CORPORACIÓN EMPRESARIAL DE MATERIALES DE ... - CoemacInterim report Second half 2015 Corporación...

CORPORACIÓN EMPRESARIAL DE

MATERIALES DE CONSTRUCCIÓN S.A. AND

SUBSIDIARY COMPANIES

INTERIM RESULTS

Second half 2015

Interim report

Second half 2015

Corporación Empresarial de Materiales de Construcción, S.A. 1

Preliminary note: Divestment of insulation business and presentation of

results

On 17th September the Spanish Securities & Exchange Commission [CNMV] was informed by

means of the pertinent bulletin of the execution and conclusion of the transaction under which a

group of creditors led by KKR acquired the control of the Insulation business.

This operation consisted of the creditors in question taking up a capital increase in Ursa Insulation

Holding BV, the parent company of the division, in exchange for a 90% stake, with COEMAC, S.A.

conserving a 10% holding in that business.

According to the generally accepted accounting principles, the consolidated financial statements

of COEMAC corresponding to the first nine months of 2015 show the activities of the Insulation

division under a single heading of “Results from discontinued operations”. In order to facilitate

comparison, the same criteria is applied to the information corresponding to the 2014 financial

period, which also includes the Roof-Tile division which was sold to the minority shareholder Brass

Monier in January 2015.

Once the Insulation business no longer formed part of the Group, COEMAC's business consisted of

the Gypsum and Piping Systems divisions. The information presented in this report refers to this

new perimeter of the Group and is set out in such a way as to make it possible to compare its

evolution in 2015 with previous years.

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Second half 2015


1. Introduction to COEMAC

Corporación Empresarial de Materiales de Construcción, S.A. (hereinafter “COEMAC”), is a

corporate group operating in over 20 countries, whose main activity is manufacturing and selling

construction materials for use in the building industry and civil engineering.

COEMAC's strategy revolves around three major main principles: (i) having a portfolio of unique

products and services, offering a high added value for each participant of their service life, (ii)

international business diversification and (iii) efficiency in management operations and

procedures.

COEMAC consists of two business divisions1, Gypsum and Piping Systems, of which it holds all or a

majority part of the share capital and where each company handles its products through trade

names. To be specific:

- Gypsum: which uses the trade names of Pladur® (construction systems based on

laminated plasterboard) and Algíss® (Dry plaster powder and gypsum)

- Piping Systems: who trades under the name of adequa® (Plastic Pipes and fittings for

collecting and distributing water)

1 For more information on the businesses of Gypsum and Piping Systems, please visit www.pladur.com, www.algiss.com, www.adequa.es

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Second half 2015


2. Consolidated results at 31st December 2015

After disinvestment in the insulation business in September, COEMAC improved its

operating result and restructure its balance in 2015

Total figures for COEMAC

(in millions euros) FY2015 FY2014

Variation

2015/2014

Sales 129.7 120.8 +7.4%

EBITDA 8.4 3.7 +126.8%

EBITDA margin on sales 6.5% 3.1% +3.4 p.p.

Results from continuing operations -68.9 -45.8 -50.3%

Results from discontinued operations -4.5 -86.8 +94.8%

Results attributable to parent company -76.0 -118.4 +35.8%

Net financial debt 1.5 365.0 -363.5

In the whole of 2015, COEMAC obtained sales of EUR 129.7 million, which represented a growth of

7.4% when compared to the same period the previous year. This increase arose in both half years

although, in the second, the growth was reduced due to the slowing down of the construction

market in the final months of the year.

By geographical areas, the sales in Spain grew by 5.6% with a significant advance in the markets

for building and civil engineering, although, as we said, there was a deceleration in the fourth

quarter due to different political and economic factors. For their part, the international markets

(which represented 25% of sales in 2015) continued with the positive evolution of previous years

and grew by 13.6%, with an especially positive evolution in the second half year where the

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Second half 2015


company continued to increase its presence in the french market and advanced in its exports to

other countries.

The proportion of sales per business unit was similar to those obtained in 2014, where Gypsum

represented 59% of the total sales while Piping Systems contributed 41%.

