Consolidated Financial Results for Sarantis S A in H1 2022

Thursday, September 8^th 2022

GR. SARANTIS S.A.
Comprehensive Overview of Consolidated Financial Results for the First Half of 2022

EXCEPTIONAL SALES GROWTH OF 9.3% DESPITE ADVERSE MARKET CONDITIONS

DEEP COMMITMENT TO EXECUTING THE GROUP’S STRATEGIC GROWTH INITIATIVES

In the first half of 2022, the Group experienced remarkable sales growth momentum, achieving a notable 9.34% increase despite facing substantial challenges due to soaring input costs, which were further intensified by the ongoing war in Ukraine. This demonstrates the Group’s resilience and strategic adaptability in a volatile market environment.

The Group’s total turnover during H1 2022 surged to € 213.48 million, compared to € 195.24 million in H1 2021, marking a robust performance driven by both value and volume. This growth reflects the Group’s effective pricing strategies and its ability to capture market share within its key segments.

A diversified product portfolio significantly contributed to this sales growth. The Group effectively seized opportunities in high-potential market segments while implementing strategic pricing actions. Sales increased particularly in categories such as deodorants, face skin care, sun care, body wash, garbage bags, food packaging products, and food supplements. These efforts have solidified the Group’s presence across its operational regions.

Notably, sales in Greece demonstrated a remarkable growth of 10.29%, surpassing overall market performance. Greek sales totaled €76.37 million in the first half of 2022, up from €69.25 million in the same period last year. This growth stemmed from successful initiatives across the mass market, healthcare, and export channels, showcasing the Group’s effective market penetration strategies.

Foreign sales also exhibited impressive growth of 8.82%, reaching €137.11 million in H1 2022, up from €125.99 million in the previous year. Even when adjusting for foreign exchange fluctuations, sales from foreign markets showed a solid growth of 9.3%. This performance underscores the Group’s successful international strategies and operational resilience amidst global challenges.

It is noteworthy that foreign sales figures include contributions from the Group’s subsidiary in Ukraine, Ergopack. After an initial halt in operations due to the conflict, Ergopack’s production facility in Kaniv resumed full operations in April 2022, reflecting the Group’s commitment to maintaining operational continuity in challenging times.

The persistent inflation of costs, exacerbated by the geopolitical scenario, has had an impact on the Group’s profitability during the first half of 2022, contrasting with last year’s results, which were unaffected by such inflationary pressures. To counteract these challenges, operating expenses, as well as advertising and promotion costs, have been closely monitored and managed to mitigate the pressure on the Group’s gross profit margin.

The Group’s profitability metrics are as follows*:

