Quarterly Report • Nov 29, 2013
Quarterly Report
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1 January to 30 September
Q3
specialists for surface technologies
OVERVIEW REPORT FOR THE FIRST THREE QUARTERS 2013 SURTECO SE
Q3
| Q3 | Q1-3 | |||||
|---|---|---|---|---|---|---|
| € 000s | 1/7/-30/9/ 2012 |
1/7/-30/9/ 2013 |
Variation in % |
1/1/-30/9/ 2012 |
1/1/-30/9/ 2013 |
Variation in % |
| Sales revenues | 102,056 | 97,882 | -4 | 312,978 | 297,094 | -5 |
| of which - Germany - Foreign |
30,986 71,070 |
29,134 68,748 |
-6 -3 |
99,170 213,808 |
91,258 205,836 |
-8 -4 |
| EBITDA | 14,434 | 13,916 | -4 | 40,959 | 40,484 | -1 |
| EBITDA margin in % | 14.1 | 14.2 | 13.1 | 13.6 | ||
| EBIT | 8,741 | 8,702 | - | 24,216 | 24,691 | +2 |
| EBIT margin in % | 8.6 | 8.9 | 7.7 | 8.3 | ||
| EBT | 6,586 | 5,999 | -9 | 18,066 | 17,857 | -1 |
| Consolidated net profit | 5,344 | 4,341 | -19 | 13,145 | 12,361 | -6 |
| Earnings per share in € | 0.48 | 0.39 | -19 | 1.19 | 1.12 | -6 |
| 30/9/2012 | 30/9/2013 | Variation in % |
31/12/2012 | 30/9/2013 | Variation in % |
|
|---|---|---|---|---|---|---|
| Net financial debt in € 000s | 114,990 | 103,207 | -10 | 101,835 | 103,207 | +1 |
| Gearing (level of debt) in % | 51 | 46 | -5 pts. | 46 | 46 | - |
| Equity ratio in % | 47.5* | 47.9 | +0.4 pts. | 47.8 | 47.9 | +0.1 pts. |
| Number of employees | 2,004 | 1,984 | -1 | 1,967 | 1,984 | +1 |
The latest projections in October 2013 by the International Monetary Fund (IMF) once again significantly revised its growth forecast for the global economy in 2013 downwards. According to these figures, the prediction for global economic growth in 2013 fell by 0.3 percentage points to 2.9 % by comparison with the forecast in July. This is despite the fact that the IMF assessed the situation in the core countries of the eurozone with rather greater – albeit cautious – optimism. A decline of 0.4 % was projected for eurozone output in the current year. In July, the IMF was still predicting a higher negative figure. The reason for the rise is also the slightly increased expecta-4 5
Q3
tion for the growth rate in Germany, where an increase of 0.5 % has now been assumed. The forecasts for France (+0.2 %) and Spain (-1.3 %) have also improved, while in Italy the assumption of a decline in economic output of 1.8 % continued unchanged.
While according to the IMF the emerging economies and developing countries previously acted as economic engines, the industrial countries are increasingly returning to the forefront of the action. The economy in the USA is set to grow by 1.6 % in 2013 mainly thanks to robust private demand for consumption and investment. The IMF is predicting growth of 2.0 % for Japan. The IMF sees the biggest potential problems for emerging economies and developing countries, where the IMF is projecting economic growth of 4.5 % after 5.0 % in July. Dynamic growth continued to slow down in China. The growth forecast for the current year has been reduced by 0.2 percentage points to 7.6 %. Downward corrections or sideways movements have also been observed in the other BRIC countries.
The IMF stated that the depressed expectations were mainly due to the lower potential for growth in the emerging economies, the high level of unemployment in Europe and uncertainty about the consequences of tighter monetary policy in the US.
Companies from the furniture and wood industry constitute the key customer base for the SURTECO Group. The relevant associations for this group of customers (HDH and VDM) identified a decline of 4 % in the first half-year of 2013 for sales in the German furniture industry by comparison with the year-earlier period. The previous development in 2013 was therefore disappointing for this sector. Business also underwent negative development in foreign markets. During the period from January to July 2013, 4.8 % less furniture was exported than in the corresponding period of the previous year. In particular, sales to EU countries underwent significant falls of 10.2 %, with exports to France and the Netherlands declining significantly. Conversely, more furniture was exported to China (+20 %) and to the USA (+25.8 %). The export drive of German furniture manufacturers bore fruit and "Made in Germany" is now regarded as a quality seal for first-class manufacturing.
