EVC International NV; Results for the 1998 Financial Year.

BRUSSELS, Belgium--(BUSINESS WIRE)--Feb. 24, 1999--EVC International NV ("EVC"), Europe's largest PVC manufacturer, today announced its full results for the financial year ended 31 December 1998.

Key Features

- Group turnover of NLG 2,041.8 million (1997: NLG 2,367.6

million).

- Operating loss of NLG 84.8 million (1997: operating profit of

NLG 24.9 million).

- Net loss, after exceptional items, of NLG 230.5 million (1997:

net profit of NLG 32.6 million).

- Dividend of NLG 1.00 per share (1997: NLG 3.00 per share).

Commenting on the results, Ettore dell'Isola, Chairman of EVC, said: "1998 proved to be more and more difficult for PVC producers as global trading conditions were severely affected by the economic problems emanating from Asia, where PVC demand declined by an unprecedented 9%. Operating rates for the PVC industry fell significantly and West European PVC margins reached record lows in the latter part of the year.

"EVC will continue to focus on the further optimisation of its VCM and PVC assets and will grow, as resources allow, its profitable Rigid Film business and exploit the Group's technological leadership in the Vinyl's industry. This is particularly important given the low PVC demand growth forecasted for 1999 in Western Europe."

Financial Review

- Results of Operations

Group turnover for 1998 was NLG 2,041.8 million (1997: NLG 2,367.6 million), a decrease of 14% compared to 1997, reflecting the deterioration of the markets in which EVC operates. Most of this reduction was in the Polymers business where, as a result of the Asian economic crisis and the slowing of markets in Europe, S-PVC prices decreased by 12% year on year and VCM sales volumes halved. Sales volumes in Rigid Film were also 13% lower.

The Group's gross margin was reduced to NLG 105.9 million in 1998 (1997: NLG 217.5 million). Again, the Polymers business was largely responsible for this decrease as margins came under pressure as the year progressed. However, in spite of unfavourable exchange effects in the U.K., Group fixed costs declined by NLG 14.6 million and, in real term, were 6% lower than in 1997. At the operating profit level, the Group incurred a loss of NLG 84.8 million (1997: profit of NLG 24.9 million).

As part of the continuing drive to optimise assets, the Group will close its VCM and PVC manufacturing operations at Brindisi, Italy, by the end of 1999. This has resulted in an exceptional charge of NLG 122.6 million which, together with other costs, account for total exceptional costs of NLG 137.3 million. After a NLG 5.1 million tax charge and losses associated with EVC's interest in a non-consolidated Company, this resulted in a loss from ordinary operations after taxation of NLG 230.5 million compared to a NLG 32.6 million profit in 1997.

- Cash Flow

In 1998, the Group invested NLG 258.9 million in capital expenditures (1997: NLG 250.5 million) which, together with the loss on operations, resulted in a net cash outflow before financing activities of NLG 185.3 million. The capital expenditure undertaken in the Polymers business amounted to NLG 213.1 million, with NLG 134.5 million spent on the final stage of the rejuvenation of the VCM plant at Runcorn, UK and the expansion of the PVC assets at Schkopau, Germany.

During the first half of 1998, the Group also repurchased 271,900 or 2% of its shares.

An interim dividend of NLG 1.00 per share was paid during the year. In view of the weak trading performance, no further dividend for the year will be proposed.

- Financial Position

At the end of 1998, the Group had net debt of NLG 298.5 million (1997: net debt of NLG 118.8 million) and net gearing of 34% (1997: net gearing of 10%).

Group Performance

- Polymers

Weak global trading conditions meant that EVC's Polymers business had an extremely difficult year. As a result of the Asian crisis, West European deep sea export opportunities disappeared almost completely, whereas the local market saw an increase of PVC imported from other regions. Falling selling prices of S-PVC (between January and December there was a 33% reduction) continuously outpaced the benefits derived from falling raw material costs.

Despite this difficult trading environment, several major operational objectives were achieved by the end of the year. At Schkopau, Germany, where the Group took over the PVC assets of BSL, a subsidiary of Dow Chemical, in June, there was a smooth transition of operations to EVC. In line with the agreement with Dow, construction of a new PVC plant commenced, which, when completed in 2000, is expected to be one of the most cost-effective PVC production facilities in Europe. At Wilhelmshaven, Germany, the pilot plant to test EVC's revolutionary ethane-to-VCM technology has been operating successfully since June 1998.

EVC's strategy to increase competitiveness through further optimisation of its asset structure will reach a further milestone when the new, low cost VCM facility at Runcorn, UK comes onstream at the end of the first quarter of this year and the VCM plant at Hillhouse, UK is subsequently closed. These actions, together with the closure of the manufacturing operations at Brindisi, are expected to make EVC one of the lowest cost producers in Western Europe for the millennium.

