Zwolle, 17 August 2010 - Wavin N.V., leading supplier of plastic pipe systems and solutions in Europe, today announces its First Half Year 2010 results:

Summary H1

• Revenue increased 3.8% to EUR 594.0 million. Like-for-like 0.9%
• Ebitda up 5.3% to EUR 47.9 million (H1 2009: 45.5 million)
• Ebitda margin maintained at 8.1%. (2009: 8.0%)
• Sharp rise of raw material prices is causing pressure on margins; negative effect largely offset by lower cost base as result of restructuring
• Net result break even compared to net loss of EUR 7.2 million in H1 2009

Summary Q2

• Solid revenue growth in Q2 following nine consecutive quarters of y-on-y decline
• Revenue up 8.7% to EUR 348.7 million, like-for-like revenue increase of 5.4%
• Ebitda EUR 39.6 million, 3.1% ahead of last year. Q2 Ebitda margin 11.4% (2009:12.0%)

Philip Houben, Wavin CEO: "After a very slow start of the year because of heavy winter conditions, it was certainly encouraging to see solid sales growth in the second quarter after more than two years of unprecedented market decline. Below ground activities picked up well as backlogs in infrastructural- and civil works were partly recovered when the weather improved. Our above ground business showed a steady uptick in both quarters. As far as geographies are concerned, we saw a clear recovery of construction markets in the UK, Scandinavia, Poland and Turkey. In other countries the pace of improvement was moderate, whilst markets in Italy, Netherlands and some Eastern European economies were still in decline.

A strong increase of raw material prices, which usually takes 3-6 months to be passed on to the market, puts pressure on our margins. The savings of our cost reduction programmes largely offset this negative effect.

Although there are increasing signs of a pick up, we remain cautious about our outlook as the pace of recovery in the European construction markets is still fragile and it takes time to pass on raw material cost increases. Nevertheless we are confident of realising top line growth this year and net profit will be significantly ahead of 2009."

Revenue

Revenue in the first half year increased 3.8% to EUR 594.0 million. The weakening of the Euro had a positive 2.9% impact as more than half of Wavin's revenue is sold in non-Euro countries. Adjusted for the exchange rate impact, like-for-like growth was 0.9% in H1.

Following the slow start of the year, revenue in the second quarter picked up well. After nine consecutive quarters of decline, like-for-like revenue was up 5.4% in Q2.

Market trends in Europe over the first half year differed substantially per geography. Noticeable recovery was seen in the UK, Scandinavia and in emerging markets like Poland and Turkey. Developments in markets like the Netherlands and Italy but also some Eastern European economies still showed a downward trend.

The Business Unit Civils & Infrastructure (below ground activities) was severely impacted in Q1 by the strong winter but enjoyed a solid performance in the second quarter. Revenue was up 2.6% to EUR 349.8 million in H1. The increase in Q2 was a strong 10.6%, partly due to catching up on postponed activity in the first quarter.

Revenue in Building & Installation (above ground activities) grew 5.4% to EUR 233.9 million in spite of the fact that the number of housing starts remained low.

Ebitda and Ebitda margin

Ebitda in H1 improved 5.3% to EUR 47.9 million. The second quarter Ebitda result was EUR 39.6 million, slightly ahead of the same period last year.

The H1 Ebitda margin was 8.1%, marginally above H1 2009 (8.0%).The cost restructuring programmes that started in 2008 are now fully visible. The cost base is structurally lower. Whilst revenue and volume were ahead of last year, operational costs were maintained in line with 2009. This allowed the business to absorb the negative impact of increasing raw material prices and competitive price pressure.

Operating result

The operating result including non-recurring costs, increased to EUR 16.6 million from EUR 2.0 million in H1 2009. Recurring operating result improved 22.6% to EUR 17.9 million.

Non-recurring items in operating result

Non-recurring items amounted to EUR 1.3 million versus EUR 12.5 million in H1 2009.

The cost reduction program of 2008-2009 is now fully implemented. In H1 some smaller additional restructuring measures in the UK and the Netherlands were taken. Management is following market developments closely and will continue to take restructuring measures, if local market conditions so require.

Financing cost and tax

Net financing costs were EUR 17.2 million compared to EUR 11.9 million in 2009. The increase is primarily a result of the additional costs related to the extended terms under the financing facility concluded in July 2009.  These costs concern the additional interest margin and banking fees for improved banking covenants and the extended maturity of the facility.

Interest costs depend on the leverage ratio, which is measured quarterly. In the first half year the interest margin above 3-month Euribor was 315 bps. The Euribor rate is largely hedged until April 2011 at an average rate of 3.9%. Income tax expense was EUR 0.4 million versus an income tax benefit of EUR 1.6 million in H1 2009.

Net result

Net profit in H1 was EUR 0.2 million, compared to a net loss of EUR 7.2 million last year.

Cash flow and Net Debt

Cash outflow from operations amounted to EUR 92 million in H1, resulting from the seasonal increase of activities. Working capital grew with EUR 59 million compared to the same period last year as a consequence of sales growth and higher raw material prices in Q2, higher stock levels to meet demand and full use of cash discounts in purchasing. Adjusted for these elements, working capital development was in line with the normal seasonal increase.

Investments amounted to EUR 20.0 million (H1 2009: 23.8 million). For the full year investments are expected to be in line with last year.

Net debt amounted to EUR 363 million. The additional working capital requirement was partly compensated by improved operating profit and lower investments. The company operated well within the bank covenants.