Stabilization of sales within the sector is anticipated by the close of 2013. This assumption is based on the robust rise in planning permissions for new-build projects which was recorded in Germany for the first half of 2013. This will in turn stimulate the purchase of furniture, although there will be a delayed effect.
Against this background, the association has downplayed overall business expectations for the sector in the coming year. Instead of predicting sales around the level of the previous year, VDM is anticipating a fall in sales of 2 to 3 %. The forecast for 2014 is modestly optimistic.
The continuing slowdown in the dynamic of the global economy and the unsatisfactory development of the German furniture industry ensured restrained demand for furniture. As in the first half of the year, this development was also tangible for the SURTECO Group in the third quarter of the year. The internal market and foreign business of both Strategic Business Units was defined by a decline in business development. 6 7
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The cause continues to be problems associated with sovereign debt which lead to uncertainties among consumers, and this in turn constrains the desire to purchase long-term investments like furniture. Although the SURTECO Group succeeded in improving its margins in the third quarter, the declining sales are now also reflected in the result.
After sales revenues at the SURTECO Group declined in the first quarter by 7 % and in the first half-year by 6 % compared with the equivalent year-earlier figures, sales in the months January to September of the current business year were only 5 % below the values for 2012. Domestic business with a volume of € 91.3 million declined by 8 %. Sales amounting to € 205.8 million were generated abroad (-4 %). Declining sales revenues, particularly in Asia (-14 %) and Australia (-16 %), only posted slight gains in North and South America (+3 % and +1 % respectively). The share of foreign sales in total sales rose by 1 percentage point to 69.3 %. The SURTECO Group achieved aggregated sales amounting to € 297.1 million in the first three quarters of 2013 compared with € 313.0 million in the previous year.
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The German office and kitchen furniture industry found itself in a difficult position on capacity utilization in the first three quarters of 2013. This was also reflected in business development of the Strategic Business Unit Plastics because plastic edgebandings represent the highest-selling product in the Business Unit and they are used primarily in these sectors. Sales revenues for this product in the months January to September declined from € 107.9 million in 2012 to € 101.8 million in the reporting period. Gratifying gains with other revenues (+25 %) and skirtings (+10 %) could not prevent sales in the Strategic Business Unit amounting to only € 176.0 million and thus remaining 4 % below the year-earlier nine-month value for 2012 (€ 182.5 million). € 52.2 million (-8 %) were attributed to domestic business. Foreign sales achieved a value of € 123.8 million (-2 %), with business on the North and South American continent rising slightly overall by 4 %, whereas sales losses had to be absorbed in Asia (-5 %) and Australia (-10 %).
The uninterrupted trend towards more costeffective pre-impregnated materials continues to be experienced in the Strategic Business Unit Paper at the expense of fully impregnated foils. The preference of consumers for white or single-colour surfaces also continues to prevail and this exerts a direct effect on business in decorative printing. An unsatisfactory order situation in the furniture industry with weak employment in the bedroom and flat-pack furniture sector also contributed to a 7 % decline in sales revenues to € 121.1 million for the Strategic Business Unit 8 sonnel expense ratio – calculated from the ratio of 9
Paper during the months January to September 2013 compared with the equivalent value for the previous year (€ 130.5 million). Foreign sales fell by 7 % to € 82.0 million (2012: € 88.0 million), declining almost as strongly as domestic business, which fell by 8 % to € 39.1 million (2012: € 42.5 million). Business in the country segments only developed positively in North America (+5 %) whereas losses were posted in all other country segments.
Within the SURTECO Group, the cost of materials is the biggest item of expenditure. Despite increased energy costs and volatile prices for some chemical intermediate products, the SURTECO Group succeeded in keeping the cost of materials ratio (cost of materials/total output) stable during the period under review. After 44.7 % in the first quarter and 44.8 % in the first half-year, this ratio was 44.7 % in the first three quarters of 2013. Shifts in the product mix essentially brought about an improvement in the ratio of 1.7 percentage points compared with the value for the previous year. The aggregated cost of materials amounted to € 133.5 million during the first nine months of 2013.
