Regulatory News

of EUR 3.7 million in 2017, in 2018 a profit before tax of EUR 7.2 million was recorded, attributable to all the factors stated above.

Net debt increased by EUR 58 million to EUR 183 million at the year-end, driven by the significant working capital needed for the execution of the increased number of projects for the year. During 2018, Corinth Pipeworks achieved a debt reprofiling of EUR 30.8 million through a 5-year extension of the syndicated bond loan initially received in 2013 with improved pricing terms.

Throughout 2018, Corinth Pipeworks operated in a business environment characterized by strong competition and volatile market conditions caused by import duties imposed by a number of countries worldwide. The company’s ability to maintain its position as a top-quality steel pipe producer and achieve market share growth in such adverse market conditions are testimony to its long track record in the industry, its strong reputation and focus on technological innovation.

In 2018, the company was awarded its first deep sea offshore pipes project and production started. “Karish” is both a strategic project for the South-eastern Mediterranean and a highly demanding engineering task (a pipeline at a maximum depth of 1,750m) that only a few companies worldwide can accomplish.

During the year, it also successfully manufactured steel pipes for the Balticconnector offshore project, a 77 km offshore pipeline from Finland to Estonia and one of the biggest within the Baltic region. The Company also manufactured and supplied steel pipes for two major oil pipeline projects in North America, both by Plains All American: the Cactus II pipeline (750 km) and a pipeline from Wink to McCamey (127 Km).

At the same time, Corinth Pipeworks was able to re-establish its presence in the North African market with the supply of pipes for a gas pipeline project in Algeria, and to increase its presence in Europe, with the implementation of a series of projects, mainly in Italy and Poland.

The Company’s market position was further reinforced by qualifications received from major companies in the energy sector, including BP, Shell and Technip, as well as the manufacture of products for new applications, such as HFI pipes for reel-lay applications and LSAW pipes for offshore projects. In conjunction with the addition of the concrete weight coating facility in Corinth Pipeworks’ plant, these achievements give the Company a distinct competitive advantage with respect to offshore projects.

Cables

Revenue for the cables segment increased by 16% year-on-year to 489 million in 2018, driven mainly by the increased sales volumes in the cable product business.

As for the project business, 2018 saw the successful completion of significant assignments, such as the interconnection of the wind parks Borkum Riffgrund 2 and Trianel (on behalf of TenneT). In contrast, a number of high-voltage project awards expected in H1 2018 were postponed, causing the Fulgor plant to operate at low utilization capacity during 2018. This adversely affected results for the entire fiscal year. During H2 2018, however, a significant number of projects were secured in the submarine cables segment, allowing Fulgor to return to high capacity utilization for 2019. These awards are testament to Hellenic Cables’ and Fulgor’s ability to provide cost-effective, reliable and innovative solutions that meet the changing needs of the offshore sector and allow the companies to leverage market opportunities.

Consequently, the cables segment recovered from a moderate first half, with adjusted EBITDA and earnings before tax for H2 2018 of EUR 20.8 million (H1 2018: EUR 14 million) and EUR 2.5 million (H1 2018: EUR -7 million), respectively. Overall, adjusted EBITDA increased by 5% year-on-year to EUR 34.8 million in 2018 and was coupled with stable operational profitability.

The cables product business achieved 6.3% higher sales volumes compared to 2017 along with an improved sales mix. The main drivers of such an improved performance include:

• Better than expected performance in the Greek market, due to increased demand from contractors and the building sector;
• A moderate increase in the traditional markets (Germany and Central Europe), and further penetration into new markets (Nordic countries and the Middle East); and
• Solid demand for telecom and signalling cables in Europe and the Middle East.
  During 2018, the metal price lag remained negative (EUR -1.7 million) but improved compared to strong losses recorded in 2017 (EUR -3.1 million).

Net finance costs for 2018 amounted to EUR 22.3 million, in line with the previous year, while depreciation & amortization for 2018 amounted to EUR 14.5 million.

