Recylex S.A. - 2020 Annual results
Recylex S.A. (Euronext Paris: FR0000120388 - RX)
publishes today its consolidated annual financial results for the
full year 2020, as approved by the Board of Directors at its
meeting of April 22, 2021. For more details, the 2020 Annual
Financial Report, filed today with the Autorité des Marchés
Financiers, can be consulted on the company's website
www.recylex.eu (Finance - Publications section).
1. Context of
the closing of the 2020 annual accounts
As for the 2018 and 2019 consolidated and annual
financial statements, the preparation of the 2020 financial
statements is characterized by significant uncertainties that
weight on the company's ability to continue as a going concern.
Thus, Recylex S.A.'s ability to continue as a
going concern remains subject to:
- The outcome of the ongoing discussions with the creditors
Glencore International AG and the European Commission concerning
the restructuring of the Company’s debt. This debt, which amounts
to €51.1 million, is no longer compatible with the Group's capacity
to generate cash in its new configuration. Recylex S.A. has
therefore asked its creditors to adapt the amount and maturity of
this debt to the repayment capacity of the Group's remaining
activities. In this context, the Group is also studying the
feasibility of a disposal of certain assets and/or activities;
- The continued commercial activity with Weser-Metall GmbH, a
company that is no longer part of the Group and is subject to
insolvency proceedings in Germany. Weser-Metall GmbH, whose assets
are currently being sold by the German insolvency authorities,
remains today Recylex S.A.'s almost sole client;
- The adjustment of expenses related to the obligation to
rehabilitate former mining sites and the discontinued Estaque site
to Recylex S.A.'s cash flow generation capacity.
As a reminder1, following the confirmation of
the filings for insolvency proceedings on May 15, 2020 under the
German law at the level of the German subgroup, Recylex S.A.
definitively and irreversibly lost control of these entities. This
resulted in the deconsolidation of the entire German scope of
consolidation. The accounting effects of this deconsolidation are
included in the consolidated financial statements for the year
ended in December 31, 2020.
As the insolvency proceedings at the level of
the German subgroup entities constituted an event that rendered the
Glencore International AG loan payable at any time, Recylex S.A.
obtained a third temporary waiver of the maturity of the debt,
which can be extended, subject to conditions, until January 31,
2022.
Given the inability to assess the relevance of
the assumptions2 and factors that led the Board of Directors to
approve the 2020 financial statements on a going concern basis, the
Statutory Auditors have, in accordance with their professional
standards, expressed the impossibility to certify the 2020
consolidated and annual financial statements due to a number of
uncertainties related to the going concern assumption. However,
Recylex S.A. specifies that this does not constitute a refusal to
certify.
At the balance sheet date, Recylex S.A. is
actively working with its advisors to restructure the Group's
financial and non-financial debt and is studying the feasibility of
disposing of certain assets and/or activities in order to
restructure the debt and ensure the continuity of the remaining
operations. The financial outlook is based on a favorable outcome
to discussions with Recylex S.A.'s creditors regarding the
adaptation of the amount and maturity of existing debt to the
Group's future cash generation capacity. These discussions are
currently underway. The outcome of these discussions is uncertain,
and if no agreement is reached with the creditors, then the
consequences in terms of the payability of debts would lead Recylex
S.A. to declare suspension of payments at the current state of its
cash flow forecasts.
For this reason, the listing of the share
remains suspended.
2. Key events
in 2020
The economic effects of the SARS-CoV-2 pandemic
have impacted the activities of the German subgroup entities, which
have filed for insolvency proceedings on May 14, 20201.
Following Recylex S.A.'s loss of control over
the German subgroup entities, the consolidation criteria set out in
IFRS 10 were no longer met. Recylex S.A. therefore deconsolidated
all the German subgroup entities subject to insolvency proceedings3
with effect from May 14, 2020.
As a result, the Recylex Group, from that point
onwards, has been reduced to the following activities:
- Lead segment: Recylex S.A.'s used lead-acid battery recycling
business (Villefranche-sur-Saône and Escaudoeuvres plants);
- Plastics segment: C2P S.A.S.'s polypropylene waste recycling
business;
- Other activities: Recylex S.A.'s holding activities, including
the equity method accounting for the 50% stake in Recytech
S.A.