As a whole, the EBITDA obtained by COEMAC during 2015 was EUR 8.4 million, 127% more than

that which was obtained in 2014, due both to the improvement in sales achieved in the business

and the greater commercial and industrial efficiency of the business operations.

As was stated in the corresponding relevant facts, 2015 was a turning point for the group after the

divestment in the Roof-Tiles business (Cobert®) and the Insulation business (URSA®). As a result of

these operations the group assets have been reduced by EUR 515 million (from EUR 717 million to

EUR 202 million) and the turnover by EUR 432 million (from EUR 562 million to EUR 130 million

Euros). The divestment of the Insulation business, which concluded in September, enabled

COEMAC to cancel the totality of its financial debt, from EUR 365 million to EUR 1,5 million

ending 2015. This disinvestment has caused a decrease in the shareholder equity of the parent

company of the group, Coemac S.A., even though this has not had an impact at the consolidated

level. After these divestments, it has been considered appropriate to undertake a series of

provisions and assets disposal (fundamentally fiscal credits) to restructure the group's balance

sheet and adapt it to its new perimeter and this has affected the 2015 results negatively.

For this reason, the net result attributed to COEMAC in 2015 was EUR -76.0 million, including the

atypical effects of the provisions and restructuring mentioned of EUR -53.9 million and of the

discontinued activities of EUR -4.5 million.

COEMAC maintained a net cash position of EUR 4.0 million at 31st December 2015.

For additional information about the net result attributable to the group in 2015, see the "Notes

complementary to the selected financial information".

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3. Evolution of business in the second half year

ECONOMIC ENVIRONMENT

The Spanish economy closed 2015 with an annual average advance of 3.2% in its gross domestic

product (GDP), exceeding the expectations at the beginning of the year. The economic growth

continued finding support both in external and internal elements. Among the former are the low

price of oil, the gradual improvement in European demand and the monetary policy of the

European Central Bank (ECB), which provided a favourable context of the Euro exchange rate,

interest rates and liquidity.

With regard to internal conditions, the recovery in demand is based both on transitory and

structural elements. On the one hand, the tone of the fiscal policy has been slightly expansive. On

the other hand, there are the after-effects of certain economic reforms (such as that of the labour

market) and also the changes that have taken place in the production structure.

In summary, the data on economic activity show that the recovery is continuing and that for the

moment no significant effects are observed of the greater uncertainty associated with the

expectations of growth in emerging economies, the volatility of capital markets or the internal

political context.

In this context, construction in the Spanish market continued its improvement which began in mid-

2014 accumulating growth in the sectors of new building and refurbishments, although bidding in

civil works was reduced after the second half year of low activity. According to the latest data

published by the Ministry of Public Works accumulated up to December 2015, the permits for new

building of apartments grew by 43%, the area of non-residential new building grew by 30%, the

refurbishment and remodelling of buildings by 11%, while bidding competitions for hydraulic

works were reduced by 22%.

With regard to the behaviour of building in our main international markets, building permits for

residential new building remained stable in France while they grew by 19% in Portugal.

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GYPSUM (PLADUR® AND ALGISS®)

In 2015, the Gypsum business completed sales of EUR 77.7 million, 6.3% more than those of the

previous year and consolidating a second year of growth in sales after the years of market

adjustment. This growth occurred in both half years although in the second one it was affected by

the deceleration in sales in Spain in the fourth quarter.

By geographical areas, the growth in sales arose both in Spain and in the international markets

where the business is consolidating its position in the surrounding countries and carrying out

significant export operations to other markets.

From the point of view of product lines, Pladur® completed a year of growth in all its markets

while Algíss® slightly reduced its total sales due to extraordinary orders agreed in the first half of

2014 which were not repeated in 2015.

For its part, the EBITDA obtained by the business at the end of the year was EUR 10.6 million,

increasing by +31.4% compared with the same period last year due to the increase in sales and the

industrial improvements carried out.

Consolidated figures of Gypsum

(in millions of Euros) 2015 2014

Variation

2015/2014

Sales 77.7 73.1 +6.3%

EBITDA 10.6 8.1 +31.4%

EBITDA Margin on sales 13.7% 11.1% +2.6 p.p.

