HEURTEY PETROCHEM : 16/03/2016 - 2015 Results

RESULTS SHOW RESILIENCE IN 2015 IN A VERY DIFFICULT MARKET
LAUNCH OF A RESTRUCTURING PLAN

Vincennes, 16 March 2016 - Heurtey Petrochem announces its consolidated results for 2015.

The Board of Directors of Heurtey Petrochem met on 16 March 2016 and approved the Group's 2015 financial statements.
The consolidated financial statements have been audited.
A certification report is being prepared.

Audited figures, in € million (IFRS)	2015	2014	Change
Revenues	420,3	437,5	-4%
Cost of sales	(360,5)	(376,9)	-4%
Gross margin % of revenues	59,8 14.2%	60,6 13.8%	-1%
Administrative and commercial expenses	(43,5)	(39,9)	+9%
EBITDA*	24,7	24,7	0%
Current operating income % of revenues	16,3 3,9%	20,7 4,7%	-21%
Other operating income and expenses	(0,6)	(0,5)
Operating income	15,7	20,2	-22%
Share of equity-accounted companies Financial profit Tax	0,1 0,2 (7,7)	(0,2) (5,4) (5,0)
Consolidated net income	8,3	9,6	-14%
Net income, Group share**	8,3	9,2	-10%

* EBITDA: Current operating income before amortisation, depreciation and provisions.
** Full consolidation of Prosernat starting on 1 June 2014.
2015 Revenues: €420 million
Heurtey Petrochem's revenues amounted to €420 million in 2015, in line with the Group's target (between €400 million and €420 million), and down 4% on 2014 (-9% at constant exchange rates).
The Gas segment accounted for 26% of business, while the Furnaces segment represented 74% (36% in petrochemicals, 34% in refining and 4% in hydrogen). The regional breakdown of the Group's revenues was 51% from the Americas, 19% from Asia-Pacific, 15% from Europe and Russia and 15% from the Middle East and Africa.
Current operating income in line with the Group's target and contrasting situation for the two businesses

The gross margin, which amounted to €59.8 million, was maintained at 14% of revenues, demonstrating the good execution of contracts underway.
Current operating income totalled €16.3 million, in line with the Group's target of a current operating income between €16 million and €17.5 million.
An analysis by sector shows a contrasting situation for the two businesses.

Audited figures, in € million	2015				2014
	Furnaces	Gas processing	Total		Furnaces	Gas processing	Total
Revenues	309,2	111,1	420,3		349,8	87,7	437,5
Current operating income % of revenues	15,3 5,0%	0,9 0,8%	16,3 3,9%		15,3 4,4%	5,4 6,2%	20,7 4,7%

Indeed, in the furnaces branch, the current operating margin rate improved to 5.0%, compared with 4.4% in 2014. By contrast, current operating income in the gas branch was impacted both by an unfavourable mix of contracts between licences and EPC contracts and by the suspension of contracts in Venezuela owing to the financing difficulties encountered by the client.
The Group's policy in Venezuela has always been to have negative cash exposure, i.e. to commit to external expenses with suppliers and sub-contractors only within the limit of amounts received by the client. From a prudential perspective, taking into account the suspension of contracts in Venezuela, the Group has decided to cancel the margins previously accounted for as technical work progresses and to recognise provisions for research not paid to date, which has an impact on the current operating income of the gas branch of some €3 million.
The Group's operating income came out at €15.7 million.
Given the positive changes in exchange rates, Heurtey Petrochem recorded a financial profit of
€0.2 million. The tax liability of €7.7 million, which corresponds to a tax rate of 43% restated for CVAE, reflects the mix of the subsidiaries' contribution to taxable income, the loss of foreign tax credits that cannot be carried forward and the non-activation of fiscal deficits in some subsidiaries. The consolidated net income came to €8.3 million. Adjusted for the €3m impact related to the Venezuelan contracts, the tax rate would be 6% lower and the consolidated net income would be approximately
€ 2 million higher.
The Group share of net income, which includes the full consolidation of Prosernat since 1 June 2014, totalled €8.3 million.
A strong financial position

With €93.8 million in shareholders' equity, €55.0 million in cash, of which €34.0 in net cash, and €14.7 million in medium and long-term financial debt, Heurtey Petrochem is in a solid financial situation.
Strategy : implementation of a restructuring plan to strengthen the Group's competitiveness in a very difficult market
The collapse of the oil price over the past 18 months has generated a significant fall in investments by oil companies, thereby considerably reducing Heurtey Petrochem's accessible market, particularly in the upstream sector where the gas branch is active.
As at 31 December 2015, the Group's order book totalled €400 million, compared with €507 million as at 31 December 2014. This includes €107 million worth of contracts in Venezuela for which the Group does not anticipate any significant movement in 2016. The order book is expected to total €250-€270 million for 2016 and €130-€150 million for 2017 and beyond.
In this difficult environment, the Group implemented an action plan in 2014 to optimise its commercial positioning and strengthen its competitiveness: increasing its geographic coverage through local sales partnerships, closing non-strategic offices, including the Group's subsidiary in South Africa, implementing technological and business partnerships, giving priority to projects with high added value, diversification of supplies and production, and rationalisation of project management. These measures have already enabled fixed cost savings in the full year of some €2 million.
As it does not expect any of its markets to recover in the short term, the Group will step up its efforts by launching a restructuring plan*, which will result in a reduction of the global workforce by approximately 100 (approximately 15% of project execution centres employees) and additional steps to cut general expenses. In 2016, the various measures in the plan will generate a non-recurring charge evaluated at €4.7 million and, from 2017, should produce a reduction in fixed costs of some €10 million per year.
In this context, Heurtey Petrochem's Board of Directors has decided not to propose dividend payment this year.
2016 outlook
Heurtey Petrochem is aiming to generate revenues in 2016 of between €320 million and €340 million.
For the furnace branch, the Group is targeting a current operating margin rate in excess of 2.5%. For the gas branch, given the particularly weak market environment in the upstream sector, the Group is anticipating a negative current operating income in 2016 and is aiming to return to a positive current operating margin from 2017.
Given all these factors, the Group aims to break even in its consolidated operating income (after restructuring costs) in 2016.
'In the context of an extended crisis in the sector, we are going to ramp up our cost-reduction measures, with the aim of saving €10 million per year from 2017. Our restructuring plan will allow us to be better positioned to seize any market opportunities that may arise, particularly in the Middle East, India and North America. With a strong financial situation, recognised experience, a broad international network, an offensive sales strategy and a leaner cost structure, we are poised to overcome the crisis,' says Dominique Henri, Chairman and CEO of Heurtey Petrochem.

* The restructuring plan will be submitted to the competent employee representative bodies for information and consultation, in line with current legislation.