Trading update: good start to the year until mid-March; end of the
quarter and short term outlook significantly affected by
coronavirus situation
Paris, April, 8, 2020: Tarkett
today gives an update on its sales and expected performance for the
first quarter. The Group is also providing initial views on
business trends for the second quarter which is expected to be
severely affected by the escalation of travel and social
restrictions decided by public authorities in various geographies
over the last few weeks.
Q1 net sales In EMEA, net sales
were performing in line with management’s expectations until
mid-March. North America was recording improving trends following a
depressed fourth quarter 2019 with commercial carpet better
oriented than initially anticipated. The Sport business, which is
in its low season, was also doing well with a sustained level of
growth. The level of activity in CIS countries was stable compared
to last year, while Latin America was continuing to grow double
digit on an organic basis.
The deployment of lockdown measures accelerated
mid-March in both Europe and North America. It resulted in the halt
of construction projects and the shutdown of many flooring
retailers and distributors in several areas, primarily in South
Europe. To adapt to this reduced demand, some of our manufacturing
sites have been operating at reduced capacity or have been
temporarily shutdown. In Europe, facilities concerned by the
temporary shutdown are progressively reopening but operate at
reduced capacity. Until now, most sites which have suspended
operations continued satisfying customer demand by delivering
products from existing inventories. Tarkett has applied all
required actions to protect its employees, customers and partners
in all geographies, including social distancing on production sites
and remote work for support functions.
China focusFor Tarkett, China is represents less
than 1% of consolidated net revenues. Net sales were affected by
the coronavirus outbreak and lockdown measures in February. Since
then, there has been a rebound of the activity: revenues in March
were only slightly down compared to last year. The two
manufacturing sites in China, which focus on the Chinese and
South-East Asian markets, were closed during the lockdown phases.
They both resumed production early March and are now back to normal
production level.
Q1 Sales and estimated Adjusted EBITDA Overall,
net revenues were penalized by a significant slowdown at the end of
the quarter particularly in Europe and amounted to €612 million in
the first quarter or a decrease of -2.1% as reported and -2.9% on a
like-for-like basis. In spite of a good level of productivity and
cost reduction aligned with the “Change to win” plan, lockdown
measures generated production disruptions and higher logistic
complexity. This weighed on the Group’s adjusted EBITDA that should
be comprised between €40 million and €43 million in Q1 2020
compared to €43.1 million in Q1 2019.
Net sales by segment
€ million |
Q1 2020 |
Q1 2019 |
Change |
o/w LfL |
EMEA |
228 |
239 |
-4.5% |
-3.6% |
North America |
196 |
196 |
+0.3% |
-2.7% |
CIS, APAC & LATAM |
110 |
113 |
-2.4% |
-1.2% |
Sports |
77 |
77 |
-0.1% |
-3.7% |
Total Group |
612 |
624 |
-2.5% |
-2.9% |
Implemented measures As the
lockdown measures have been strengthened and extended to most
countries and regions over the past few days, Tarkett expects
further disruption in Q2 2020. Lockdown measures have been
implemented early April in Russia and in other CIS countries. The
Group is now seeing impacts on demand in all its key geographies
outside China.
In order to mitigate the negative impact on its
results, Tarkett implemented a vigorous set of measures,
including:
- Temporary lay-offs and reduction in working time in all
locations concerned, including for support functions, in compliance
with schemes proposed by local governments;
- Drastic reduction of discretionary costs and deferral of
expenses.
The Group also remains focused on protecting its
cash flows:
- Capex will be limited to safety and a selection of key
productivity projects. They should be significantly reduced to
around €80 million compared to €125 million in 2019;
- Strict management of working capital with daily monitoring
tools;
- Cancellation of the dividend initially proposed, as
communicated on March 18th.
LiquidityTarkett has a solid
liquidity to cope with the consequences of the pandemic. The Group
has solid bank relationships and last year refinanced its revolving
credit facility and a large part of its private placements with a
solid rate of renewals from existing creditors (above 95% for the
RCF). As a result of the refinancing, the Group has no major debt
installment to pay before 2022 (i.e. maturity of €150 million in
June 2022).