Workforce

Despite an increase of sales and production volume, Wavin operated with a workforce of 6,718, approx 60 FTE's lower than H1 last year. Since the economic downturn started in 2008 Wavin has approx 1700 FTE's less.

Results per region

All regions, except North West Europe, reported revenue growth in H1 2010. After a difficult start of the year double digit Q2 growth was seen in 4 of the 6 regions.

In spite of sharply rising raw material prices and competitive price pressure, margins remained overall stable at 8.1%.

In the North West Europe region, the Dutch construction sector is now fully experiencing the impact of the credit crisis, distinctly later than the other European economies. Markets in Belgium and Germany showed some improvement.

The drop in building activity affected both above and below ground business activity. Revenue in the region fell 10.7% to EUR 129.8 million. With some lost sales recaptured, the decline in Q2 was less severe. As a consequence of the drop in revenue, Ebitda margin was under pressure, declining 230 bps to 5.3% in H1.

After the market collapse in 2009, revenue in the UK/Ireland region was up 8.2% in H1 to EUR 115.0 million. In the UK market sentiment was encouraging, whilst conditions in Ireland remained weak.

The revenue improvement and benefits from restructuring measures delivered a margin increase of 270 bps to 7.6% for the region.

In the South East Europe region, market conditions were challenging in all countries. Revenue increased 9.4% to EUR 100.3 million carried by the strong double digit growth in Turkey were market share was gained. Overall margin was stable at 6.1%.

The Central and East Europe region recorded a revenue increase of 5.4% to EUR 80.4 million. The market in Poland proved to be more resilient than other markets in the region. The performance in Q2 indicates some growth recurring in most other markets.

In a competitive environment with increasing input prices Ebitda margin was maintained at a healthy 15.0%.

In the Czech Republic, Wavin strengthened its market position through a sales joint venture with OSMA zpracování plastů in which Wavin has a controlling 65% stake.

In the Nordic region markets were clearly regaining ground. The economic outlook improved and building activities were recovering. Revenue was EUR 75.8 million, 7.2% ahead of last year. The region has rationalised its cost base successfully. The Ebitda margin turnaround from 3.7% to 7.1% was satisfying.

Construction climate in France (South West Europe region) has somewhat improved but remains hesitant. Revenue increased 5.8% to EUR 69.4 million. The measures taken in 2009 have resulted in a margin increase of 260 bps to 7.8%.     

Business Unit Developments

The performance of both Wavin's Strategic Business Units was impacted by the extreme cold weather conditions in Q1. The winter effect was estimated at EUR 15-20 million of lost sales in the first quarter. Part of the lost sales was recuperated, leading to an 8.7% revenue increase in the second quarter.  

The Building & Installation business grew 5.4% in the first six months to EUR 233.9 million, with 5.2% growth in the second quarter. The Civils & Infrastructure business increased 2.6% in H1 to EUR 349.8 million, with a strong 10.6% growth in Q2.

Building & Installation

The Building & Installation business (above ground plastic pipe systems and solutions) regained good ground during H1 in most regions compared to the sharp decline in the same period last year. Overall growth was tempered by the weak building market in the Netherlands that is now experiencing the full impact of the financial crises on construction activity.

In the Hot & Cold segment growth was 6.8% to EUR 127.7 million with a strong rebound in the UK and good growth in Turkey. Wavin continues to invest in Surface Heating and Cooling that are now marketed in 10 countries. These solutions bring more comfort and meet the energy efficiency requirements of today in residential and non residential construction. In the reporting period Wavin won a contract to provide 4000 m2 ceiling cooling for the new Westminster Court House in London.

In Soil & Waste, revenue was up 8.9% to EUR 82.4 million. Except for the North West Europe region, all regions recorded healthy growth.

Civils & Infrastructure

The Civils & Infrastructure business (below ground plastic pipe systems and solutions) represents around 60% of revenue.  Foul Water systems include complete sewage systems and below ground house connections. In this segment, conditions at the start of the year were difficult, but revenue recovered strongly in Q2. H1 revenue was up 4.6% to EUR 182.1 million, delivering double digit growth in Q2.

The Water Management revenue was flat in H1 at EUR 67.3 million. The impact of the winter, the weak Dutch market, and delays in project approvals across Europe was clearly visible. In the reporting period Wavin won several contracts to disconnect rain water discharge from the existing sewer systems to prevent flooding. In Koksijde, Belgium, Wavin was chosen to install a water sewer system under a large stretch of a coastal cycle path.

In Cable Ducting (last mile telecom systems), the lack of available project financing slowed the roll out of new glass fibre networks. This had a direct impact on demand for Wavin products. In H1 revenue declined 6.2% to EUR 25.8 million. Some recovery was recorded in the second quarter.

Water & Gas reported revenue of EUR 74.6 million, 3.6% ahead of last year. Growth stems mainly from the emerging markets. In this segment, Wavin focussed on technically advanced solutions that require high-quality, sophisticated systems.

Outlook

Although we expect the positive sales and volume trends to continue, Wavin remains cautious. The construction recovery is still fragile, varies widely across geographies and can easily be disrupted. We foresee a substantial decrease in public spending throughout Europe and the impact thereof on construction activity and consumer confidence is yet unclear.  

Also the volatility of input prices continues to be high. The company has a history of passing on raw material cost increases in its selling prices with a 3 to 6 months delay. This is expected to support margin development in the second half of the year. We are confident that, barring unforeseen circumstances, full year sales will be ahead of 2009 and we repeat our view that net profit will be significantly higher than previous year's break-even result.