TeraPlast Group reported turnover of 147 million RON, down 14 percent in Q1

TeraPlast Group announced its financial results for the first quarter of 2023. The consolidated turnover decreased by 14 percent compared to Q1/2022, to around 147 million RON, mainly as a result of the reduction in volumes. EBITDA at Group level stood at 9 million RON, down 42 percent compared to the first three months of last year.

The Installations & Recycling division, which generates almost 70 percent of the consolidated turnover (102 million RON) had a slow start at the beginning of the year, and a significant acceleration of orders is expected starting from the 3rd quarter. The construction sector has mixed developments, with underperformance on the residential and water and sewer infrastructure segment. The big transport infrastructure projects are the ones currently benefiting from financing, but they have a negligible impact on the Group’s business. A positive effect as a result of the development of projects from the PNRR and the “Anghel Saligny” Program is foreseeable from quarter 3/2023, as more projects will go through tenders and the execution will be accelerated in the context in which 2024 is an election year.

The Compounds & Recycling segment faced a radical change in market conditions, which led to a sharp drop in EBITDA compared to Q1/2022 (-63 percent), but also in volumes. Demand in Western Europe for recycled, micronized and regranulated, material has decreased since the second half of last year and the trend has continued in Q1. The market has seen a significant flow of raw material at low prices, which has reduced the attractiveness of recycled material. It was a phenomenon that affected the performance of the Installations & Recycling division, but especially of the Compounds & Recycling division. However, the Group remains faithful to its commitments to promote recycled material, expand its use and persevere on the path of sustainable development.

TeraGlass (Windows & Doors) has faced an additional cost since the beginning of the year from the increase in the minimum wage for the construction sector which has reduced the performance of the division and generated operational losses. The new legal provisions resulted in a 30 percent increase in salary costs for this segment. The transfer of these costs into prices will be difficult, given that indexation was slow last year as well, after prolonged negotiations with distributors, especially since the division is strongly export-oriented. To counterbalance such costs, measures will be taken to optimize other expenses so as to reduce the overall impact.

The Flexible Packaging business line experienced an improvement in parameters compared to previous quarters, although the degree of equipment loading is far from optimal, and this fact is reflected by the division’s performance (EBITDA -2 million lei). Generated turnover increased by 23 percent and the division’s EBITDA loss narrowed compared to Q1/2022, which provides the premises to meet the objective of taking this business line into positive territory from the profitability point of view until the end this year.

„Through our investment plans involving diversification and streamlining, we seek to deliver solid long-term performance. We do not let the current results discourage us, especially since we are referring to successive periods of record results. We aim for a good mix of activity in several markets that will provide future opportunities and at the same time reduce the Group’s dependence only on certain segments that can suffer temporary shocks. We have a solid business that can adapt to the momentary discontinuities and a management team that has successfully gone through difficult periods before, so it knows what it has to do. We are expanding the business, increasing its geographical footprint, also analyzing M&A operations, to generate long-term added value, something that we know is also desired by our shareholders, who stayed with us even when, at a cursory look, the numbers seem unfavorable” stated Alexandru Stânean, CEO of TeraPlast Group.

TeraPlast Group has planned investments worth 120 million RON this year, which are added to the ones worth almost 400 million RON of the last 5 years. For the project of the new stretch film factory, the actual construction phase of the building has been entered, and the first production line has already been ordered. The construction of the new photovoltaic plant, worth 19 million lei, is still awaiting the approval of financing through the PNRR, and the agreement will be followed by an accelerated implementation of the project.