Personnel expenses came down by 5 % to € 78.6 million (Q1-3 2012: € 82.5 million) during the period under review. This fall was essentially due to a provision of € 1.7 million formed in the previous year for restructuring measures. The per-
personnel expenses to total output – rose slightly from 25.9 % in the previous year to 26.3 % in the months of January to September 2013.
The other operating expenses only fell slightly by -2 % and aggregated over the first nine months of 2013 amounted to € 48.1 million after € 49.0 million in 2012.
A slight improvement in margins in the third quarter of 2013 was unable to compensate for sales losses in the months from January to September. The accumulated operating result (EBITDA) of the SURTECO Group at € 40.5 million was slightly below the year-earlier value of € 41.0 million. The EBITDA margin rose from 13.1 % in 2012 to a respectable 13.6 % in the current business year. Depreciation and amortization amounting to € 15.8 million (2012: € 16.7 million) resulted in an EBIT of € 24.7 million after € 24.2 million in the previous year. The EBIT margin rose by 0.6 percentage points to 8.3 %. After deducting the financial result of € -6.8 million (2012: € -6.2 million) earnings before tax (EBT) amounted to € 17.9 million (2012: € 18.1 million). The result was impacted negatively by a slightly higher tax rate compared with the previous year. Consolidated net profit of € 12.4 million for the first three quarters lagged by € 0.7 million behind the equivalent year-earlier value (€ 13.1 million). On 30 September 2013, the number of shares remained unchanged at 11,075,522 no-par-value shares. This yields earnings per share of € 1.12 after € 1.19 in 2012.
Q3
On 30 September 2013 the balance sheet total of the SURTECO Group at € 472.0 million was € 4.7 million above the value for year-end 2012 (€ 467.3 million). The key items on the asset side responsible for this increase were trade receivables (€ +8.2 million), property, plant and equipment (€ +1.8 million) and intangible assets (€ +1.2 million). This was offset against cash and cash equivalents (€ -3.1 million), other current assets (€ -1.4 million) and other non-current financial assets (€ -1.5 million). The main increase on the liabilities side was other current liabilities (€ +3.0 million). The net financial debt rose to € 103.2 million due to higher investments on the balance sheet date for the quarter (31 December 2012: € 101.8 million). This is also reflected in the constant gearing (level of debt) unchanged at 46 %. The equity ratio at 47.9 % remained virtually at the year-end value for 2012 (47.8 %). During the first three quarters of 2013, the com-
pany generated a cash flow from ordinary activities amounting to € 29.2 million after € 33.8 million in the previous year. Investments in a new production site in Myrtle Beach, USA, at BauschLinnemann North America, in a new digital printing system at the Strategic Business Unit Paper and in a company software system resulted in cash outflows of € 17.6 million after € 14.1 million in 2012. The free cash flow in the reporting period was therefore € 11.6 million (year-earlier period: € 19.7 million). At the end of the third quarter, cash and cash equivalents amounted to € 58.3 million.
| € 000s | 1/1/-30/9/ 2012 |
1/1/-30/9/ 2013 |
|---|---|---|
| Cash flow from current business operations |
33,761 | 29,215 |
| Purchase of property, plant and equipment |
-12,062 | -14,270 |
| Purchase of intangible assets |
-526 | -2,466 |
| Acquisition non-controlling interests (2012: Acquisition of business) |
-1,575 | -866 |
| Dividends received | 55 | 0 |
| Cash flow from investment activities |
-14,108 | -17,602 |
| Free cash flow | 19,653 | 11,613 |
The Strategic Business Unit Plastics has a long and successful track record in digitally printed plastic edgings alongside edgings manufactured using conventional processes. The company joined forces with a coating manufacturer and cooperated in developing a new version of the digital edging. This enabled "true-to-scale" decors to be 12 designed which, for example, reproduce stone 13
REPORT FOR THE FIRST THREE QUARTERS 2013 1 JANUARY - 30 SEPTEMBER 2013 SURTECO SE
Q3
replicas on a scale that is true to life. The special feature of this process is a repeat length of 2000 mm, which means that the decor can be repeated at the earliest after 2 metres of edging length. Thanks to the technical know-how of the Strategic Business Unit Plastics in digital printing technique, these decors can be harmonized so precisely with the worktop that the edging continues the decor of the worktop virtually seamlessly. The premium high-gloss surface has already been proven in conventional edgings and this has been further developed for digital edgings. In conjunction with the new decorative designs, workpieces can be manufactured from wood-based boards which look as though they are made from a piece of granite or marble.
