Tue 09/20/2022 11:04 AM
Share this article:
Sweden-based mattress maker Hilding Anders reported a weak set of June numbers, with earnings in the core European and Asian business hit by falling volumes and margin pressure from input costs. Meanwhile, EBITDA at standalone Russian JV Askona turned negative and the entity’s cash position is eroding fast, sources told Reorg.

Sales in Europe and Asia came in at €50 million in June, falling short of €53 million budgeted and €52 million for the same month last year driven by a double-digit volume drop in Europe, which more than offset price increases. As a result, EBITDA slumped to €2.3 million, barely reaching half the €4.4 million the group had budgeted and well below the €3.2 million Hilding Anders generated last year. However, EBITDA is increasing sequentially as price increases are starting to catch up with raw material cost inflation, sources noted.

On a year-to-date basis to June the Europe and Asia business generated €301 million of sales, which is in line with €302 million budgeted and up from €276 million over the same period last year. EBITDA reached €16 million, trailing €19.7 million budgeted and down from €16.7 million last year.

Hilding generated €8.8 million of cash in June, but that was driven by a €10.8 million working capital inflow largely as a result of a €9.9 million increase in payables. On a year-to-date basis the group burned €22.7 million driven by a €23.5 million working capital outflow.

It left the group with €34.7 million of cash, which was slightly below the €40.1 million it had budgeted at this point. Hilding was unable to secure a working capital loan from Ikea, one source noted.

Falling Off a Cliff

The group’s Russian JV Askona is faring significantly worse. The number of mattresses sold dropped to 93,000 in June, almost halving from 175,000 last year and short of 152,000 budgeted by some distance. Sales reached 2.955 billion roubles ($49.2 million), up from RUB 2.773 billion for the same period last year but short of RUB 3.136 billion budgeted. EBITDA turned negative RUB 28 million versus RUB 266 million budgeted and RUB 252 million in June last year.

That left Askona burning cash, eroding its liquidity at a rapid rate, sources noted. The JV’s cash balance dropped to RUB 398 million at the end of June from RUB 1.549 billion at the start of the year.

Following its restructuring, Hilding’s stake in Askona will be held via Halecroft Ltd., a holding company incorporated in Cyprus and run as an operationally independent and self-funding entity in compliance with all trading restrictions until it can be sold. Hilding owns 73% of Halescoft Ltd., while the other 27% is held by Dealrose Ltd., which is owned by Vladimir Sedov, the founder of Askona.

Hilding is aiming to implement its restructuring proposal in September after receiving unanimous consent from lenders. Under the deal, 45% of the current senior debt will be shifted into holdco PIK instruments while €300 million senior debt will be reinstated. The deal will reduce net leverage to 5.6x from 7x through the reinstated opco debt, which is essential to maintain terms with Hilding’s suppliers. Sponsor KKR will receive contingent value rights, which will crystallize into a debt claim at the holdco level, ranking pari passu with the new PIK notes in the event of a sale of the business.

–-Robert Schach
Share this article:
This article is an example of the content you may receive if you subscribe to a product of Reorg Research, Inc. or one of its affiliates (collectively, “Reorg”). The information contained herein should not be construed as legal, investment, accounting or other professional services advice on any subject. Reorg, its affiliates, officers, directors, partners and employees expressly disclaim all liability in respect to actions taken or not taken based on any or all the contents of this publication. Copyright © 2022 Reorg Research, Inc. All rights reserved.
Thank you for signing up
for Reorg on the Record!