• EBITDA decreased by 9.6% to € 22.58 million in H1 2022, down from €24.98 million in H1 2021, resulting in an EBITDA margin of 10.58%, compared to 12.79% in H1 2021.
  </li>
  <li>
  Earnings Before Interest and Tax (EBIT) amounted to € 16.04 million during H1 2022, compared to € 18.56 million in H1 2021, reflecting a decline of 13.57%. The EBIT margin decreased to 7.51%, down from 9.51% in H1 2021.
  </li>
  <li>
  Earnings Before Tax (EBT) totaled €14.77 million in H1 2022, down from €18.38 million in H1 2021, representing a decline of 19.64%, with the EBT margin at 6.92%, compared to 9.41% in the prior year’s first half.
  </li>
  <li>
  Net Profit reached €11.59 million in H1 2022, down from €14.63 million in the previous year’s first half, a decrease of 20.78%, while the Net Profit margin settled at 5.43%, down from 7.49% in H1 2021.
  </li>
  </ul>
  <p dir="auto">
  <strong>Detailed Consolidated Financial Figures for Sarantis Group’s Continuing Activities</strong>
  </p>
  <table>
  <tbody>
  <tr>
  <td>
  <p dir="auto">
  <strong><em>P&L (€ mil.)</em></strong><strong><em>*</em></strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong><em>H1</em></strong><strong><em>‘</em></strong><strong><em>22</em></strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong><em>%</em></strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong><em>H1</em></strong><strong><em>‘2</em></strong><strong><em>1</em></strong><strong><em>*</em></strong><strong><em>*</em></strong><strong><em>*</em></strong>
  </p>
  </td>
  </tr>
  <tr>
  <td>
  <p dir="auto">
  <strong>Turnover</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>213.48</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  9.34%
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>195.24</strong>
  </p>
  </td>
  </tr>
  <tr>
  <td>
  <p dir="auto">
  <strong>Gross Profit</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>75.02</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  2.49%
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>73.20</strong>
  </p>
  </td>
  </tr>
  <tr>
  <td>
  <p dir="auto">
  Gross Profit Margin
  </p>
  </td>
  <td>
  <p dir="auto">
  35.14%
  </p>
  </td>
  <td>
  </td>
  <td>
  <p dir="auto">
  37.49%
  </p>
  </td>
  </tr>
  <tr>
  <td>
  <p dir="auto">
  <strong>EBITDA *</strong><strong>*</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>22.58</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  -9.60%
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>24.98</strong>
  </p>
  </td>
  </tr>
  <tr>
  <td>
  <p dir="auto">
  EBITDA Margin
  </p>
  </td>
  <td>
  <p dir="auto">
  10.58%
  </p>
  </td>
  <td>
  </td>
  <td>
  <p dir="auto">
  12.79%
  </p>
  </td>
  </tr>
  <tr>
  <td>
  <p dir="auto">
  <strong>ΕΒΙΤ</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>16.04</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  -13.57%
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>18.56</strong>
  </p>
  </td>
  </tr>
  <tr>
  <td>
  <p dir="auto">
  EBIT Margin
  </p>
  </td>
  <td>
  <p dir="auto">
  7.51%
  </p>
  </td>
  <td>
  </td>
  <td>
  <p dir="auto">
  9.51%
  </p>
  </td>
  </tr>
  <tr>
  <td>
  <p dir="auto">
  <strong>EBT</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>14.77</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  -19.64%
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>18.38</strong>
  </p>
  </td>
  </tr>
  <tr>
  <td>
  <p dir="auto">
  EBT Margin
  </p>
  </td>
  <td>
  <p dir="auto">
  6.92%
  </p>
  </td>
  <td>
  </td>
  <td>
  <p dir="auto">
  9.41%
  </p>
  </td>
  </tr>
  <tr>
  <td>
  <p dir="auto">
  <strong>Tax</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>3.13</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  -10.59%
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>3.50</strong>
  </p>
  </td>
  </tr>
  <tr>
  <td>
  <p dir="auto">
  <strong>Profit After Tax</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>11.64</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  -21.77%
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>14.88</strong>
  </p>
  </td>
  </tr>
  <tr>
  <td>
  <p dir="auto">
  <strong>Profit After Tax Margin</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  5.45%
  </p>
  </td>
  <td>
  </td>
  <td>
  <p dir="auto">
  7.62%
  </p>
  </td>
  </tr>
  <tr>
  <td>
  <p dir="auto">
  <strong>Minorities</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>0.05</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  -79.71%
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>0.25</strong>
  </p>
  </td>
  </tr>
  <tr>
  <td>
  <p dir="auto">
  <strong>Net Profit</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>11.59</strong>
  </p>
  </td>
  <td>
  <p dir="auto">
  -20.78%
  </p>
  </td>
  <td>
  <p dir="auto">
  <strong>14.63</strong>
  </p>
  </td>
  </tr>
  <tr>
  <td>
  <p dir="auto">
  Net Profit Margin
  </p>
  </td>
  <td>
  <p dir="auto">
  5.43%
  </p>
  </td>
  <td>
  </td>
  <td>
  <p dir="auto">
  7.49%
  </p>
  </td>
  </tr>
  </tbody>
  </table>
  <p dir="auto">
  <em>*The financial figures included in the table above reflect the Continuing activities of the Group, excluding the contribution from ELCA Cosmetics Ltd, as the Group’s stake was sold on June 15, 2022. For detailed insights, please refer to the Group’s Half-Year 2022 Financial report, paragraph 4.9.2.</em>
  </p>
  <p dir="auto">
  <b><em>This represents an Alternative Performance Measure, as defined in paragraph 2.9 of the Group’s 2022 Semi-Annual Financial Report.</em>
  </p>
  <p dir="auto">
  <em><b>*The comparative figures for H1 2021 have been revised due to changes in the accounting policy under IAS 19.</em>
  </p>
  <p dir="auto">
  <strong>Strategic Sale of ELCA Cosmetics Ltd</strong>
  </p>
  <p dir="auto">
  The Profit and Loss table above outlines the Group’s consolidated financial results, excluding the financial contribution from ELCA Cosmetics Ltd, which was previously reported as an affiliate through the equity method. This strategic move reflects the Group’s ongoing focus on optimizing its core activities.
  </p>
  <p dir="auto">
  It is important to note that on June 15, 2022, after a successful partnership spanning twenty-one years, the Group divested its 49% stake in the joint venture with The Estée Lauder Companies, known as ELCA Cosmetics Ltd. This decision aligns with both The Estée Lauder Companies’ go-to-market strategy and Sarantis Group’s vision for future growth based on its core strategic activities.
  </p>
  <p dir="auto">
  The total purchase price for this transaction amounted to €55.2 million, with €14 million paid on June 16, 2022. The remaining balance will be settled in two equal installments of €20.6 million, due in January 2025 and January 2028. This structured payment plan mitigates financial risk while ensuring liquidity for future investments.
  </p>
  <p dir="auto">
  The agreed purchase price is viewed as advantageous for Sarantis Group, as it finalizes the transaction amount and reduces exposure to potential negative fluctuations in the business environment. This divestment also allows the Group to redirect funds into strategic investments, particularly in mergers and acquisitions related to its core activities.
  </p>
  <p dir="auto">
  The Group is actively pursuing opportunities to replace the profitability previously generated by the Joint Venture through a well-defined strategy that emphasizes both acquisition efforts and the establishment of new distribution agreements. This dual approach is aimed at enhancing the Group’s competitive standing in the market.
  </p>
  <p dir="auto">
  Specifically, the Company has announced plans to acquire Stella Pack S.A., a notable Polish consumer household products company, pending approval from antimonopoly authorities. This acquisition is projected to be finalized by early Q4 2022, further bolstering the Group’s market position.
  </p>
  <p dir="auto">
  STELLA PACK is recognized as a leading entity in the production and distribution of household products, with a successful 25-year track record in categories such as <b>garbage bags, food packaging, and household cleaning items. In 2021, STELLA PACK reported a turnover of approximately €65 million and an EBITDA of €8.5 million, underscoring its significant market presence.

