LISI (EPA:FII) - LISI - Q1 2018: Financial information

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25/04/2018 17:40

FINANCIAL INFORMATION

The LISI group reports sales of EUR 420 million in the first quarter of 2018, a
year-on-year decline of 5.6%, taking into account an unfavorable basis of
comparison with the same period of the previous financial year and a very
adverse exchange rate effect

. LISI AEROSPACE : - 15.1% (Q1 2017: +11.7%)

o Very negative currency effect due to the weak dollar, which accounts for -
  7.6% of first quarter sales
o "Europe fasteners" segment negatively affected by the continued adjustment of
  the supply chain of its main contractor
o Sustained ramp-up of new programs in the "Structural Components" segment
o Slight strengthening of order intake in the United States (excluding the US
  dollar effect)
o Sustainable long-term outlook for the commercial aircraft market, encouraging
  signs of a recovery in business aviation and helicopters

. LISI AUTOMOTIVE : +19.4% (Q1 2017: +6.6%)

o Confirmation of the good trend of 2017 with organic growth exceeding that of
  the European market
o Increase in market shares
o Strong contribution from TERMAX, acquired in October 2017, and from
  developments initiated in previous years
o Strong momentum in the " Safety Mechanical Components" and "Clipped
  Solutions" segments, in line with development strategy

. LISI MEDICAL : - 20,3 % (Q1 2017 : + 103.1 %)

o Significant currency effect related to the weak dollar (- 5.5 %)
o Sales down, following the loss of two significant products in the second half
  of 2017 and the ramp-up of new products in the "Minimally Invasive Surgery"
  segment

in EURM                                     Changes
                 2018     2017    2018/2017        2018 / 2017
                                                on a like-for-like
                                                     basis(1)
First quarter
ended March 31, 419.5    444.3    - 5.6 %           - 4.4 %

(1) The change on a like-for-like basis is calculated by:

- Converting the sales revenues of companies whose accounts are denominated in
foreign currencies to the average rate of year N-1 or month M-1
- Converting sales revenue invoiced in currencies other than the local currency
to the average rate of year N-1 or month M-1
- Restoring the consolidations and deconsolidation in order to find a
comparable base.

On a like-for-like basis, the 4.4% drop in sales in the first quarter of 2018
confirms, as anticipated, the slowdown in organic growth recorded in the second
half of 2017 (+6.1% in H1 and +1.1% in H2).

Quaterly Consolidated sales
In million euros

2018   444     417    370    412

2017   420

        Q1      Q2     Q3     Q4

EBIT* & Net Profit in EURM

EBIT         146,5   157,5   171,4

Net Profit    81,8   107,0   108,0

              2015    2016    2017

* After participation and profit-sharing expenses

The difference between reported and like-for-like sales is explained by:

. a particularly unfavorable impact of foreign currencies (- EUR 19.8 million,
or -4.5%), notably due to the accelerated decline of the US dollar against the
euro (1.2331 in Q1 2018 vs. 1.0681 in Q1 2017),

. the disposal of Précimétal Fonderie de Précision (Belgium) on February 2,
2017 (- EUR 1.5 million),

. a positive impact (+ EUR 17.9 million) related to the consolidation within
LISI AUTOMOTIVE of the US company TERMAX effective since November 1, 2017.

The Aerospace Division was particularly hit by the weakening of the US dollar
against the euro, which represents nearly 50% of the sales decline. The growth
of the "Structural Components" segment following the ramp-up of the new
programs mitigates the division's decline in sales in the first quarter.
In the Automotive Division, growth remains solid at +5.6% and confirms the good
trend of 2017. The division benefits from the dynamics of its main customers
and the developments launched in recent years in the areas of "Clipped
Solutions" and "Mechanical Safety Components".
The Medical segment was down -14.9%, a direct result of the loss of parts
following the reallocation of two significant products in the field of
Minimally Invasive Surgery to other production processes recorded in the third
quarter of 2017.

