EVC Results for the 1999 Financial Year.

Business Editors

BRUSSELS, Belgium--(BUSINESS WIRE)--Feb. 23, 2000

EVC International NV ("EVC"), Europe's largest PVC manufacturer, today announced its full year results for the year ended December 31, 1999.

Key Results

Group turnover of EUR 919.1 million (1998: EUR 926.5 million)

Operating loss of EUR 37.1 million (second half: loss of EUR 4.6 million)

Net loss of EUR 46.9 million (1998: loss of EUR 104.4 million)

Commenting on the results, Ettore dell'Isola, Chairman of EVC, said: "1999 was very much a year of contrasting fortunes for EVC. In the first six months, the Group continued to suffer from the difficult trading conditions experienced in the latter part of 1998. However, since early summer, demand has steadily improved as have PVC prices, enabling the Group to make significant progress in its return to profitability towards the end of the year.

EVC is now reaching the end of a three-year investment program committed to rationalizing and optimizing its VCM and PVC production assets. I am confident that the resulting cost savings of these investments will progressively leverage the financial benefits that will accrue from the overall improvement in market conditions."

Financial Review

Results of Operations

Group turnover for 1999 at EUR 919.1 million was similar to the previous year. The Polymers business saw a 5% reduction in S-PVC prices for the year as a whole, but this was more than compensated for by an increase in sales volumes, mainly as a result of additional sales from the plant at Schkopau, Germany, acquired in 1998. In the second half of the year, as a result of a rapid recovery in PVC prices, turnover grew by 23% compared to the first six months. However, turnover for the year in the Compounds and Rigid Film businesses fell by 6%, the reduction resulting from both lower sales volumes and prices.

The Group's gross margin improved slightly to EUR 51.1 million in 1999 (1998: EUR 48.0 million), despite continuing tight margins over base raw materials for much of the year and a weaker trading performance in Rigid Film. At the operating profit level, the Group incurred a loss of EUR 37.1 million (1998: loss of EUR 38.5 million), nearly all of which occurred in the first half of the year.

Net financial expenses increased to EUR 15.9 million, reflecting higher debt levels and after exceptional income of EUR 9.0 million, the Group recorded a net loss after tax of EUR 46.9 million compared to a EUR 104.6 million loss in 1998.

In view of the negative earnings performance, no dividend for the year will be proposed.

Cash Flow

Net cash flow before financing activities amounted to an outflow of EUR 62.2 million in 1999, all of which occurred in the first six months of the year. This represented a EUR 21.9 million improvement over 1998 and resulted mainly from lower capital expenditure, partially offset by an increase in working capital arising from higher selling prices, and the cash costs of the rationalization of the VCM/PVC sites. Group net capital expenditure was EUR 53.3 million in 1999, significantly below last year and below depreciation levels.

Financial Position

At the end of 1999, the Group had net debt of EUR 213.4 million (1998: net debt of EUR 135.5 million) and net gearing of 60% (1998: net gearing of 34%), the increase mainly reflecting the outflows experienced during the first half of the year.

Group Performance

Polymers

The weak global trading conditions that characterized the latter half of 1998 continued during the first months of 1999, with depressed prices and margins over base raw materials of ethylene and chlorine remaining at record lows. However, from May onwards demand started to improve, and for the rest of the year PVC prices climbed steadily, such that by the fourth quarter the impact of improving margins started to become apparent in the business trading performance.

Further progress was made towards improving cost competitiveness by concentrating production on fewer, larger integrated sites. At Schkopau, Germany, installation of EVC's own modern technology significantly improved the production efficiency of the existing 85 ktpa S-PVC line. At the same time, mechanical completion of the new 180 ktpa S-PVC plant, scheduled to come onstream in the second quarter of 2000, took place at the end of the year. The rejuvenated and expanded 300 ktpa VCM plant at Runcorn, UK started commissioning in the second quarter and the Hillhouse VCM unit in the UK was closed in March. The VCM/S-PVC plants at Brindisi, Italy, were closed at the end of the year and the site handed over to new owners.

During the year EVC signed an agreement with the US engineering, construction and project management company Bechtel to market and build industrial plants, using EVC's own innovative Ethane-to-VCM process technology, currently being trialled at EVC's Wilhelmshaven site. During 2000, preliminary plant design will commence, while testing of the Ethane-to-VCM process continues.

Compounds and Rigid Film

In the downstream operations, the profitability of the Compounds business improved as a result of the benefits of enhanced cost efficiency achieved through the recent restructuring. In February 2000, the Group disposed of its Spanish compounds unit as it no longer fitted into the geographic portfolio of the business.

For much of the year, the performance of the Rigid Film business was adversely affected by difficult trading conditions and an ongoing project to develop individual sites to serve specific market applications. When completed, this project, together with the benefits expected from the new coating line installed at Botzingen, Germany, will ensure that the business emerges as a stronger, more market focused operation.

Outlook for 2000

The recovery in the PVC markets since last summer has continued into the new year. Together with the scarcity of capacity increases now expected over the next two years, this is likely to lead to higher operating rates for PVC producers and improved financial performance, provided macroeconomic conditions remain favorable. EVC's strategy over the last three years to optimize further its VCM and PVC production assets will progressively enable the Group to take advantage of the recovery in the PVC markets.

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