The Strategic Business Unit Paper has also expanded its competence in digital printing technology by investing in a new system. This new machine allows digital printing and varnishing to be carried out in a single operation. Inline varnishing offers attractive value for money in conjunction with the benefits of digital printing technology for small and mid-sized order volumes. Customers therefore benefit from the option of being able to place orders for individual decors and small batches at short notice and at an attractive price.
After the SURTECO share started the year positively and increased by 15.1 % during the first quarter, it lost these gains as the year proceeded, and the price had returned to the level of the beginning of the year by the close of the reporting period. Overall, the share decreased slightly by 0.9 % in the first nine months of 2013. This meant it lagged significantly behind the performance of the SDAX German comparator index, which gained 19.8 % in the same period. The share attained the high of € 20.01 for the reporting period on 20 March. After that date, the performance of the share started a trend of decline and ended trading on 30 September, the last trading day of the reporting period, with a value of € 17.09. The planned takeover of the Süddekor Group (→ Events after the balance sheet date) received a positive reception on the capital market. After the announcement of the intended acquisition at the end of October, the share price rose to more than € 23. The price then remained stable until the middle of November when the capital increase carried out for purposes of the takeover was successfully concluded.
At the end of September 2013, the market capitalization of SURTECO SE was € 189.3 million based on an unchanged number of shares at 11,075,522. The percentage of shares in free float continued unchanged at 22.6 %. The capital measure completed in November for the purchase of Süddekor increased the volume of shares to around 15.5 million. The free float rose to 45.4 %. This significantly increases the chances of SURTECO being listed in the German SDAX Small Cap Index. 14 15
Q3
REPORT FOR THE FIRST THREE QUARTERS 2013 1 JANUARY - 30 SEPTEMBER 2013 SURTECO SE
Q3
In October, a purchase contract for the takeover of all the shares in the Süddekor companies was concluded (→ Events after the balance sheet date). However, it is not yet possible to provide an assessment of when these companies will be included in the financial statements. This forecast therefore expects the existing Group structure still to be in place at the end of the third quarter of 2013.
Although the global economic development is assessed differently in the individual countries, a slight improvement in sentiment has been evident since September. In Germany and Europe – the most important markets for the SURTECO Group – the company is not expecting an upturn in the economy by year-end 2013. Business operations in the company are traditionally rather muted at the end of the year. SURTECO anticipates sales of less than € 400 million for the end of the business year 2013. Apart from the lower sales volume, the costs incurred in conjunction with the acquisition of the Süddekor companies are also impacting negatively on the result. The bottom line is that earnings before tax will not reach the level of the previous year.
