Stable sales at
constant exchange rates
Adjusted EBITDA
penalized
by raw material prices and currency effects
Highlights
Paris, April 24,
2018
-
Slight organic growth of
0.1%(1), reported net sales down 7.2% year-on-year at €568m due to
adverse currencies
-
Lower sales than expected in
EMEA (-4.6%)(1) and in North America (-1.6%)(1), including negative calendar
effects
-
Strong organic growth in Sports
(up 15.9%)(1) and good start to the year for the CIS, APAC and Latin
America segment (up 5.0%)(1)
-
Adjusted EBITDA(2) down to €30m versus €52m in Q1 2017, penalized by raw
material prices, lower activity in EMEA and North America and
currency effects
(1) Organic growth: at constant
scope of consolidation and exchange rates (note that in the CIS
segment, price increases implemented to offset currency
fluctuations are not included in organic growth, which only
reflects changes in volumes and the product mix). See the
definition of alternative performance indicators at the end of this
press release.
(2) Adjusted EBITDA: adjustments
include expenses such as restructuring, acquisitions and
share-based payment expenses. See the definition of alternative
performance indicators at the end of this press release.
Net sales at
constant scope of consolidation and exchange rates remained
stable (+0.1%) in Q1 2018. In EMEA (down
4.6%), the basis of comparison to last year was high (Q1 2017
organic growth of 7.0%) and the performance has been penalized by a
negative calendar effect (-1.6%) and destocking at key customers.
In North America, like-for-like(1) sales were
down 1.6%, also affected by a negative calendar effect (-1.6%). The
Sports segment continued to enjoy strong growth (up 15.9%) and the
CIS, APAC and Latin America segment started the year on a solid
5.0% organic growth.
Reported sales were down 7.2%
versus Q1 2017. Currency movements had a significant -7.5% negative
impact in the first quarter primarily due to the US dollar, the
Russian ruble and the Swedish krone. The perimeter impact accounted
for +0.3% thanks to the acquisition of the assets of Grassman, a
leading Australian synthetic turf manufacturer that reported
approx. €10m of sales in 2017.
The Group adjusted EBITDA amounted to €30m
(vs. €52m in Q1 2017) and the adjusted EBITDA
margin came in at 5.2%. We delivered a
good level of productivity (+€9m) and selling price increases
contributed positively (+€2m). However, as expected, raw materials
(-€10m) remained adverse in Q1. Currency effects also penalized the
adjusted EBITDA (-€5m), mainly owing to the Russian ruble's
devaluation compared to last year, the British pound and Norwegian
krone. The net impact of currency and selling prices in the CIS
countries (lag effect) is -€2m. In addition, the volume decrease in
EMEA and North America has negatively impacted the profit of the
Group.
We continue to deploy selling
price increases where needed and have implemented cost reduction
measures across the Group. In addition, our robust program of new
product launches, which are being well received by our customers,
will also contribute to mitigate some of the shortfall of the first
quarter.
Commenting on these results,
Glen Morrison, CEO, stated:
"While the first
quarter is traditionally the quietest quarter of the year, revenue
level is below our expectations. The adverse effects of raw
material price increases and currencies continue to negatively
impact our profitability. We have and are taking actions to both
accelerate the deployment of our growth initiatives and reduce
costs. I am confident that we will return to our usual levels of
profitability in the medium term."
Net sales by segment
€
million |
Q1 2018 |
Q1 2017 |
% Change |
o/w organic growth(1) |
EMEA |
228.3 |
243.4 |
-6.2% |
-4.6% |
North
America |
163.5 |
190.3 |
-14.1% |
-1.6% |
CIS, APAC
& Latin America |
116.3 |
121.3 |
-4.1% |
+5.0% |
Sports |
59.8 |
56.7 |
+5.4% |
+15.9% |
Total Group |
567.9 |
611.7 |
-7.2% |
+0.1% |
Adjusted EBITDA(2)
€
million |
Q1 2018 |
Q1 2017 |
Change |
Adjusted
EBITDA
% of net sales |
29.8
5.2% |
51.5
8.4% |
-42%
-320 bps |
(1) Organic growth: at constant
scope of consolidation and exchange rates (note that in the CIS
segment, price increases implemented to offset currency
fluctuations are not included in organic growth, which only
reflects changes in volumes and the product mix). See the
definition of alternative performance indicators at the end of this
press release.
(2) Adjusted EBITDA: adjustments
include expenses such as restructuring, acquisitions and
share-based payment expenses. See the definition of alternative
performance indicators at the end of this press release.