The filings for insolvency proceedings by the
German subgroup entities has had a significant impact on Recylex
S.A, mainly in terms of the repayment-date of the existing debt and
the reduction in cash inflows from the German subgroup entities
compared with the cash flow forecasts previously drawn up.
This led Recylex S.A. to:
- Request and obtain from Glencore International AG a waiver of
its right to demand the immediate repayment of the loan of €16
million. At the balance sheet date, Recylex S.A. was granted a
waiver from Glencore International AG of its right to declare the
loan immediately due and payable until 31 January 2022 at the
latest. The termination date of this suspension of rights may,
however, be extended by Glencore International AG if Recylex S.A.
does not meet the conditions precedent to the suspension of rights
being granted, namely the continued supply of Weser-Metall GmbH
with secondary materials by Recylex S.A. or the successful
continuation of the restructuring process of Recylex S.A.'s
financial and non-financial debt;
- Temporarily suspend, as of September 2020, the payment of the
fine imposed by the European Commission according to the payment
plan agreed in 2017;
- Engage in discussions with its creditors, namely Glencore
International AG and the European Commission, in order to adapt the
amount and maturity of its debts to the Group's current and future
cash-generating capacity within a now very limited scope of
activities;
- Suspend the rehabilitation works at the Estaque site until
December 31, 2021 and postpone, in agreement with the competent
authorities, the completion date of these works to December 31,
2024, in view of the Company's current cash generation
capacity;
- Establish, based on the new scope of its activities, a new
short- and medium-term financial outlook that would ensure the
financial stability of Recylex S.A. and, consequently, of the Group
as a whole, the main assumptions of which are described below ("7.
Outlook").
In this context, the Group is studying the
feasibility of the disposal of certain assets and/or activities in
order to restructure the debt while allowing the remaining
operations to continue.
3. Financial information as
of December 31, 2020
In view of the above, the consolidated income
statement as of December 31, 2020 includes only four months of
activity for the German subgroup entities, compared to twelve
months of activity for the period ended in December 31, 2019,
making it difficult to compare one period with the other.
In order to allow a better assessment of the
2020 consolidated financial information in the context of the
Group's new scope of consolidation3, the Group presents hereafter
certain key aggregates for the 2020 financial information on the
basis of the new scope of consolidation, i.e. excluding in full the
entities of the German subgroup which were deconsolidated in the
first half of 2020.
Consolidated financial information at
December 31, 2020:
€ million |
At 31/12/2020 |
At 31/12/2019 |
At 31/12/2020 New scope of consolidation |
At 31/12/2019 New scope of consolidation |
ChangeNew scope of consolidation |
Sales (IFRS) |
113.9 |
237.4 |
58.1 |
72.8 |
-14.7 |
EBITDA4 |
(15.3) |
(26.6) |
(4.8) |
(0.6) |
-4.2 |
Operating income/(loss) before non-recurring items (IFRS) |
(25.6) |
(38.5) |
(12.1) |
(2.4) |
-9.7 |
Result from discontinued operations |
(2.3) |
(15.4) |
- |
- |
- |
Net result (IFRS) |
126.8 |
(84.3) |
145.7 |
(2.5) |
148.2 |
Cash and cash equivalents |
6.5 |
9.1 |
6.5 |
5.2 |
+1.3 |
Net cash and cash equivalents5 |
6.5 |
(5.9) |
6.5 |
5.2 |
+1.3 |
Shareholders' equity |
(40.0) |
(168.7) |
(40.0) |
(26.9) |
-13.1 |
Net debt |
45.8 |
176.9 |
45.8 |
46.4 |
-0.6 |
Consolidated sales in 2020 amounted to €113.9
million, including €70.9 million in sales for the German subgroup
entities in the first four months of 2020.
Consolidated sales under the new scope of
consolidation amounted to €58.1 million in 2020, compared with
€72.8 million in 2019.
This decrease is explained by the decline in the
performance of the lead segment impacted by lower volumes sold of
secondary materials by the two used lead-acid battery recycling
plants in France (Villefranche-sur-Saône and Escaudoeuvres) coupled
with the decline in the price of lead, but also by a sharp
reduction in sales in the plastics segment in an economic context
marked by the effects of the SARS-CoV-2 pandemic.