| Q3 | Q1-3 | ||||
|---|---|---|---|---|---|
| € 000s | 1/7/-30/9/ 2012 |
1/7/-30/9/ 2013 |
1/1/-30/9/ 2012 |
1/1/-30/9/ 2013 |
|
| Sales revenues | 102,056 | 97,882 | 312,978 | 297,094 | |
| Changes in inventories | 1,388 | -1,321 | 3,791 | -455 | |
| Own work capitalized | 522 | 708 | 1,600 | 1,863 | |
| Total | 103,966 | 97,269 | 318,369 | 298,502 | |
| Cost of materials | -47,991 | -43,272 | -147,720 | -133,505 | |
| Personnel expenses | -25,783 | -24,890 | -82,512 | -78,649 | |
| Other operating expenses | -16,463 | -15,950 | -49,003 | -48,061 | |
| Other operating income | 705 | 759 | 1,825 | 2,197 | |
| EBITDA | 14,434 | 13,916 | 40,959 | 40,484 | |
| Depreciation and amortization | -5,693 | -5,214 | -16,743 | -15,793 | |
| EBIT | 8,741 | 8,702 | 24,216 | 24,691 | |
| Financial result | -2,155 | -2,703 | -6,150 | -6,834 | |
| EBT | 6,586 | 5,999 | 18,066 | 17,857 | |
| Income tax | -1,228 | -1,535 | -5,116 | -5,405 | |
| Net income | 5,358 | 4,464 | 12,950 | 12,452 | |
| Group share (consolidated net profit) | 5,344 | 4,341 | 13,145 | 12,361 | |
| Non-controlling interests | 14 | 123 | -195 | 91 | |
| Basic and diluted earnings per share in € | 0.48 | 0.39 | 1.19 | 1.12 | |
| Number of shares | 11,075,522 | 11,075,522 | 11,075,522 | 11,075,522 |
REPORT FOR THE FIRST THREE QUARTERS 2013 SURTECO SE
Q3
| € 000s | 31/12/2012 | 30/9/2013 |
|---|---|---|
| ASSETS | ||
| Cash and cash equivalents | 61,386 | 58,328 |
| Trade accounts receivable | 41,745 | 49,959 |
| Inventories | 61,052 | 61,824 |
| Current income tax assets | 2,692 | 2,406 |
| Other current assets | 8,442 | 7,008 |
| Current assets | 175,317 | 179,525 |
| Property, plant and equipment | 158,520 | 160,342 |
| Intangible assets | 12,658 | 13,902 |
| Goodwill | 112,718 | 111,885 |
| Investments in associated enterprises | 1,660 | 1,626 |
| Financial assets | 569 | 550 |
| Non-current tax assets | 527 | 527 |
| Other non-current assets | 335 | 446 |
| Other non-current financial assets | 2,150 | 656 |
| Deferred taxes | 2,796 | 2,583 |
| Non-current assets | 291,933 | 292,517 |
| 467,250 | 472,042 |
| € 000s | 31/12/2012 | 30/9/2013 |
|---|---|---|
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Short-term financial liabilities | 1,975 | 981 |
| Trade accounts payable | 26,483 | 27,463 |
| Income tax liabilities | 1,253 | 364 |
| Short-term provisions | 2,349 | 2,528 |
| Other current liabilities | 19,746 | 22,763 |
| Current liabilities | 51,806 | 54,099 |
| Long-term financial liabilities | 161,246 | 160,554 |
| Pensions and other personnel-related obligations | 11,139 | 11,510 |
| Deferred taxes | 19,881 | 19,794 |
| Non-current liabilities | 192,266 | 191,858 |
| Capital stock | 11,076 | 11,076 |
| Capital reserve | 50,416 | 50,416 |
| Retained earnings | 146,358 | 152,120 |
| Consolidated net profit | 15,028 | 12,361 |
| Capital attributable to shareholders | 222,878 | 225,973 |
| Non-controlling interests | 300 | 112 |
| Equity | 223,178 | 226,085 |
| 467,250 | 472,042 |
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Q3
| Retained earnings | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| € 000s | Capital stock |
Capital reserve |
Fair value measure ment for financial instruments |
Other compre hensive income |
Currency translation adjust ments |
Other retained earnings |
Consoli dated net profit |
Non controlling interests |
Total |
| 31 December 2011 | 11,076 | 50,416 | 1,953 | 368 | -2,649 | 142,248 | 12,484 | 608 | 216,504 |
| Dividend payout | 0 | 0 | 0 | 0 | 0 | 0 | -4,984 | 0 | -4,984 |
| Net income | 0 | 0 | 0 | 0 | 0 | 0 | 13,145 | -195 | 12,950 |