  Given the operational similarities between Sarantis Group and the acquired company, synergies are anticipated across various business levels, including sales, administrative services, warehousing, and manufacturing. Consequently, this acquisition is expected to add substantial value to the Group, with projections indicating an EBITDA contribution of at least €12 million annually by 2023, thereby exceeding the previously anticipated profitability of the Joint Venture by a significant margin.

  It is imperative to highlight that the expected future profitability of the Joint Venture would have faced a decline regardless, as Sarantis Group’s stake would have gradually reduced to 40% between 2022 and 2024, and further down to 15% from 2025 to 2027, culminating in complete divestment following the release of the financial statements for FY 2027.

  Operational Update on Ergopack

  On February 24, 2022, we made the decision to temporarily close Ergopack’s plant in Kaniv and halt production for safety reasons. However, since April, we have gradually resumed manufacturing in Ukraine and are actively distributing products under a stringent credit control policy, successfully covering a significant portion of our channels within Ukraine and Ergopack’s export network. Despite a month and a half of temporary suspension, Ergopack’s sales during H1 2022 totaled €9.72 million, compared to €12.6 million in the same period last year, reflecting a decrease of 22.9%.

  Strategic Withdrawal from the Russian Market

  Sarantis Group has made a decisive decision to permanently exit the Russian market amidst the ongoing crisis between Ukraine and Russia. This strategic move is part of the Group’s broader commitment to ethical business practices and global responsibilities.

  Currently, GR. SARANTIS S.A. operates in the Russian market through its wholly-owned subsidiary, HOZTORG LLC., which manages commercial activities. As of H1 2022, sales generated by Hoztorg LLC amounted to €0.75 million, representing a mere 0.4% of the Group’s overall sales, indicating limited exposure to this market segment.

  Furthermore, the assets of Hoztorg LLC constituted only 0.26% of the Group’s total assets during H1 2022. The Group anticipates that the negative financial impact resulting from the cessation of its operations in Russia will approximate €1.2 million, reflecting the total equity tied to the Russian subsidiary.

  On a positive note, the Group maintains a robust financial position bolstered by profitable business operations, balanced capital expenditures, and effective working capital management. As of the close of the first half of 2022, the Group’s net debt-to-EBITDA ratio (excluding ELCA Cosmetics Ltd) stood at 0.4x, with a net debt position of €18.72 million, compared to €5.96 million at the end of 2021. This increase in debt is attributed to higher financing needs and a temporary surge in working capital requirements.

  Increased working capital needs stem from a rise in trade receivables, largely due to seasonal factors that are expected to normalize in the latter half of the year, coupled with heightened inventory levels resulting from increased input prices. This strategy reflects the Group’s proactive measures to safeguard its cost and production capabilities during uncertain times.

  Despite the prevailing challenges posed by the ongoing COVID-19 pandemic, global supply chain disruptions, and inflationary pressures, the Group remains dedicated to executing its strategic agenda. This includes reinvesting cash generated from operations into initiatives aimed at accelerating both organic and acquisition-based growth while delivering value to shareholders.

  Throughout 2022, the Group distributed approximately €10 million as dividends for FY 2021, translating to €0.143108 per share, thereby reaffirming its commitment to shareholder returns.

  Additionally, during the first half of 2022, significant progress was made in the construction of Polipak’s new production facility in Poland, with completion expected by the end of 2022. This new facility for garbage bag production is designed to enhance automation and increase production capacity, efficiency, and product sustainability, focusing on ecological improvements and functionality.

  As part of its strategy to drive organic sales and profit growth, the Group is prioritizing optimization of its product portfolio while leveraging its strong brand equity across strategic product categories. Targeted investments and innovation initiatives are being deployed to foster growth across its markets.

  Furthermore, the Group has made investments aimed at enhancing infrastructure, systems, processes, and operational models to improve overall efficiency and effectiveness across the board.

  The Group is also actively pursuing its growth agenda through acquisitions. Following a rigorous due diligence process in 2021, an agreement was reached on March 2^nd 2022 for the acquisition of STELLA PACK S.A., a prominent Polish consumer household products company. This acquisition is currently pending the approval of antimonopoly authorities in the respective countries and is anticipated to finalize by the end of 2022.

  STELLA PACK stands out as a leading producer and distributor of household products, boasting over 25 years of experience in categories such as garbage

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