The consolidated operating result before
non-recurring items for 2020 was a loss of €25.6 million, including
a loss of €13.5 million for the entities of the German subgroup in
the first four months of the year 2020.
The operating loss before non-recurring items
under the new scope was of €12.1 million in 2020 compared to a loss
of €2.4 million in 2019. This sharp deterioration in the operating
income/(loss) before non-recurring items is due in particular
to:
- A deterioration in the financial performance of the lead
segment in a context of insufficient volumes produced and
unfavorable market conditions leading to a decrease in the
segment's EBITDA of €3.4 million;
- The depreciation of trade receivables from the German subgroup
entities in the amount of €5.2 million;
- The greater weight of the holding company's structural costs,
which are no longer shared with the German subgroup entities (€1.7
million);
- These negative effects were slightly offset by an improvement
in operating income before non-recurring items for the plastics
segment (+€0.5 million).
Result from discontinued operations was a loss
of €2.3 million and consisted of the results of Norzinco GmbH and
PPM Pure Metal GmbH in the first four months of 2020.
Results from companies accounted for by the
equity method (50% stake in Recytech S.A.) amounted to a profit of
€2.9, down by -€3.8 million in 2019, particularly due to the sharp
fall in zinc prices in 2020.
The Group recorded a positive net result of
€126.8 million at December 31, 2020, compared with a loss of €84.3
million euros for the same period in 2019. This result is strongly
impacted by the technical effect of the deconsolidation of the
German subgroup entities, which generated a deconsolidation result
of €159.4 million. This impact, which does not result in a cash
inflow, is recognized within Other Operating Income/ Expenses and
reflects the negative consolidated contribution of the German
subgroup entities to the Group's net result in connection with the
accumulated losses and asset impairments previously recognized.
4. Results by
segment as of December 31, 2020
4.1 Evolution of metal prices in Euros
as of December 31, 2020
€ per tonne |
Average 2020 |
Average 2019 |
Change (%) |
Lead price |
1,598 |
1,787 |
-11% |
Zinc price |
1,979 |
2,274 |
-13% |
€/$ exchange rate |
1.1412 |
1.1195 |
2% |
Source: London Metal Exchange.
4.2 Results by segment as of December
31, 2020
Lead segment
€ millions |
At 31/12/2020 |
At 31/12/2019 |
At 31/12/2020 New scope of consolidation |
At 31/12/2019 New scope of consolidation |
ChangeNew scope of consolidation |
Sales (IFRS) |
98.9 |
195.9 |
48.7 |
61.6 |
-12,9 |
Operating income/(loss) before non-recurring items (IFRS) |
(14.5) |
(29.4) |
(6.9) |
1.3 |
-8,2 |
In 2020, sales in the lead segment accounted for
83% of sales under the new scope of consolidation. As of December
31, 2020, it amounted to €48.7 million (new scope, down 21%
compared to 2019). Due to health measures and the economic downturn
in connection with the SARS-CoV-2 pandemic, operations at the
Group's two used lead-acid battery recycling plants in France
(Recylex S.A.) were shut down almost entirely between April and May
2020, with "short-time" measures for the employees. Battery
recycling activity gradually resumed in the second half of
2020.
Against this backdrop, Recylex S.A. recycled
around 61,000 tonnes of used lead-acid batteries during 2020, a
volume that was almost stable compared with 2019, a year marked by
technical difficulties at the level of the lead smelter, but lower
than the volume seen in 2018 of 71,300 tonnes.
Recylex S.A. continues to supply secondary
materials to Weser-Metall GmbH, with a prepayment system in view of
the ongoing insolvency proceedings for this company.
The outlook for the used lead-acid battery
processing business - now the Group's core business - will depend
heavily on the continued operation of Weser-Metall GmbH and the
continued supply of secondary materials to Weser-Metall GmbH's
smelter by Recylex S.A. Weser-Metall GmbH - which represents the
Company's quasi-unique client to date - is now a company outside
the Recylex Group, under insolvency proceedings. A disposal project
of Weser-Metall GmbH's assets is currently underway by the German
Insolvency Administration.
While the objective remains to remain a key
supplier to Weser-Metall GmbH in the future, subject to the
progress of the sale process and the future business model of
Weser-Metall GmbH, Recylex S.A. is actively pursuing its search for
other commercial outlets for its recycled products.