Comments by reporting
segment
Europe, Middle
East and Africa
(EMEA)
In EMEA, Q1 2018 like-for-like(1) sales were down 4.6%
vs. Q1 2017, affected by a negative calendar effect (-1.6%) and
compared to a strong quarter in 2017 (7.0% organic growth).
Trading has been particularly weak in France owing mostly to
significant destocking in distribution and adverse weather
conditions resulting in commercial projects being delayed. Nordic
countries have experienced a stronger than anticipated slowdown,
albeit from a record-high basis of comparison in 2017. In the UK,
trading has been poor, owing to destocking at some distributors and
the liquidation of a major building contractor adding to the
anticipated weakening. Southern Europe (Italy, Spain and Portugal),
Central Europe and the Netherlands kept growing.
Luxury vinyl tiles (LVT) continued
to perform well. The capacity and efficiency improvement program
(€20m investment over three years) is well on track.
Sales retreated 6.2% on a reported basis, hit by unfavorable exchange rate
fluctuations (mainly the Swedish krone and Norwegian krone).
Selling price increases have been implemented in 2017 and are
progressively contributing to mitigate raw material costs.
North
America
North America reported a 1.6% decline in organic growth vs. Q1 2017, negatively
impacted by a lower number of working days (-1.6%).
Sales performance was mixed. The
resilient business continued to perform well, thanks to good trends
in the rubber, accessories and VCT (Vinyl Composite Tiles)
businesses. Luxury vinyl tiles (LVT) reported vigorous growth, the
recently launched ProGen (semi-rigid board product) is gaining
traction across North America. The $60m three-year investment
program in the LVT category is progressing well to enable Tarkett
to enhance its local capacity and improve production
efficiency.
Commercial carpet activity was
slower than anticipated in the first three months of the year,
especially in the education and office sectors. We are on track
with the product launches program designed to improve sales
performance.
Reported
sales decreased by 14.1%, strongly hit by
the depreciation of the US dollar against the euro.
On April 6, 2018, Tarkett North
America announced further selling price increases on its product
portfolio, effective May 1st. Tarkett,
Tandus Centiva, and Johnsonite product prices will increase between
5 to 7%.
As previously announced, Andrew
Bonham has now joined the Group as President and Chief Executive
Officer of Tarkett North America.
CIS, APAC and
Latin America
CIS, APAC and Latin America
segment posted robust 5.0% organic growth for
Q1 2018 (excluding price adjustments in the CIS countries). After a
strong year in 2017, the CIS countries enjoyed good momentum in the
first quarter thanks to growing volumes and improvement in product
mix.
Over the past few weeks, the ruble
has been very volatile. We are watching the situation very closely
and we will take appropriate measures in terms of selling prices
when the ruble stabilizes.
Despite nice trends in China,
sales in the Asia-Pacific region retreated
slightly in Q1 2018, due to a slow start to the year in Australia
and South-East Asia. Latin America reported a
good growth, driven by Brazil in particular.
Reported
sales were slightly down by 4.1%, affected
by the depreciation of the Russian ruble and the Brazilian real
over the period against the euro.
Sports
Sales in
Sports climbed 15.9% in Q1 2018, assuming constant scope of consolidation and exchange
rates. The quarter has shown strong growth in artificial turf
in North America, good development of turn-key projects and a
vigorous performance in landscape applications. Given the
seasonality of this segment, the activity of the first quarter is
structurally at a low level.
Reported
sales were up 5.4%, penalized by the
depreciation of the US dollar against the euro.
Outlook
Notwithstanding a flat start to
the year, we believe the underlying levels of business activity are
sound.
The Group maintains the objective
of achieving its 2020 financial targets (mainly adjusted EBITDA
margin > 12% and ROIC > 9%, including the acquisitions'
contribution - appendix 2) by the end of the plan. Given the
negative impact of raw material prices and unfavorable currency
movements, especially the recent evolution of the ruble, these
targets will not yet be achieved at the end of 2018.
In this context, we have already
implemented cost reduction measures that will quickly contribute to
mitigate some of the shortfall of the first quarter. On an ongoing
basis, we are continuing to review our operating cost
structure.
The Group will adjust selling
prices in Russia and pursue its efforts on selling prices in other
regions with the goal of compensating raw material costs for the
full year.
In addition, the Group is
reinforcing growth initiatives to get back to growth over the
course of 2018, at constant exchange rates.
The conference
for analysts will be held at 11:00am CET on Wednesday April 25 and
an audio webcast (live and replay, in English) will also be
available on www.tarkett.com.
