Growth of 2011 sales, margins under pressure due to strong raw material increases
Net sales: €2.1 bn Organic growth: +6,8% EBITDA before unusual items: €191m Net result: €25m
Tarkett, worldwide leader in innovative flooring and sports surface solutions publishes today its 2011 results.
Net sales grow by 8.8% vs. 2010
This performance results from a strong organic growth (6.8%) and from acquisitions (2.8%), while exchange rates had a slightly unfavorable impact (0.7%).
Organic growth came mostly from the dynamism of emerging countries (Eastern Europe, South America), where the Group reported sales up by 21% vs. 2010. Emerging countries now account for 38% of total Group sales, vs. 34% in 2010.
In Western Europe and North America, flooring markets have been relatively stable, even if the situation varied across the regions. As an example, Spain and Italy had a very challenging year, while Nordic economies demonstrated a strong dynamism. In this environment, Tarkett continued to progress, by 5% in Western Europe and by 2% in North
Sports surfaces (mainly artificial turf and running tracks) have suffered a reduction in sales by 9% vs. 2010, mainly due to budget cuts initiated by local communities in Europe.
EBITDA before unusual items declines by 14%, at €191m.
The Group profitability has been particularly impacted by the raw material price increases that have taken place since Q2-2010. This effect alone accounts for a €110m hit on margins. Selling price increases implemented in the second half of 2010 and during 2011 have enabled Tarkett to recover 65% of this impact. These selling price increases will have a positive carryover effect on 2012.
Net result: €25m
Financial expenses have been kept under control and represented only 1% of net sales. However, the results reported by certain regions have led the Group to adopt a prudent view and to depreciate €16m of deferred tax assets that had been previously recognized on the balance sheet.
Lower operating cash-flow explained in particular by a strong industrial investment program.
On top of the reduction in operating margins, two elements had a negative effect on operating cash-flow: :
- The growth in working capital (€23m) was contained: despite the strong growth of sales and the geographical expansion of the Group, inventory turns remained stable.
- Capital investments increased by €31m vs. 2010 following the launch of significant investment project such as the implementation of a new calender in Russia, LVT (Luxury Vinyl Tiles) production capacity increases or the deployment of SAP within the Group.
A sound financial structure
For the first time in four years, Tarkett paid a dividend in 2011, amounting to €103m. In spite of that, the Group indebtedness remains at a low level, with a leverage ratio (Net debt/EBITDA) of 1.7 times, and a gearing ratio (Net debt / Equity) of 53%.
With the refinancing of its main credit facility achieved in June 2011 (€450m), Tarkett has the necessary financial resources to pursue its strategy of targeted acquisitions. In 2011, the Group acquired Marty, a French specialist of engineered wooden floors.
« Our strategy of innovation and growth in emerging countries has been successful in 2011 and will be carried on. We remain prudent for 2012, given the risks that continue to weigh on European economies. In this environment, our team’s priority will be to strengthen our margins” said Michel Giannuzzi, CEO of Tarkett.