Over the financial year 2020, the drop in the
price of lead, coupled with the deterioration in commercial
conditions for sales and the increase in the price of used
lead-acid batteries on purchase weighed heavily on the margin of
this segment.
In addition, the results of the lead segment
include the full write-down of the trade receivables held against
Weser-Metall GmbH at the time of its insolvency proceedings, i.e.
an amount of €4.8 million.
As a result, the lead segment recorded an
operating loss before non-recurring items of €6.9 million in 2020,
compared with a positive result of €1.3 million in 2019 (new scope
of consolidation).It should be noted that following the
deconsolidation of Weser-Metall GmbH and Harz-Metall GmbH, the lead
segment now consists solely of Recylex S.A.'s operations in
France.
Zinc segment
€ millions |
At 31/12/2020 |
At 31/12/2019 |
At 31/12/2020 New scope of consolidation |
At 31/12/2019 New scope of consolidation |
ChangeNew scope of consolidation |
Sales (IFRS) |
6.2 |
23.6 |
- |
- |
- |
Operating income/(loss) before non-recurring items (IFRS) |
(3.4) |
2.9 |
- |
- |
- |
Consolidated sales in 2020 for this segment
correspond to the sales of the electric arc furnace dust recycling
business operated by Harz-Metall GmbH, while the secondary zinc
recycling business operated by Norzinco GmbH is presented under
Result from discontinued operations (IFRS 5).
The segment's sales amounted to €6.2 million in
2020, i.e. until the date of deconsolidation of Harz-Metall GmbH in
May 2020. The segment reported an operating loss before
non-recurring items of €3.4 million in 2020.
Following the deconsolidation of the German
entities Norzinco GmbH and Harz-Metall GmbH, the zinc segment no
longer exists in the new scope of the Recylex Group's
activities.
The 50% stake held in the Recytech S.A. joint
venture is accounted for by the equity method in the Group's
consolidated financial statements in accordance with IFRS.
Special metals segment
Sales of the special metals segment are no
longer included in the Group's consolidated sales following the
application of IFRS 5 and this activity is now classified as
“discontinued operations”.
Sales and operating income/ (loss) before
non-recurring items are part of the aggregate "Result from
discontinued operations", amounting to €5.5 million and -€1.1
million respectively for the first four months of 2020.
In addition, following the deconsolidation of
PPM Pure Metal GmbH in May 2020, the special metals segment no
longer exists in the new scope of the Recylex Group's
activities.Plastic segment
€ millions |
At 31/12/2020 |
At 31/12/2019 |
At 31/12/2020 New scope of consolidation |
At 31/12/2019 New scope of consolidation |
ChangeNew scope of consolidation |
Consolidated sales |
8.7 |
12.1 |
8.7 |
11.2 |
-2.5 |
Operating income/(loss) before non-recurring items (IFRS) |
0.2 |
(1.0) |
0.2 |
(0.4) |
0.6 |
Following the deconsolidation of C2P GmbH, the
plastics segment now consists solely of C2P S.A.S.'s activity in
France.
Sales reached €8.7 million in 2020, down 22%
compared to 2019 (new scope of consolidation). Given the sharp
slowdown in global demand for recycled polypropylene, particularly
in the automotive sector weakened by the effects of the SARS-CoV-2
pandemic, C2P S.A.S.'s activity in France was drastically reduced
in April 2020, only to gradually pick up in the third quarter of
2020.
Activity in the fourth quarter of 2020 was
positive, with production levels close to those prior to the
pandemic period.
In this context, the segment's operating income
before non-recurring items was of €0.2 million in 2020, compared
with a loss of €0.4 million in 2019.
5. Cash flow
and financial structure
The Group's gross cash position amounted to €6.5
million at December 31, 2020, down by €2.6 million compared to the
same period in 2019. The Group had no credit lines at the end of
December 2020, in contrast to the end of 2019 when the Group had
credit lines of €15.0 million, all of which were used at the German
subgroup level.