Financial Calendar
-
April 26, 2018: Annual General
Meeting
-
July 25, 2018: H1 2018 financial
results - press release after close of trading on
the Paris market and presentation in person the following
morning
-
October 23, 2018: Q3 2018 financial
Results - press release after close of
trading on the Paris market and conference call the following
morning
About Tarkett
With net sales of more than €2.8
billion in 2017, Tarkett is a worldwide leader of innovative
flooring and sports surface solutions. Offering a wide range of
products including vinyl, linoleum, carpet, rubber, wood, laminate,
synthetic turf and athletic tracks, the Group serves customers in
more than 100 countries worldwide through its major brands:
Tarkett, Desso, Johnsonite, Tandus Centiva, Tarkett Sports,
FieldTurf and Beynon. With approximately 13,000 employees and 34
industrial sites, Tarkett sells 1.3 million square meters of
flooring every day, for hospitals, schools, housing, hotels,
offices, stores and sports fields. Committed to "Doing Good.
Together", the Group has implemented an eco-innovation strategy
based on Cradle to Cradle® principles and promotes circular
economy, with the ultimate goal of contributing to people's health
and wellbeing, and preserving the natural capital. Tarkett is
listed on Euronext Paris (compartment A, ISIN: FR0004188670, ticker
TKTT) and is included in the following indices: SBF 120, CAC Mid
60. www.tarkett.com.
Investor
Relations contact
Tarkett - Alexandra Baubigeat
Boucheron - alexandra.baubigeatboucheron@tarkett.com
Media Relations
contacts
Tarkett - Véronique Bouchard
Bienaymé - communication@tarkett.com
Brunswick -
tarkett@brunswickgroup.com - Tél. : +33 (0) 1 53 96 83 83
Disclaimer
The information contained in this
press release has not been independently verified and no express or
implied representations or warranties are made as to the fairness,
accuracy, completeness or correctness of the information or
opinions set out herein.
This press release may contain
estimates and/or forward-looking statements. These do not represent
forecasts of Tarkett's results or other performance indicators, but
rather trends or targets as appropriate. These statements are
inherently subject to risks and uncertainties, most of which are
outside Tarkett's control, including but not limited to the risks
described in Tarkett's registration document, the French version of
which was filed on March 21, 2018 and is available on
www.tarkett.com. These risks and uncertainties include those
discussed or identified in the "Risk factors" section of its
registration document filed with the AMF. These statements do not
constitute guarantees as to Tarkett's future performance, which may
differ materially from these forward-looking statements. Tarkett
disclaims any intention or obligation to update these
forward-looking statements in light of events or circumstances that
may arise subsequent to the date of publication of this press
release.
Appendices
1/ Bridges
Net sales evolution by division
in million euros
see attached PDF
Adjusted EBITDA evolution by
nature in million euros
see attached PDF
2/ 2017-2020
financial objectives communicated in October 2016, unless
transforming acquisition, based on relatively stable raw material
prices (as of October 2016)
-
Net Sales of €3.5bn in 2020, including
acquisitions
-
Adjusted EBITDA margin(1) >
12%
-
Return On Invested Capital
(ROIC)(2) >
9%
-
Additional sales by 2020 of ~€500m
through acquisitions
-
Net debt / adjusted EBITDA(1) <
2.5x
-
Dividend: at least €0.60 per
share
(1) Adjusted EBITDA: adjustments
include expenses such as restructuring, acquisitions and
share-based payment expenses. See the definition of alternative
performance indicators at the end of this press release.
(2) Defined as the Net operating profit after tax [Adjusted EBIT *
(1 - Normative tax rate of 35%)] divided by the Capital employed
[Goodwill + Tangible and intangible assets + Working capital].
3/ Definition of
alternative performance indicators
(not defined by
IFRS)
The Tarkett Group uses the
following non-IFRS financial indicators:
-
Organic growth
-
Adjusted EBITDA
These indicators are calculated as
described below.
-
Organic
growth:
-
Organic growth measures the change in net sales
as compared with the same period in the previous year, at constant
scope of consolidation and exchange rates.
-
The exchange rate effect is calculated by
applying the previous year's exchange rates to sales for the
current year and calculating the difference as compared with sales
for the current year. It also includes the impact of price
adjustments in CIS countries intended to offset movements in local
currencies against the euro.
-
The scope effect reflects:
-
current-year sales for entities not included in
the scope of consolidation in the same period in the previous year,
up to the anniversary date of their consolidation;
-
the reduction in sales relating to discontinued
operations that are not included in the scope of consolidation for
the current year but were included in sales for the same period in
the previous year, up to the anniversary date of their
disposal.
€
million |
Q1 2018 |
Q1 2017 |
%
change |
o/w exchange rate effect |
o/w scope effect |
o/w organic growth |
Total Group |
567.9 |
611.7 |
-7.2% |
-7.5% |
+0.3% |
+0.1% |
link to PDF
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Tarkett via Globenewswire
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