- Compounds and Rigid Film

In EVC's downstream operations, despite weak trading conditions, the performance of the Compounds business improved as the benefits of the plant rationalisation programme started to come through.

The Rigid Film business continued to make a positive contribution to the Group's earnings, although its performance was affected by weaker trading conditions in the second part of the year as an indirect consequence of the economic collapse in both Asia and Russia.

Outlook for 1999

The weak conditions experienced by the PVC industry in the latter part of 1998 have continued so far into 1999. For the year as a whole, the rate of global demand growth will be heavily dependant upon economic prospects. In Western Europe, there are clear signs of a slow down of industrial production, suggesting little PVC demand growth in local markets. And although PVC capacity additions have also slowed, operating rates for the industry are not expected to improve in the short term and margins are likely to remain depressed.

Against this background, in 1999 EVC intends to:

- Continue the implementation of its asset optimisation programme.

The combined benefits of the start-up of the VCM plant at

Runcorn, the closures of the VCM plant at Hillhouse and the

VCM/S-PVC plant at Brindisi, and other projects are expected to

amount to NLG 70 million per annum by the millennium.

- Strictly conserve cash flows.

- Use future cash generation to grow the Rigid Film business.

Already, the commissioning of a new coating line at Botzingen in

the first half is expected to deliver up to NLG 4 million cost

savings annually by the year 2000.

- Further exploit its technological leadership in VCM/PVC.

- Continue to pursue industry rationalisation opportunities. -0-

Summary Consolidated Balance Sheet
as at 31 December

                            1998       1997       1998       1997
                           (NLG in millions)    (Euro in millions)

Assets

Fixed assets             1,099.6    1,100.0      499.0      499.2
Current assets             636.1      782.4      288.6      355.0
Cash and bank balances      61.3      124.3       27.8       56.4

Total assets             1,797.0    2,006.7      815.4      910.6

Shareholders' equity
 and liabilities

Shareholders' equity       870.2    1,139.0      394.9      516.9
Provisions                 132.0      150.5       59.9       68.3
Total loans                359.8      243.1      163.3      110.3
Trade creditors and
 other current
 liabilities               435.0      474.1      197.3      215.1

Total Shareholders'
 equity and liabilities  1,797.0    2,006.7      815.4      910.6




Summary Consolidated Cash Flow
for the year ended 31 December

                            1998       1997       1998       1997
                           (NLG in millions)    (Euro in millions)

Operating profit/(loss)    (84.8)      24.9      (38.5)      11.3
Depreciation and
 amortization              125.2      122.3       56.8       55.5
Change in working capital   91.2      (31.1)      41.4      (14.1)
Net financial income         3.5       11.2        1.6        5.1
Dividend paid              (41.2)     (41.9)     (18.7)     (19.0)
Exceptional items           (7.7)       4.0       (3.5)       1.8
Other                      (12.6)      (8.7)      (5.7)      (4.0)

Net cash provided by
 operating activities       73.6       80.7       33.4       36.6

Net fixed assets
 expenditure              (258.9)    (250.5)    (117.5)    (113.7)

Net cash flow before
 financing                (185.3)    (169.8)     (84.1)     (77.1)



Summary Consolidated Profit and Loss Account
for the year ended 31 December

                            1998       1997       1998       1997
                           (NLG in millions)    (Euro in millions)

Net turnover             2,041.8    2,367.6      926.5    1,074.4
Cost of turnover        (1,935.9)  (2,150.1)    (878.5)    (975.7)
Gross margin               105.9      217.5       48.0       98.7
Operating expenses        (190.7)    (192.6)     (86.5)     (87.4)
Operating profit/(loss)    (84.8)      24.9      (38.5)      11.3
Net financial income         0.7        1.3        0.3        0.6
Exceptional items         (137.3)     (46.4)     (62.3)     (21.1)
Loss from ordinary
 operations before
 taxation                 (221.4)     (20.2)    (100.5)      (9.2)
Taxation                    (5.1)      54.0       (2.3)      24.5
Result of non-
 consolidated company       (4.0)      (1.2)      (1.8)      (0.5)
Profit/(loss) from
 ordinary operations
 after taxation           (230.5)      32.6     (104.6)      14.8
Net result                (230.5)      32.6     (104.6)      14.8
Earnings/(loss) per
 share (a) (in NLG
 and in Euro)             (16.75)      2.34      (7.60)      1.06

(a)  Earnings/(loss) per share is calculated on profit/(loss) from
     ordinary operations after taxation and is based upon the weighted
     average number of shares respectively in issue during 1997 and
     1998.