The TeraPlast Group recorded in the first quarter of 2024 results above the budget and above last year, both as a result of the efficiency of the activity in each business line, and on the basis of organic growth. Positive contributions to the Group’s results can be felt from the start of production in the Opal stretch film factory and from the integration of the activity of the Palplast company from the Republic of Moldova, recently acquired.

Group-wide EBITDA reached almost 12 million lei in Q1/2024, up 32% compared to Q1/2023 and higher than the budget for the same period.

The turnover reached almost 177 million lei, up 20% compared to Q1/2023 and 19% over budget.

 

“We increased turnover, increased EBITDA, increased export and payments against the budget. The Palplast acquisition proves to be a resounding success as they increased sales by almost 50%. All the tests we did with the customers of the stretch film factory were successful, which makes us confident that we will become the market leader in Romania. The growth strategy we implemented shows its results and thanks to the new production capacities we can supply Romanian products of the highest quality where we imported until the past years. All this without the results of the Freiler Group being consolidated, which will happen starting from the 2nd quarter. The vision of transforming the TeraPlast Group into a regional leader is taking shape,” said Dorel Goia, President of the TeraPlast Board of Directors.

In quantitative terms, the Group’s sales increased by 50% in Q1/2024 compared to Q1/2023, up to 23,355 tons. The decrease in raw material prices was transferred to the market to increase the utilization of production capacities and consolidate market shares.

Sales outside Romania increased by 32% and in the first quarter of the current year represent 17% of the consolidated turnover. The products of the TeraPlast Group reach 22 European countries, mainly in Hungary, the Republic of Moldova and Germany.

Gross margin decreased percentage wise (36% in Q1/’24 vs 38% in Q1/’23), as part of the strategy to increase market shares. As a result of higher capacity loading, however, profitability in relative terms improved and EBITDA margin increased to 6.7% in the first 3 months of 2024, compared to 6.1% in the same period last year.

Regarding the net result compared to last year, after the first 3 months of 2024 the TeraPlast Group recorded a loss reduction of up to 2.5 million lei, under the influence of a mix of factors. Due to seasonality in the first quarter, TeraPlast paid sales tax, which resulted in an additional cost of 1 million lei. In addition, there is also an increase in depreciation expenses generated by the new investments put into operation, of almost 2 million lei, to which are added non-recurring expenses of almost 1 million lei caused by recent M&A operations. Compared to the budget, the loss recorded in Q1/2024 is significantly lower than expected, due to the favorable evolution of the installations and granules segments, but also lower than anticipated start-up costs of the Opal stretch film business.

“In the 1st quarter, a trajectory that had been taking shape since the second part of 2023 and which brought us an improvement in financial performance was consolidated. We have organic growth of the Installations business line and the improvement of the performance of the other segments, to which Palplast Moldova is added. They confirm to us the effectiveness of the strategy focused on investments and M&A which increases the value and competitiveness of the Group,” said Ioana Birta, financial director of the TeraPlast Group.

“It is essential that the allocation of funds for infrastructure works continue in the second part of the year, after the local elections, because as they showed last year, constructions are an engine of growth of the Gross Domestic Product in Romania” , Ms. Birta added.

The results of the Installations segment still generated the highest turnover of 122 million lei in Q1/2024, 19% more than in Q1/2023, while the EBITDA margin is approaching 10%, as a result of the increase significant volumes. The evolution reflects the acceleration of public infrastructure works by increasing the number of projects that have reached the execution phase. In addition to the demand generated by the works for the water-sewage infrastructure, a significant advance is also observed in the works for the transportation and distribution of natural gas. TeraPlast remains the first choice for these projects, with a tradition of solid, long-term partnerships with construction market leaders.

The Installations segment also includes the results of Palplast Moldova in the first quarter. The newly acquired company’s sales rose nearly 50% in the first 3 months of the year compared to Q1/2023, while margins fell as part of an effort to gain market share. Considering the completion of the acquisition of the Wolfgang Freiler Group at the end of March, the results of the Installations segment will also consolidate its evolution starting from the 2nd quarter of the current year.

For the Granule business line, the EBITDA margin normalized, reaching 11%, but sales stagnated in terms of value. The group remained focused on increasing its market share, and in the first quarter TeraPlast managed to increase it by replacing part of its imports.

For recycled material, the context remains unfavorable due to the decrease in the price of virgin raw material. Volumes sold to third parties are currently below estimates, but overall (including quantities sold to TeraPlast’s Installations segment) volumes are up 48% from Q1/2023.

The Flexible Packaging segment doubled its turnover in the 1st quarter, up to 24 million lei. Sales of TeraBio Pack’s flexible polyethylene and biodegradable and compostable packaging are at budgeted levels, with lower losses compared to previous years.

Forecasts for this business line foresee an operational loss this year as well, because the margins on the biodegradable packaging market in Romania have deteriorated significantly. In addition, in order to support the achievement of break-even, the segment went through a process of diversifying its supplier base and product portfolio.

The evolution of the Flexible Packaging segment also reflects the start of production of Opal stretch films. The Opal business got off to a good start, with sales volumes double targets. Opal has thus reached the top 3 players in the Romanian market, with a client portfolio that includes large producers in the food and beverage market both in the country and abroad.

“The increase in TeraPlast Group’s sales in Romania was done by replacing imports. Every ton of TeraPlast products sold here eliminates a ton of balance-of-payments burdening imports. If all Romanian companies proposed this goal, the country’s economy would look different,” also said Dorel Goia.

Due to demand, a range of special products, Power and Super Power foils, aimed at industrial customers, have already been introduced to the market, although they were only scheduled for release in the 2nd quarter of this year.

The Opal plant is still in the ramp-up period, so even if volumes are above expectations, EBITDA is in negative territory, with the prospect of a positive result in 2025.

The Windows & Doors segment had revenues down 16% compared to the 1st quarter of last year, a level in line with the budget. At the same time, the EBITDA margin improved as the Group adapted its strategy for this segment, focusing on sales to the Romanian new residential project and rehabilitation market, to reduce retail dependence.