Pfleiderer, the world’s second biggest producer of particleboard and fibreboard, admits that it is in danger of breaching its lending agreements unless there is a sustained improvement in markets.
The €1.4bn turnover German company, which also produces MDF and laminate flooring, reported a pre-tax loss of €28m for Q3 and even suggested a worst case scenario where the company’s existence might be compromised.
Pfleiderer said it was examining various restructuring options, which in combination with economic developments, could lead to impairment charges and restructuring expenses.
“We do not exclude the possibility that if there is no sustained improvement in the market situation, we may be unable to fulfil the financial covenants agreed upon with the banks in the future, and may have to resume negotiations,it said in a trading statement.
“This would lead to credit lines becoming more expensive or even falling due. In the worst case, it might jeopardise the company’s continuing existence.”
However, the company said it assumed it would be able to reach an agreement with the banks should it find itself unable to meet its financial covenants.
Pfleiderer, whose business includes the Pergo flooring brand, currently has debts of €914.5m.
It does not foresee any significant recovery of the raw particleboard market in the short term, while margins were also being pressured by increasing raw material costs (wood and chemicals).
“An additional factor is that the economic situation in North America has not developed in line with our expectations,it added.
The group made a pre-tax loss of €64.9m in 2009.