| Acquisition of non-controlling interests |
0 | 0 | 0 | 0 | 0 | -98 | 0 | 0 | -98 |
| Other changes | 0 | 0 | 409 | -989 | 2,130 | 7,500 | -7,500 | 0 | 1,550 |
| 30 September 2012* | 11,076 | 50,416 | 2,362 | -621 | -519 | 149,650 | 13,145 | 413 | 225,922 |
| 31 December 2012 | 11,076 | 50,416 | 1,260 | -652 | -3,998 | 149,748 | 15,028 | 300 | 223,178 |
| Dividend payout | 0 | 0 | 0 | 0 | 0 | 0 | -4,984 | 0 | -4,984 |
| Net income | 0 | 0 | 0 | 0 | 0 | 0 | 12,361 | 93 | 12,454 |
| Acquisition of non-controlling interests |
0 | 0 | 0 | 0 | 0 | 0 | 0 | -281 | -281 |
| Other changes | 0 | 0 | -310 | 0 | -3,972 | 10,044 | -10,044 | 0 | -4,282 |
| 30 September 2013 | 11,076 | 50,416 | 950 | -652 | -7,970 | 159,792 | 12,361 | 112 | 226,085 |
SEGMENT REPORTING SURTECO GROUP
| Sales revenues | ||||
|---|---|---|---|---|
| € 000s | SBU Plastics |
SBU Paper |
Recon ciliation |
SURTECO Group |
| 1/1/-30/9/2013 | ||||
| External sales | 175,988 | 121,106 | 0 | 297,094 |
| Internal sales | 944 | 810 | -1,754 | 0 |
| Total sales | 176,932 | 121,916 | -1,754 | 297,094 |
| 1/1/-30/9/2012 | ||||
| External sales | 182,543 | 130,435 | 0 | 312,978 |
| Internal sales | 411 | 848 | -1,259 | 0 |
| Total sales | 182,954 | 131,283 | -1,259 | 312,978 |
| Segment earnings (EBT) | ||
|---|---|---|
| € 000s | 1/1/-30/9/2012 | 1/1/-30/9/2013 |
| SBU Plastics | 15,261 | 14,510 |
| SBU Paper | 9,821 | 12,059 |
| Reconciliation | -7,016 | -8,712 |
| EBT | 18,066 | 17,857 |
| Sales revenues SURTECO Group | ||
|---|---|---|
| € 000s | 1/1/-30/9/2012 | 1/1/-30/9/2013 |
| Germany | 99,170 | 91,258 |
| Rest of Europe | 135,371 | 130,920 |
| America | 43,551 | 44,618 |
| Asia, Australia, Others | 34,886 | 30,298 |
| 312,978 | 297,094 |
| Sales revenues SBU Plastics | ||
|---|---|---|
| € 000s | 1/1/-30/9/2012 | 1/1/-30/9/2013 |
| Germany | 56,725 | 52,142 |
| Rest of Europe | 69,282 | 68,076 |
| America | 28,707 | 29,812 |
| Asia, Australia, Others | 27,829 | 25,958 |
| 182,543 | 175,988 |
| € 000s | 1/1/-30/9/2012 | 1/1/-30/9/2013 |
|---|---|---|
| Germany | 42,445 | 39,116 |
| Rest of Europe | 66,089 | 62,844 |
| America | 14,844 | 14,806 |
| Asia, Australia, Others | 7,057 | 4,340 |
| 130,435 | 121,106 |
Q3
The consolidated financial statements of SURTECO SE for the period ended 31 December 2012 are pre pared in accordance with the regulations of the International Financial Reporting Standards (IFRS), as they were adopted by the EU, in the version valid on the closing date for the accounting period. As a matter of principle, the same accounting and valua tion principles were used for the preparation of this interim report as at 30 September 2013 as in the preparation of the consolidated financial statements for the business year 2012.
The objective and purpose of interim reporting is to provide an information tool building on the consolidated financial statements and we therefore refer to the standards and interpretations applied in the valuation and accounting methods used in the preparation of the consolidated statements of SURTECO SE for the period ending 31 December 2012 for further information. The comments includ ed in this report also apply to the quarterly financial statements and the half-yearly financial statement for the year 2013 if no explicit reference is made to them.
The regulations of the International Accounting Standard (IAS) 34 "Interim Financial Reporting" for interim financial statements and the German Accounting Standard (DRS) 16 "Interim Reporting (Zwischenberichterstattung)" were applied for this interim report.