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Second half 2015


PIPING SYSTEMS (ADEQUA®)

The business of Piping Systems, adequa®, completed 2015 with sales of EUR 54.6 million, obtaining

an improvement of 8.2% compared with 2014. Both half years showed growth although in the

second half year it was slightly less due to the slowing down of sales in the Spanish market at the

end of the year.

In geographical terms, the growth arose principally in the national market where the business

behaved better than the market strengthening its competitive position in the segments of building

and civil engineering. The international markets were prejudiced by the increase in competitive

pressure in the French market, especially in the first half of the year, although this was in part

compensated for by the advance in other international markets.

Despite the powerful deterioration in the price of raw materials and oil throughout the second half

of the year, the price of PVC resin did not decrease in the same proportion. Despite this, the

business advanced in its plan to improve the industrial efficiency, with important improvements in

product quality and completed 2015 with EBITDA of EUR 1.5 million.

Consolidated figures of Piping Systems

(in millions of Euros) 2015 2014

Variation

2015/2014

Sales 54.6 50.5 +8.2%

EBITDA 1.5 0.0 n.a.

EBITDA Margin on sales 2.7% 0.0% +2.7 p.p.

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Quarterly summary of the main economic and financial figures

Quartertly figures of COEMAC (1)

Year 2015

(in million euros) 1Q 2Q 3Q 4Q FY

Sales 32.9 35.3 32.2 29.4 129.7

% variation on previous year 3.5% 16.7% 10.2% -0.7% 7.4%

By region: Spain 24.1 26.2 24.9 22.4 97.6


International 8.8 9.1 7.2 7.0 32.1

% variation on previous year -8.3% 25.5% 16.2% 31.1% 13.1%

By business: (2) Gypsum 20.5 21.4 19.2 16.6 77.7


Piping Systems 13.0 15.0 13.8 12.9 54.6

% variation on previous year 1.0% 19.4% 8.4% 3.9% 8.2%

EBITDA 1.9 1.8 2.9 1.9 8.4

% over sales 5.8% 5.0% 8.9% 6.4% 6.5%

Gypsum 2.6 2.3 3.2 2.5 10.6

% over sales 12.7% 10.8% 16.8% 15.0% 13.7%

Piping Systems 0.4 0.7 0.0 0.3 1.5

% over sales 3.4% 4.8% 0.3% 2.1% 2.7%

EBITDA Margin over sales 5.8% 5.0% 8.9% 6.4% 6.5%

Results from continuing operations -5.0 -3.6 -3.0 -57.3 -68.9

Results from discontinued operations -13.3 -14.6 23.4 0.0 -4.5

Minority results 0.7 0.6 0.7 0.6 2.6

Results attributable to parent company -18.9 -18.8 19.7 -57.9 -76.0

Operating cash flow(3) 0.5 2.1 5.3 -0.6 7.3

Net financial debt 363.5 381.4 -3.5 1.5 1.5

Number of employees at end of period 576 597 566 539 539

(1) Figures on a like-for-like basis without taking discontinued operations into account (Insulation and Roof-Tiles), which are

included under the heading of “Results from discontinued operations”.

(2) Group adjustments are not included

(3) Operating cash flow expressed as EBITDA less taxes paid and changes in working capital

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4. Outlook

MARKET ENVIRONMENT

Both the recent evolution of the economy in Spain and the support which has been given to the

recovery allow us to foresee that the growth in GDP will stabilise during the next two years at

about 2.7%, in a context in which the strength of the data from the last months, at the national

level, will falter due to doubts and uncertainties, both outside Spain and nationally. The activity

data point to, during the previous year's close and the beginning of the present year growth has

remained high and with hardly any sign of deceleration.

It is hoped that the fall in the price of oil and the monetary policy will support the recovery

although, at the domestic level, the uncertainty about the economic policy stands out as one of

the main obstacles to continuing growth.

For its part, the construction sector returned to growth in 2015 boosted by the residential

segment (see graphs 5 and 6 with monthly and historical evolution of permits for new building in

Spain) and civil engineering. For 2016, our forecast is for an additional improvement bearing in

mind that the non-residential segment will return to growth and civil engineering will ease the

post-electoral vacuum without again going into recession. For the next few years, it is hoped that

construction will advance a little more than the economy assuming that although demand is not

significant, it has been unattended to for the last few years.

