There has been an encouraging trend in both divisions over the first six months of the 2017 financial year. The paper division is benefiting from the excellent reputation that its products enjoy on the market, with distribution focusing increasingly on the sale of high-margin speciality papers. Efficiency gains at the company's mills are also increasing profitability. The real estate division achieved higher rental income and is developing according to plan, with a focus on the planning process for the first stage of construction. Slightly lower revenue of CHF 99.2 million (previous year: CHF 103.8 million) resulted in an operating profit of CHF 9.9 million (previous year: CHF 5.2 million). Net income came to CHF 7.1 million (previous year: CHF 3.3. million).

Further progress in the paper division
The paper division enjoyed high demand in every market segment in the first half of the year and thus benefited from the outstanding quality of Cham Paper Group's products and services. This allowed the Group to focus on selling high-margin speciality papers. For instance, sales of digital imaging papers outperformed the market, rising by 15% (revenue share 15%). Sales of speciality papers for industrial applications (industrial release segment) also increased by 3% (revenue share 38%). The revenue share of the consumer goods segment was reduced slightly to 47%. Overall the paper division generated revenue of EUR 91.6 million (previous year: EUR 94.0 million). Production volumes were just below the previous year's levels due to the switchover to TRANSJET products (digital imaging) on the company's own base paper. In terms of tonnage, volumes dropped to lower basis weights as a result of the market trend.

At the same time, after the major efforts of the past few years, efficiency gains are proving increasingly profitable in production, while gross margins have risen considerably. The partial hedging of pulp costs largely compensated for the sharp rise in pulp prices and this effect should be partially offset in the second half of the year too now that sales prices have increased. A slight dip in operational costs resulted in an operating profit of EUR 9.4 million for the paper division, a figure which has doubled year on year (previous year: EUR 4.8 million) and corresponds to a pleasing EBIT margin of 10.3%.

Scheduled development in the real estate division
Preparations are under way for two commissioned studies for the first two substages of the site's development. Once complete, this stage will see around 80 owner-occupied flats, 130 rental flats and 30 affordable homes built. These are expected to go on sale from 2020/2021 together with some 9,000 m2 of service and commercial space. Around CHF 180 million is being invested in the first stage, while the long-term financing has been secured on favourable terms. The rental income generated by existing buildings rose by 28% to TCHF 1.089 million. The lessee Specialized moved into the renovated workshop building on 1 October 2016, which had a particularly positive effect on rental income. The division was also able to make greater interim use of free space. The operating profit for the first half of the year amounted to TCHF 484 (previous year: TCHF 29).

The Tour de Suisse got under way in glorious weather, attracting thousands of cycle racing fans to the Papieri-Areal from 9 to 11 June. The new website www.papieri-cham.ch was launched to coincide with the event and will provide information about further developments on the site in future. The Zug cantonal council ruling on approving the development plan as well as the partial change to the building regulations and zoning plan is due to be announced after the summer holidays.

Further increase in shareholder's equity ratio
Cham Paper Group further bolstered its balance sheet in the reporting period. Free cash flow of CHF 6.0 million was generated. The shareholders' equity ratio stood at 59.2% at the end of the first half of the year (end of 2016: 55.4%), while net cash amounted to CHF 5.4 million. The site in Cham will continue to be valued at acquisition cost for the time being.

Functional change on the Executive Management Board
Luis Mata, who has played a significant role in restructuring the company over the past five years and has managed the Italian mill for the past two years as COO, is to take over the role of CFO of the entire Group with effect from 1 September 2017 and will thus support both divisions in their next phase of growth. Delegate of the Board and CEO of the paper division Susanne Oste shall assume direct responsibility for mills, sales and innovation.

Outlook
The Board of Directors and Executive Management Board are optimistic that the financial year will continue to develop well. They anticipate that the paper division will see continued positive market demand and further efficiency gains in production in the second half of the year, although higher pulp costs will curb margin development. The commissioned studies for the first two substages are scheduled to begin in the real estate division.