Where the standards adopted by the IASB had to be applied from 1 January 2013, they were taken into account in this interim report if they exert effects on the SURTECO Group.
The preparation of the interim report requires as sumptions and estimates to be made by the man agement. This means that there may be deviations between the values reported in the interim report and the actual values achieved.
The mandatory standards and interpretations to be applied for the first time in the business year as from 1 January 2013 exerted no material effect on the net assets, financial position and results ment € 000s -989). 34 35
of the Group. The following change in reporting results from the change in IAS 1 with mandatory application for the financial years subsequent to the business year 2013: The comprehensive income will be regrouped according to items, which will be reclassified in the income statements in future, and in items which will not be reclassified in the income statement in future.
Due to the first-time application of IFRS 13, the notes to the consolidated financial statements for the half year were amended. The first-time appli cation of IAS 19R did not result in any material changes. The overall activities of the SURTECO Group are typically not subject to significant sea sonal conditions.
The Group currency is denominated in euros (€). All amounts are specified in thousand euros (€ 000s). These interim financial statements and the interim report have not been audited and they have not been subject to an audit review by an auditor.
The adjustment of the values for the previous year was carried out due to an incorrect presentation of the actuarial profits and losses as at 30 September 2012. On this balance sheet date no actuarial losses essen tially originating from the change in the discount rate during the course of the year were recorded under pension provisions. The effects are presented below: Comprehensive income:
The item "Components of comprehensive income that may not be reclassified in the income statement in future" has been reduced by € 000s -989 (before amendment: € 000s 0, after amendment € 000s -989). The share of the Group in total comprehensive income therefore came down by € 000s -989. Development of equity capital:
The "Other comprehensive income" in equity capital came down as a result of the amendment by € 000s -989 (before amendment: € 000s 0, after amend -
The SURTECO Group interim consolidated financial statements include all domestic and foreign companies which are material for the net assets, financial position and results of operations in which SURTECO SE holds a direct or indirect majority of the voting rights. The group of consolidated companies has only undergone minor changes that are insignificant compared with the consolidated financial statements for the period ended 31 December 2012.
Döllken CZ s.r.o., Czech Republic, was included in the consolidated financial statements for the first time on 1 January 2013 due to its increased importance. With effect from 1 January 2013, SURTECO acquired the outstanding minority shareholdings of 20 % in BauschLinnemann South Carolina LLC, USA, which was then merged to BauschLinnemann North America, Inc., USA. A purchase price amounting to €000s 281 was agreed with the minority shareholders, which was made up of the nominal value of the shareholding and a premium.
These changes in the group of consolidated companies exerted no significant effects on the net assets, financial position and the results of the Group.
The following table shows the financial instruments whose subsequent valuation is carried out at the fair value. There were no reclassifications between the stages in the fair-value hierarchy during the reporting or comparator period.
| FAIR VALUE / BOOK VALUE | |||||||
|---|---|---|---|---|---|---|---|
| 31/12/2012 | 30/9/2013 | ||||||
| € 000s | Category | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 |
| Assets / (liabilities) from derivative financial instruments |
|||||||
| with hedge relationship | n.a. | 0 | 2,150 | 0 | 0 | 656 | 0 |
| without hedge relationship | FlaFV | 0 | 21 | 0 | 0 | -11 | 0 |
| 0 | 2,171 | 0 | 0 | 645 | 0 |
The financial instruments from the categories "Recorded at fair value" are valued at the current value. The cash and cash equivalents, trade accounts receivable, other financial assets in the category "Loans and receivables" and trade accounts payable and other financial liabilities have overwhelmingly short residual terms. The values reported in the balance sheet on the reporting date therefore approximate to the fair value.
The calculation and recognition of the fair values of financial instruments is based on a fair value hierarchy which takes account of the significance of 36 37
the input data used for the valuation and classifies it as follows:
Level 1 - quoted prices (unadjusted) in active mar kets for identical assets and liabilities.
Level 2 - inputs other than quoted prices includ ed within level 1 that are observable for the as set or liability either directly (as prices) or indirectly (derived from prices). Derivative financial instru ments reported under level 2 include forward ex change contracts and interest swaps. The forward exchange operations are valued at fair value using the expected exchange rates which are quoted on the regulated market. Interest swaps are valued at the fair value using the expected interest rates based on recognized interest curves. The effects from discounting are generally not material for derivatives classified under level 2.
