CPH Group: The 2022 business year - Net sales and net result raised to new record highs

The CPH Group generated total net sales of CHF 725 million for 2022, a 46.0% increase on the prior year (or 50.4% at constant currency). The increase was achieved solely through organic growth, but is primarily attributable to higher sales prices.

“All three of our business divisions recorded double-digit percentage growth in their net sales for the year,” reports CPH Group CEO Peter Schildknecht. “The greatest growth was achieved by our Paper Division, which raised its net sales 66.5 per cent.”

Chemistry Division continues to expand
The Chemistry Division raised its net sales 15.9% to CHF 110 million and gained further market share, most notably in the USA. Deuterated products, molecular sieve powders, molecular sieves for purifying natural gas and ethanol and lithium-based products for concentrating industrial oxygen all saw high order volumes, while the easing of the coronavirus pandemic prompted demand from the medical field to return to more normal levels. The division expanded its capacities at all its operating sites. Despite rising input costs, the division’s EBIT for the year of CHF 14 million was virtually unchanged from its record prior-year level.

Paper Division’s net sales raised by higher paper prices
In a market with declining demand, the Paper Division’s total sales volume for the year of 473 500 tonnes was slightly below its 2021 level. Substantial reductions were seen in Western European paper production, however, with capacities withdrawn and one competitor’s factories the subject of strike action. Steep rises in the prices of recovered paper and other raw materials had to be offset by raising paper sales prices. As a result, the division’s net sales for the year increased CHF 153 million to CHF 384 million and annual EBIT before impairment was improved from the CHF ??25 million of 2021 to CHF 75 million. The division benefited from its policy of procuring its electricity on the liberalized market up to four years in advance, with the future volumes secured declining with the increasing futurity of the periods concerned.

Packaging Division’s order volumes at new record high
The production facilities of the Packaging Division were very well utilized, operating almost at full capacity. The division’s order volumes also reached new record highs. The new coating plant in Brazil commenced operations in the fourth quarter of 2022, and will provide further production capacities. Total sales volumes were up on 2021; but the 35.1% increase in net sales for the year to CHF 231 million was primarily attributable to the greater proportion of higher-value products in the sales mix and to the price increases effected. The situation on the procurement markets remained tight into the fourth-quarter period. But the division was largely able to pass on the higher raw materials and transport costs to the market, and EBIT for the year was quadrupled to a new record high of CHF 24 million.

Investments in facilities at Chemistry and Packaging
The CPH Group invested CHF 34 million in its fixed assets in 2022 to raise the capacities in its Chemistry and Packaging divisions and further enhance the production efficiency of the Paper Division’s facilities. Cash flow was raised from CHF 17 million to CHF 129 million, while free cash flow rose from CHF ??3 million to CHF 68 million. Personnel expense as a percentage of group sales was reduced from 19% to 14% of net sales. With capacities expanded (above all in Brazil), year-end headcount rose from 1 104 to 1 181 employees.

Net result increased to CHF 101 million
With a large part of the increased expense passed on to the markets, EBITDA for the year was raised CHF 105 million?to CHF 131 million. After ordinary depreciation and amortization of CHF 19 million, earnings before interest and taxes (EBIT) amounted to CHF 112 million, a CHF 115 million improvement on the prior-year EBIT (before impairment). The net result after taxes amounted to CHF 101 million. With an equity ratio of 60% the CPH Group remains in very sound financial health. It eliminated all its net debt in 2022, and held year-end net liquid assets of CHF 45 million.

Proposed dividend of CHF 4.50 per share
The Board of Directors will recommend to the Annual General Meeting of 14 March 2023 that a dividend of CHF 4.50 per share be distributed for the 2022 business year.

Outlook for 2023 holds many uncertainties
The International Monetary Fund currently forecasts global economic growth of 2.9% for 2023. Following the steep increases in interest rates in response to recent inflation, it is far from easy to determine at present whether local economies in various countries will cool, and if so to what extent.

“The CPH Group expects to report further net sales growth in 2023,” says Peter Schildknecht. “But business performance within our three divisions will be heavily contingent on the availability of raw materials and energy supplies, on their further pricing trends and on the extent to which higher costs can be passed on to the market. And with all the present economic uncertainties, a reliable business forecast is almost impossible to make.”

The Paper Division expects its profitability and thus its EBIT result to fall short of their 2022 levels. EBIT for the Chemistry Division is likely to be broadly at its prior-year level, while the Packaging Division is confident of achieving a further profitability improvement. Both group EBIT and the group net result for 2023 are likely to be in the mid-to-higher double-digit-million range. Investments in tangible fixed assets of some CHF 42 million are planned, to further expand capacities and further enhance efficiencies.