COMMENTS BY DIVISION

LISI AEROSPACE (56 % of consolidated sales)

in EURM                                    Changes
                 2018    2017    2018/2017        2018 / 2017
                                               on a like-for-like
                                                    basis(1)
First quarter
ended March 31, 235.6   277.6    - 15.1 %           - 8.1 %

At EUR 235.6 million, revenue for the first quarter of 2018 was down -15.1%
compared to the same period last year (Q1 2017: +11.7 %).

In line with the second half of 2017, the division "Europe Fasteners" segment
is affected by the temporary effects of the adjustment of its main customer's
supply chain on this specific product line. However, this effect is mitigated
by the continuing strong pace of new programs in the European market as well as
the first noticeable signs of more sustained activity on the "North American
Fasteners" segment. Added to this is a very unfavorable currency effect caused
by the significant decline of the US dollar against the euro (- EUR 18
million). On a like-for-like basis and after restatement for the currency
effect, the division's sales decreased by -8.1% (Q1 2017: +11.7%).
The "Structural Components" segment, whose products are mainly intended for the
European market, is experiencing ever-increasing activity levels, driven by the
continuing strong pace of the LEAP engine. Strikes in France at the end of the
quarter had no major impact on delivery schedules, but they did affect
production.

The production sites of the "Europe Fasteners" segment continued to implement
the cost adjustment measures initiated in the second half of 2017 to limit the
consequences of the activity slow-down. During that period of decline, the
deployment of the robotization project, which is an integral part of the
continuation of the LEAP (LISI Excellence Achievement Program) plan, is more
than ever a strategic focus.

Comments on performance and outlook

Visibility in the commercial aircraft segment remains strong over the medium
term, particularly for single-aisle and new programs. The confirmation of the
resumption of orders for Boeing in North America, the encouraging signs of
recovery observed in the other market segments served by LISI AEROSPACE,
including helicopters and business jets, have yet to be confirmed in the months
to come.

Sales in million euros
End of March

AEROSPACE

277,6     235,6

AUTOMOTIVE

128,9     153.9

MEDICAL

37,9      30,2

2017      2018

The production sites of the "Europe Fasteners" segment, which are suffering
from the adverse volume effect, will continue to adjust their production and
expenditure levels as long as there is no tangible return to normality. In line
with the previous year, the "Structural Components" segment maintains its
efforts to reduce its non-quality generated by technical difficulties and
significant industrialization costs in a context of strong rise in the pace of
new programs (Airbus and Safran).

The Aerospace Division is also pursuing the modernization of its production
facilities as well as the development of innovative products such as
OptiblindTM (currently in the intensification phase of validation tests at our
major contractors) which will enable it to maintain its technical lead and
create a strategic difference in the years to come.

LISI AUTOMOTIVE (37 % of consolidated sales)

in EURM                                      Changes
                   2018     2017    2018/2017       2018 / 2017
                                                on a like-for-like
                                                      basis(1)
First quarter
ended March 31,   153.9    128.9    + 19.4 %          + 5.6 %

The division posted a first quarter organic growth of +5.6% compared to last
year (Q1 2017: +6.6%). The "Mechanical Safety Components" segment is taking
full advantage of new developments from recent years and is experiencing the
strongest growth. While the "Threaded Fasteners" business is only progressing
moderately, "Clipped Solutions", which have been integrating the US company
TERMAX since November 1, 2017, are also very dynamic, contributing to the
continued performance of the division which sales are up +19.4%. Overall demand
remains strong, with the division fully benefiting from the integration of
TERMAX. One should also highlight the dynamism of German parts manufacturers
and car manufacturers. Concurrently, order intake for new products in "Clipped
Solutions" and "Safety Mechanical Components" is still well oriented and
represents more than 10% of the sales achieved since the beginning of the year,
which reinforces the division's strategic orientations.