Level 3 - inputs for the valuation of the asset and liability that are not based on observable market data (unobservable inputs).
The Annual General Meeting of SURTECO SE passed a resolution on 28 June 2013 to pay out a dividend for the business year 2012 amounting to € 0.45 for each no-par-value share. The payout amounted to a total of € 4,983,984.90.
During the period under review, the companies of the Group undertook no business transactions with related parties that could have exerted a material influence on the net assets, financial position and results of operations of the Group.
On 23 October 2013, a purchase contract for the takeover of all the shares in the companies of the Süddekor Group was concluded. This takeover involves the companies SÜDDEKOR GmbH in 38 39
Laichingen, Dakor Melamin Imprägnierungen GmbH in Heroldstatt, SÜDDEKOR Art Design + Engraving GmbH, Willich, SÜDDEKOR LLC, Agawam, USA, SÜDDEKOR Management Inc. Agawam, USA and Süddekor OOO in Moscow, Russia. The transaction is due to be closed on 2 December 2013 following approval by the German Federal Antitrust Office on 25 November 2013.
In order to finance the transaction, the Board of Management and the Supervisory Board passed a resolution on 30 October 2013 to increase the cap ital stock of the company by EUR 4,430,209 from EUR 11,075,522 to EUR 15,505,731 for purposes of financing the transaction by issuing 4,430,209 nopar-value bearer shares without nominal value, each share representing a proportionate amount in the capital stock of EUR 1.00 and with full participation in profits from 1 January 2013 ("New Shares") by way of a capital increase against cash contribution from subscribed capital with pre-emptive rights for shareholders. The implementation of the capital increase was entered in the company register on 4 November. The New Shares were taken up at the lowest issue amount by Joh. Berenberg, Gossler & Co. KG, Hamburg, who managed the offer as the Sole Lead Manager and Sole Bookrunner, and Berenberg offered the shares to shareholders by way of an indirect pre-emptive right based on a subscription offer published in the Federal Gazette (Bundesanzeiger) on 31 October 2013. This gener ated gross issue proceeds for the company amount ing to some € 80 million.
The company is also currently reviewing the cor porate and product portfolio with a view to opti mization in order to continue pursuing its strategy of focusing on the core business of the company following the concentration.
After 30 September 2013 when this Report went to press, there were no further events or developments that could lead to a significant change in the recog nition or valuation of individual assets or liabilities.
| Cost of materials ratio in % | Cost of materials/Total output |
|---|---|
| Earnings per share in € | Consolidated net profit/Number of shares |
| EBIT margin in % | EBIT/Sales revenues |
| EBITDA margin in % | EBITDA/Sales revenues |
| Equity ratio in % | Equity/Balance sheet total |
| Gearing (debt level) in % | Net debt/Equity |
| Market capitalization in € | Number of shares x Closing price on the balance sheet date |
| Net debt in € | Short-term financial liabilities + Long-term financial liabilities - Cash and cash equivalents |
| Personnel expense ratio in % | Personnel costs/Total output |
| Working capital in € | Trade accounts receivable + Inventories - Trade accounts payable |
| FINANCIAL CALENDAR | |
|---|---|
| 30 April 2014 | Annual Report 2013 |
| 15 May 2014 | Three-month report January - March 2014 |
| 27 June 2014 | Annual General Meeting at the Sheraton Munich Arabellapark Hotel |
| 30 June 2014 | Dividend payout |
Ticker Symbol: SUR isin: DE0005176903
Andreas Riedl Chief Financial Officer Phone +49 (0) 8274 9988-563
Martin Miller Investor Relations and Press Office Phone +49 (0) 8274 9988-508
Fax +49 (0) 8274 9988-515 Email [email protected] Internet www.surteco.com
The paper used for this Interim Report was produced from cellulose sourced from certified forestry companies that operate responsibily and comply with the regulations of the Forest Stewardship Council.
Johan-Viktor-Bausch-Str. 2 86647 Buttenwiesen-Pfaffenhofen Germany
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