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For its part, we hope that the french residential market will during 2016 return to growth after the

increase in permits for new building recorded in 2015 due to the start-up of a range of policies

favourable to investment in dwellings. Nevertheless, this improvement will be progressive with

the result that we are still waiting for the competitive pressure perceived in 2015 to be

maintained.

FORECAST OF RESULTS

This market context is reflected in the forecasts published by sectorial reports of reference

(Euroconstruct among others), which together with our commercial plans that are under way,

both in our domestic market and in international markets, must make it possible to again obtain

growth in our sales for 2016. This increase in sales together with the improvement plans in the

operational excellence of our business as well as the reduction in size of our corporate functions

will allow us to continue growing in our operating results for the next year in accordance with our

strategic plan 2016-2018.

INVESTMENTS

Our growth and improvement plan for the period 2016-18 sets down investments for a range of

growth and improvement initiatives foremost among which are the future opening of the

industrial centre for the manufacturing of plasterboard (Pladur®) located in Gelsa (Zaragoza).

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5. Risks and uncertainties

COEMAC is subject to different risks inherent to its business on the various markets in which it

operates, which can possibly be mitigated but cannot be eliminated completely.

For management purposes, the company classifies them under three categories:

a) External risks: risks deriving from the trend of the economy, technical advances and also

those arising from political and/or legal aspects. This mainly results in cycles of building

and tendering for civil engineering in our principal markets, and also in financial risks

coming from variations in exchange rates or interest rates. With regard to exchange rates,

the risk has been significantly reduced following the divestment of the Insulation business,

as practically all of our operations today take place in Euros. At the same time, the Group

currently has a net cash position, which therefore reduces the risk of interest rate

variations.

b) Operating risks: This group includes the risks arising from purchasing, selling markets,

manufacturing, innovation, human resources and finance. Exposure to these risks mainly

affects us due to the possibility of volatility in the price of raw materials (especially PVC

resin) and energy.

c) General internal risks: These refer to lawsuits and legal liability, strategic decisions,

company image or fraud. The Group companies that could be affected by those aspects,

together with their in-house and external legal advisors, will evaluate the nature,

justification and risks arising from them, estimating their possible impact, and making

provisions where considered necessary.

Risk management at COEMAC is a process encouraged by the Board of Directors and Senior

Management, which aims to provide reasonable safety in the achievement of the targets

established by the Group, providing an appropriate level of guarantees to shareholders, other

stakeholders and the market in general.

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6. Stock Market

In 2015 a total of 76,811,425 shares were negotiated on the stock markets (38.9% of the total

shares admitted to trading), with a daily average of 300.044 securities and a stock market

appreciation of -10.5% in the period.

At 30 December 2015, COEMAC had 10,114,216 treasury shares.

Evolution of the share price (Euros)

Initial 12/31/2014

End 12/31/2015

Maximum Minimum Annual Change

of COEMAC Annual Change

of IBEX-35

0.38 0.34 0.83 0.26 -10.5 % -7.2%

Volume traded

Nº of traded securities Average securities traded daily Daily effective average

76,811,425 300,044 183,702

Market capitalisation (thousands of euros)

at 12/31/14 at 12/31/2015 Var. %

75,050 67,150 -10,5%

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DISCLAIMER

The financial information contained in this document has been prepared under International

Financial Reporting Standards (IFRS). This information has not been audited, therefore it is is not

definitive and could change in the future.

This document is of a purely informative nature and does not constitute an offer to sell, exchange

or buy securities, nor does in under any circumstances, constitute the bases of any type of

document or commitment.

This document may contain statements on intentions, expectations or future forecasts. Such

forward-looking statements, by their nature, are not guarantees of future performance and

involve risks and uncertainties, and other relevant that could cause actual developments or results

to differ from those expressed in these statements on intentions, expectations or future forecasts.

The Company assumes no obligation to publicly revise or update its forward-looking statements in

the case of unexpected changes, events or circumstances that could affect them.

The Company provides information on these and other factors which could affect the forward-

looking statements, the business and financial results of COEMAC in the documents that it

presents to the Spanish National Stock Exchange Commission. Anyone interested may consult

those documents.

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