Unusual layout that did not work: The Rettenmeier site Ramstein just five years ago shows a sawmill without conventional logyard © Rettenmeier
- The losses of Rettenmeier Holz between 2010 and 2012 totaled 156 million.
- As of 31 December 2012, the Rettenmeier Group showed a negative equity of 92.6 million.
According to an assessment on the operational continuance, there is a financial, but no legal indebtedness. Due to Rettenmeiers strong market position, a continuation of operation is recommended.
Bad investment and crisis
The main reason for this development can be located in the Ramstein operation. In retrospect, Rettenmeier's sawmill concept that was implemented there must be viewed as catastrophic misinvestment. Instead of profits, losses of 100 million were accrued in Ramstein between 2009 and 2012 – money, which the owners did not have. Economic crisis and tax arrear payments did the rest. Due to the over-indebtedness, the banks now insist on selling the group. At the same time, Rettenmeier Holz has apparently achieved the turnaround and plans to be in the black this year.Strategically correct, but an operational fiasco
The restructuring of the group with once 1,500 employees (2009) also affected the very entrepreneurial family. On 28 November 2013, Dr. Josef Rettenmeier being the last member of the dynasty left the business which he had once established together with his brother Helmut to become a leading wood processor. A look back:In 2009, the position of the previously expansive Rettenmeier Group became turbid. The financial and real estate crisis reduced sales by 16% to 263 million.
Yet fatal were the difficulties that arose when the Ramstein sawmill was started up. The line based on the online concept (i.e. without log sorting) which is uncommon in Central Europe, and never lived up to the planned performance. The management then decided to actually build a second sawmill, this time with proven technology designed by Linck and Springer. At that time it calculated with 26 million reconstruction costs that should incur in 2010 and 2011.
During these months also conflicts escalated between the executive brothers Helmut Josef Rettenmeier. On 22 September 2009 – not even a month after the grand opening of Ramstein – Helmut Rettenmeier was dismissed from the management board of the Holding AG. This had nothing to do with the Ramstein fiasco, but with "irreconcilable differences regarding the corporate strategy", Helmut Rettenmeier emphasized in an Timber-online interview. In the course of the dismissal the Supervisory Board initiated a a special investigation concerning Helmut Rettenmeier’s role, the results of which were never presented publicly. The investigation alone cost 2 million.Nevertheless, it was expected at that time that net profits would increase by 21% to 2.5 million by the end of 2010. What happened was the opposite thing.
First steps on the way to restructuring
In 2010 Ramstein fully impacted the balance sheets. Instead of a profit, a 58.1 million loss was made. Shareholders' equity declined by 90% to only 6.66 million. The extraordinary costs alone (closing costs, restructuring costs, losses in Ramstein) caused a shortfall of 35.3 million. Liquidity became scarce. In the midst of this crisis, the company also lost 6.5 million, which according to information available to Timber-online accrued due to amortization of non-core companies of the family. Tax audits on the years between 1998 and 2007 caused further cash outflow as tax arrears in the millions had to be paid. In 2010, the tax burden of Rettenmeier Holz climbed from 4.75 million to 7.55 million compared to the year before. In addition, 3.58 million of provisions needed to be formed to be used for tax arrears of prior years based on annual financial statements and tax audits, and largely to be settled in the following year.So the economic crisis, special depreciation, bad investment and tax payments had turned Rettenmeier Holz into a company in need of restructuring. In 2010, Ernst & Young was brought on board – an acknowledged restructuring expert. With the creditors agreement was reached about the following points (among others):- temporary deferral of interest
- principal and interest waiver for mezzanine capital
- new loan of 24 million to secure liquidity in rehabilitation phase
72 million loss in one year
Despite restructuring efforts, Rettenmeier Holz bottomed out only in 2011. That year revenues increased by 6.3% to 315 million, but also losses climbed to 71.8 million. With 33.1 million, even cash flow from operating activities was deeply in the red. Ramstein alone caused losses of 69 million that year. Of this amount, 34.4 million were write-downs and 21.5 million potential losses from future lease payments. Mezzanine capital and shareholder loans were given lower priority and are since then de facto included in the equity capital. But that was only 7 million. With a balance sheet equity of –66.2 million, the company was hopelessly indebted. However, no bankruptcy had to be declared. The banks agreed to finance restructuring measures until 30 June 2015.In April 2011, Florian Volk was appointed as Chief Restructuring Officer (CRO). Creditors supplied the company with liquidity and were looking for a financially strong buyer. In 2012 the m & a process started which is being advised by Pöyry.
2012 still in negative territory
The last annual report signed by Dr. Josef Rettenmeier was released last September. Operationally the group had achieved an improvement in 2012, but still no profitability. The operating result was still in the red with 4.43 million. Financial and extraordinary result led to an overall net loss of 26.4 million. Ramstein continued to weigh heavy on the balance sheet. The Annual Report 2012 sheet included accruals and deferrals for prepaid lease amounts totaled 9.2 million. That year alone, consulting fees on reorganisation amounted to 4.36 million.The Annual Report 2012 also provides information about the individual companies. The Rettenmeier operation in Ramstein produced a loss of 3.15 million, the Rettenmeier operation in Hirschberg a loss of 2.03 million. On a brighter note, the Rettenmeier production site in Wilburgstetten achieved profits of 813,000.
The generally poor profit situation in the industry made restructuring efforts even more difficult. To remain solvent, it was necessary for the group to take two loans totaling 44.9 million to stay on track with the restructuring process.
Personnel merry-go-round starts turning
In 2013 two locations were sold. Yet the Slovak subsidiary Rettenmeier Polomka Timber remained in the family. It went to Helmut Rettenmeier’s four children and now operates under the name myWood Polomka Timber. The Baden-Württemberg location Gaildorf/DE was acquired by Junginger Holz who is now establishing a structural finger-jointed timber (KVH)-production there. Rettenmeier’s former base plate production went offline in mid 2013.During the refurbishment, the “staff merry-go-round” turned rapidly. CFO Dietmar Breithaupt left the board in August 2012. Chairman Hartmut Fröhlich retired from the board in mid-2013. CRO Volk was replaced in 2012 by Michael Weimar and Dr. Stephan Lang as Chief Financial Officer. Since 31 January 2013 Frank Dietz has taken Weimar’s place, whereas Lang has remained in the management. The latter has recently confirmed via Timber-Online that the sale process is now in its final stages. Apparently, plans are that Rettenmeier be sold to an investment fund just as Klenk Holz was last year. The profit situation is, however, again more positive. According to Lang, preliminary figures suggest that EBITDA (earnings before interest, taxes, depreciation and amortization) had doubled in 2013 to around 26 million. “All Rettenmeier companies were in the black last year”, the CFO says upon inquiry.
Buyer has good prospects
The m & a process is now coming to an end. A takeover of the Rettenmeier Group is expected to occur as early as this month. According to insiders, the Swiss financial investor Capvis Equity Partners, Zurich, has the best chances to acquire the company. Thus, Germany’s two formerly largest family-owned sawmilling companies would share the same destiny, that is being taken over by a foreign investment fund. Whoever the new owner will be, the prospects for a continued operation of the Rettenmeier Group are not bad. The buyer receives a group operating in the black along with a well-known brand.There is also news from Slovakia. According to a statement made by Helmut Rettenmeier, myWood Polomka Timber might start up a sawmill this year.