As a result of the deconsolidation of the German
subgroup entities in the first half of 2020, the Group's net cash
position was positive at December 31, 2020, amounting to €6.5
million, compared with a negative net cash position of €5.9 million
at December 31, 2019.Based on the new scope of consolidation, cash
and cash equivalents amount to €6.5 million in 2020 compared to
€5.2 million in 2019, up €1.3 million. This increase in the cash
position of the new scope of consolidation is mainly due to:
- A positive cash flow from operating activities of €1.4 million
following a sharp decrease in working capital requirements of €6.9
million in the two segments (lead and plastics), which more than
offset the loss generated (EBITDA of -€5.5 million);
- Dividends from Recytech S.A. (an equity-accounted company) in
the amount of €4.0 million;
- A positive cash flow of €1.9 million relating to the repayment
of part of the compensations paid by Recylex S.A. in respect of the
compensation claims of former Metaleurop Nord employees following
the May 24, 2018 ruling by the French Supreme Court in favor of
Recylex S.A.
The aforementioned cash flows were used to
finance (i) investments (€1.0 million), (ii) the repayment of the
European Commission's fine (including interest) for €1.1 million
under the payment plan and (iii) expenses related to the
rehabilitation of the former mines and the discontinued Estaque
site for €3.1 million.
The Group's net financial debt amounted to €45.8
million in 2020, down €131.1 million compared to 2019, due to the
deconsolidation of the German subgroup, whose share of net
financial debt at December 31, 2019 amounted to €130.5 million.
The Group's net financial debt as of December
31, 2020 breaks down as follows:
- A loan of €16 million (€17.2 million including capitalized
interest) granted in 2014 by Glencore International AG. The
insolvency of the German subgroup entities has made this loan
payable at any time to Glencore International AG, leading Recylex
S.A. to request and obtain from Glencore International AG a
temporary and conditional waiver of its right to declare this loan
immediately payable (see above);
- The debt relating to the European Commission's fine for €24.7
million. This debt is subject to a payment plan under which Recylex
S.A. (the Group's parent company) will pay the fine and to a report
of the payment of a significant portion of the fine to the medium
term. The Company suspended in September 2020 the payment of the
fine imposed by the European Commission according to the payment
plan agreed in 2017 and has entered into discussions with the
European Commission regarding the payment of this fine. The unpaid
instalments amounts total €0.5 million (due from September to
December 2020);
- The clawback clause under the 2005-2015 continuation plan for
an amount of €4.1 million. The amounts due under this clause amount
to €2.7 million at December 31, 2020, with the main creditor being
Glencore International AG with €2.6 million. Recylex S.A. has
obtained from Glencore International AG a waiver until January 31,
2022 of the right to demand payment of this debt on the same terms
as the suspension of its right to declare the loan of €16.0 million
immediately due and payable;
- The rescheduled debt due in 2026 under the continuation plan of
Recylex S.A. for an amount of €5.1 million towards Glencore
International AG.
As the future maturities of the financial debt
are not compatible with the Group's cash flow generation in its new
configuration, Recylex S.A. has entered into discussions with its
creditors, namely Glencore International AG and the European
Commission, to adapt the amount and maturity of the debt to its
cash flow generation capacity. In this context, the Group is also
studying the feasibility of a disposal of certain assets and/or
activities in order to restructure the debt and to enable the
remaining activities to continue operating.
In addition to financial liabilities, Recylex
S.A. has environmental liabilities relating to the rehabilitation
of the former mines and the discontinued Estaque site, for which
provisions have been set aside amounting to €13.4 million at
December 31, 2020, of which€9.1 million concern the Estaque
site.
Recylex S.A. has suspended rehabilitation works
at the Estaque site until December 31, 2021 and has obtained a
postponement from the competent authorities of the completion date
of the works to December 31, 2024.
The projected schedule of rehabilitation costs
for the Estaque site, based on current obligations and the best
estimates available at the balance sheet date, is difficult to
reconcile with the Group's future cash flow generation in its new
configuration, and Recylex S.A. will almost certainly have to find
external financing to fund these works or sell the site in its
current state.
Shareholder’s equity at December 31, 2020 was
-€40.0 million compared to -€168.7 million at December 31, 2019.
Although still negative, the improvement in shareholders' equity is
mainly due to the positive net income in 2020 of €126.7 million,
which includes the effect of the deconsolidation of the German
subgroup entities for €159.4 million.
6. Update on
ongoing legal proceedings concerning Recylex S.A.