At the end of March, the Group had a cash
position of €210 million and available undrawn credit lines of €500
million, out of which €443 million are confirmed. Gross debt
amounted to €887 million at the end of March (out of which €2
million to repay before year end). The Group is also reviewing the
possibility of leveraging credit arrangements proposed by the
French government and the possibility to set up additional lines
with its main banks to better navigate this challenging environment
and be ready to benefit from the recovery when it materializes.
As the current situation will likely affect its
adjusted EBITDA for the first half and for the full year 2020,
Tarkett is not in a position to confirm its leverage ratio target
for the end of the year (Net Debt to Adjusted EBITDA before IFRS 16
between 1.5x and 2.5x). In addition, given the extraordinary
circumstances the Group initiated discussions with its banks to
waive its financial covenant (leverage of 3.5x end of June and 3.0x
end of December).
OutlookTarkett is expecting its
activity to be severely hit in the second quarter. Considering the
unprecedented level of uncertainty, accurate impacts cannot be
quantified at the moment for the first half nor for the full year.
It will depend on many different factors including the scope and
duration of the epidemic and the prevention and support measures
adopted by local governments.
In the short term, the management team is
focused on protecting the health and safety of employees and
partners, adapting its cost base to a lower level of activity,
while ensuring the continuity of service to its customers.
Tarkett’s balanced portfolio between geographies, end markets and
channels should help the Group during this challenging period and
provide opportunities at the time of the recovery.
The Group will release its Q1 earnings
as planned on April 28 and will provide more details upon this
release.
Annual General Meeting – April 30,
2020In compliance with French regulations, the 2020
Shareholder's Meeting will exceptionally be held in closed session.
A live audio webcast will be made available to allow shareholders
to follow the meeting and presentation. Shareholders will be able
to vote either by post ahead of the Meeting or by giving a proxy to
the Chairman of the Shareholders’ Meeting.
Financial calendar
- April 28, 2020: Q1 2020 financial results - press release
after close of trading on the Paris market and conference call the
following morning
- April 30, 2020: Annual General Meeting of Shareholders
Investor Relations
ContactTarkett – Emilie Megel –
emilie.megel@tarkett.com
Media contactsTarkett -
Véronique Bouchard Bienaymé - communication@tarkett.com Brunswick -
tarkett@brunswickgroup.com - Tel.: +33 (0) 1 53 96 83 83
Forward Looking Statements
This press release may contain forward-looking
statements. Such forward-looking statements do not constitute
forecasts regarding results or any other performance indicator, but
rather trends or targets. These statements are by their nature
subject to risks and uncertainties as described in the Company’s
annual report registered in France with the French Autorité des
Marchés financiers available on its website (www.tarkett.com).
These statements do not reflect the future performance of the
Company, which may differ significantly. The Company does not
undertake to provide updates of these statements.
About Tarkett
With a history of 140 years, Tarkett is a
worldwide leader in innovative flooring and sports surface
solutions, with net sales of around €3 billion in 2019. Offering a
wide range of products including vinyl, linoleum, rubber, carpet,
wood, laminate, artificial turf and athletics tracks, the Group
serves customers in over 100 countries across the globe. Tarkett
has 12,500 employees and 33 industrial sites, and sells 1.3 million
square meters of flooring every day, for hospitals, schools,
housing, hotels, offices, stores and sports fields. Committed to
change the game with circular economy, the Group has implemented an
eco-innovation strategy based on Cradle to Cradle® principles, with
the ultimate goal of contributing to people’s health and wellbeing,
and preserving natural capital. Tarkett is listed on Euronext Paris
(compartment A, ISIN: FR0004188670, ticker: TKTT) and is included
in the following indices: SBF 120 and CAC Mid 60. Further
information about Tarkett is available from its website
www.tarkett.com.
Appendices
Reconciliation table for alternative performance
indicators (not defined by IFRS)
- 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.
- Scope effects reflect:
- 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.
- Adjusted EBITDA is the operating income before depreciation,
amortization and the following adjustments: restructuring costs,
gains or losses on disposals of significant assets, provisions and
reversals of provisions for impairment, costs related to business
combinations and legal reorganizations, expenses related to
share-based payments and other one-off expenses considered
non-recurring by their nature.
- 2020_04_08_Tarkett_Trading Update_VUS
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