLN 147.3 million, down 5.7% y/y, accounting for over 31% of the Group’s total revenue, which is in line with FAMUR’s strategy for 2019 - 2023. The largest foreign customers for the Group’s products are in Russia and CIS countries, representing 16.5% (PLN 78 million) of total revenue. European Union countries are also an important market for the products and services offered by the FAMUR Group, with their share amounting to 11% (PLN 52.1 million) of total revenue.
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