The summary document of the ongoing legal
procedures is available on the Finance section of the Recylex Group
website.
7.
Outlook
Recylex S.A. has drawn up a new short-, medium-
and long-term financial outlook to take into account the known
impacts of the insolvency proceedings at the level of the German
subgroup entities and the new scope of activities. This new outlook
is based on the following assumptions:
- Weser-Metall GmbH will continue to operate and Recylex S.A.
will continue to supply secondary materials to Weser-Metall GmbH's
smelter;
- Recylex S.A.'s ability to find new outlets for its products in
the medium term in order to reduce its dependence on Weser-Metall
GmbH, which is now its principal and quasi-unique client;
- The extension beyond January 31, 2022 of the maturity date of
the €16 million loan granted in 2014 by Glencore International
AG;
- The waiver of the payment of the financial interest related to
the €16 million loan granted by Glencore International AG for at
least the next 12 months (for an amount of €1.2 million), as well
as the adaptation of the amount, the terms of repayment and the
medium-term interest;
- The temporary waiver of the payment plan for the fine to the
European Commission and adjustment of the payment schedule to
ensure that it is compatible with Recylex S.A.'s capacity to
generate cash. In this respect, a request was made in July 2020 to
the European Commission to adjust the amount and payment plan to
the Group's new economic situation;
- The adequacy of the annual rehabilitation costs for the former
mines and the discontinued Estaque site, so that the costs are
compatible with Recylex S.A.'s cash-generating capacity, it being
specified that Recylex S.A. will most certainly have to find
external financing for the works on the Estaque site or sell the
site in its current state in order to meet its current obligations.
The rehabilitation schedule defined by the complementary
prefectoral order of January 15, 2021 is set for December 31, 2024,
for a total cost of approximately €9 million.
The financial outlook is based on a favorable
outcome to the discussions initiated with Recylex S.A.'s creditors
regarding the adjustment of the amount and maturity of existing
debts to the Group's future cash generation capacity. These
discussions are currently in progress at the date of closing of
Recylex S.A.'s consolidated and annual financial statements. As the
outcome of these discussions is uncertain, this situation gives
rise to significant uncertainty as to the company's ability to
continue as a going concern.
8. Provisional financial
agenda
The Shareholders' Meeting called to approve the
2020 consolidated and annual financial statements will be held on
June 16, 2021, in accordance with the terms and conditions that
will be specified later depending on the restrictions still in
force in connection with the SARS-CoV-2 pandemic.
Next publication: Financial information as of
March 31, 2021, on Thursday, April 29, 2021 (after market
close).
1 See press releases May 14, 2020 and May 20,
2020. With the decisions of the German court confirming the
fillings for insolvency proceedings at the level of the German
subgroup entities, Recylex S.A. has definitively lost control of
all the entities of the German subgroup. With the court's
decisions, all powers have been transferred in full to the Managing
Directors of the German entities and to the court-appointed
administrator.2 These assumptions and factors are detailed in Note
32 to the 2020 consolidated financial statements.3 Changes in the
scope of consolidation and the effects of the deconsolidation of
the German subgroup are described in Note 37 to the 2020
consolidated financial statements.4 Current operating income before
depreciation, amortization, provisions and impairment (non-IFRS
indicator).5 Net cash and cash equivalents of drawn credit
lines.
Disclaimer: This press release
may contain forward-looking statements that constitute either
trends or objectives and should not be construed as forecasts of
results or any other performance indicator. This information is by
its nature subject to risks and uncertainties, as described in the
Company's Annual Report available on its website (www.recylex.fr).
More detailed information on Recylex can be find on its website
(www.recylex.eu). In this press release, unless otherwise
indicated, all changes are expressed on an annual basis
(2020/2019).
***
Raw materials from urban mines
The Recylex Group is a European specialist in
the recycling of lead, zinc and polypropylene.
For more information about the Recylex
Group: www.recylex.eu
***
Press & Investor contact:
T +33 (0)158 47 29 91 |
E info@recylex.eu
Recylex S.A. | Registered office: 6 place de la Madeleine |
75008 Paris | France
Administrative office: 79 rue Jean-Jacques Rousseau | 92158
Suresnes Cedex | France
- Recylex S.A. - 2020 Annual results