Loss before income tax in 2018 was EUR 4.5 million, compared to a loss before income tax of EUR 5.3 million recorded in 2017. Finally, net profit after tax amounted to EUR 1.3 million versus losses after tax of EUR 4.8 million in 2017.

Investments in the cables segment in 2018 reached EUR 44 million, largely attributable to the expansion and upgrade of the submarine business unit in Fulgor’s plant to meet expected future demand levels and improve productivity at the Hellenic Cables and Icme Ecab plants.

Net debt increased by EUR 36 million to EUR 291 million as at 31 December 2018, mainly due to the financing of the aforementioned capital expenditure programme.

During 2018, a major debt re-profiling (EUR 87.9 million) was completed and achieved:

•  a 5-year extension of the syndicated bond loan initially received in 2013 with a remaining balance of EUR 55.1 million;
• a new 7-year bond loan of EUR 25 million by a major Greek bank; and
• a new 5-year secured bank loan of EUR 7.8 million by a major Romanian bank to Icme Ecab.

The above reprofiling carries improved pricing terms for all the aforementioned facilities and is expected to benefit the segment’s future liquidity and profitability.

Subsequent events

On February 21st, 2019, the U.S. Department of Commerce (the ‘DoC’) announced its affirmative final determinations in the antidumping duty investigations initiated in early 2018 on imports of large diameter welded pipe from Canada, Greece, Korea and Turkey. Similar determinations about imports from China and India were announced in December 2018. In the Greece investigation, the DoC assigned an antidumping duty rate of 9.96% for Corinth Pipeworks S.A.

The U.S. International Trade Commission (the ‘ITC’) is scheduled to make its final determinations on or about April 5, 2019. If the ITC makes an affirmative final determination that imports of large diameter welded pipe from Greece threaten material injury to the domestic industry, the DoC will issue an anti-dumping order with the above percentage. If, however, the ITC makes a negative determination of injury, the investigation will be terminated.

Outlook

In the steel pipes segment, Corinth Pipeworks enters the second fifty years of its history with excellent prospects for sustainable growth based on emerging market opportunities, a strong backlog of orders, the highly advanced production base and experienced and motivated personnel.

Looking ahead to 2019, the increased level of protectionism in countries until recently committed to free trade has increased the level of uncertainty in the market. Despite this, Corinth Pipeworks remains focused on generating revenue growth through penetration of new geographical and product markets. The solid backlog of orders from 2018 and new orders secured for the supply of pipes in both offshore and onshore pipeline projects worldwide, give rise to cautious optimism for the coming year.

As for the cables segment, high demand for new offshore projects in Europe, primarily in the North Sea and South Europe, is expected to drive growth. Given the strong forecast of new projects, the considerable backlog of orders from 2018, and the growth potential of the offshore cables sector, the outlook for the business is positive. Fulgor’s return to high utilization capacity in 2019 is expected to drive the segment’s profitability for the coming year. As the execution of high voltage and extra high voltage orders secured during 2018 starts, the Thiva plant is also expected to operate at high utilization levels in 2019. The main focus for 2019 will, therefore, be on successful execution of existing projects.

Furthermore, in the cables products, there are signs of recovery in the low and medium voltage cables markets in Western Europe which were constrained by competitive challenges during the last two years.

Despite the current market volatility, Cenergy Holdings expects to maintain the positive momentum gained in 2018. Looking ahead, the Company will benefit from a solid order backlog generated during 2018 and remains well placed to take advantage of improving market conditions in the energy sector to further its companies’ ambitions of becoming world leaders in energy transfer solutions and data transmission.

Statement of the Auditor

The statutory auditor, KPMG Bedrijfsrevisoren – Réviseurs d’Entreprises, represented by Benoit Van Roost, has confirmed that the audit procedures on the consolidated financial statements, which have been substantially completed, have not revealed any material misstatement in the accounting information included in the Company’s annual announcement.