Comments on performance and outlook

In terms of operations, the division is broadly consolidating its performance
thanks to the smooth operations at the "Clipped Solutions" and "Safety
Mechanical Components" BG sites and to actions to improve the Saint-Florent sur
Cher site, as well as to the favorable impact from TERMAX.
Structuring programs focused on streamlining the production organization,
implementing the LISI Excellence Achievement Program (LEAP), as well as
increasing productivity, are maintained with the aim of improving the return on
investment.

The order intake level remains very high overall, while the Monterrey (Mexico)
site confirms LISI AUTOMOTIVE customers' interest for a site in this
geographical area. International expansion, reinforced by the integration of
TERMAX in the second half of 2017, is in line with the division's strategic
plan.

LISI MEDICAL (8 % du total consolidé)

in EURM                                         Changes
                     2018     2017     2018/2017     2018 / 2017
                                                  on a like-for-like
                                                       basis(1)
First quarter
ended March 31,      30.2     37.9     - 20.3 %       - 14.9 %

At EUR 30.2 million, sales for the quarter decreased by -20.3% compared to the
same period of the previous financial year, which had increased by +103.1% due
to the consolidation of LISI MEDICAL Remmele. The depreciation of the US dollar
against the euro had a significant impact (- EUR 2.1 million or - 5.5%). On a
like-for- like basis, sales were down -14.9% (Q1 2017: +11.5%). As announced,
the division is negatively affected by the loss of two significant product
lines in the area of minimally invasive surgery following their reallocation to
other production processes recorded in the third quarter of 2017, which is not
offset by orders for new parts.

In terms of operations, the division's two small sites confirm the operational
progress observed since 2016. On the other hand, the underperformance of LISI
MEDICAL Remmele adversely affects the results of the division. LISI MEDICAL
teams will remain focused on new product developments and cost adjustments to
limit the effects of the temporary downturn in activity.

Comments on performance and outlook

The long-term outlook for the markets in which the division operates remains
strong. The regular reinforcement of fundamentals and the development of new
products remain the priorities to strengthen the division in its positioning as
a reference supplier to its customers.

OUTLOOK AND COMMENTS ON THE FINANCIAL IMPACT OF BUSINESS
If, in the medium-to-long term, all the divisions of the LISI Group operate in
markets with robust outlook, the beginning of 2018 confirms the complexity of
the challenges that the Group faces in the short term.
For LISI AEROSPACE, "Europe Fasteners" plants will remain focused on adjusting
their production levels and costs in the temporary phase of declining order
levels. The "Structural Components" segment will have to continue the
initiative initiated in 2017 of cutting industrialization costs in the phase of
steady rise of the new programs. The confirmation of the resumption of business
in the United States will also remain an area of focus.
For LISI AUTOMOTIVE, the main challenges will be to demonstrate its ability to
keep up with the high demand from its key customers, as well as the
continuation of the integration of TERMAX. The rise in raw materials prices is
also a topic of discussion with major customers.
LISI MEDICAL will focus its efforts on the development of new products in its
minimally invasive surgery business to restore as quickly as possible the
growth prospects offered by this market. In the other segments, the
consolidation efforts, still under way, will have to prove their
effectiveness.

Based on the first quarter performance results, considering a remaining weak US
dollar, and anticipating a very gradual recovery in the Aerospace Fasteners BG
in the second half of the year, the Group now considers that the objective of
increasing its current operating income in 2018 and posting a double-digit
operating margin will not be achieved. In contrast, the FCF(1) should be
largely positive once again.

CONTACT
Emmanuel VIELLARD
CEO
Mail: emmanuel.viellard@lisi-group.com

Tel. : +33 3 84 57 00 77 - Fax : +33 3 84 57 02 00
Website: www.lisi-group.com

(1) Free Cash Flow : capacité d'autofinancement diminuée des investissements
industriels nets et des variations des BFR

TRADING AGREEMENT: ODDO CORPORATE - +33 (0)1 40 17 52 89

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LISI (EPA:FII) - LISI - Q1 2018: Financial information

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