Earnings Release • Apr 24, 2014
Earnings Release
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24 April 2014
FIRST-QUARTER 2014 REVENUE
| Revenue (in €m) | Q1 2013 | Q1 2014 | % change | |
|---|---|---|---|---|
| Reported | Like-for-like | |||
| France | 126 | 129 | +2.5% | +2.5% |
| Other Western EU countries | 161 | 183 | +13.7% | +13.4% |
| North America | 96 | 94 | -2.3% | +0.1% |
| South America | 97 | 82 | -15.7% | +2.9% |
| Asia-Pacific | 282 | 303 | +7.2% | +12.7% |
| Central Europe, Russia and other | 169 | 151 | -10.5% | -3.7% |
| countries | ||||
| TOTAL | 931 | 942 | +1.1% | +6.2% |
| Rounded figures in € millions | Percentages based on non-rounded figures |
2014 began in a continued tense overall environment caused by an uncertain economy, heightened geo-political unrest in some regions and an on-going decline in many currencies against the euro, including the yen, rouble, Ukrainian hryvnia, Turkish lira, Brazilian real and Colombian peso. Against this backdrop, as in 2013, consumer spending remained volatile and unstable. No exception to the rule, the small domestic equipment market saw significant disparities from one region to another.
Nonetheless, the Group's like-for-like revenue growth was 6.2%, mostly led by volumes. On a reported basis, first-quarter 2014 revenue was up a slight 1.1% including a €53 million negative currency effect (with a major impact of the real, yen and rouble) and a €6 million positive effect related to changes in the scope of consolidation as Maharaja Whiteline and CORANCO have both been consolidated as from 1 January 2014.
Operating Result from Activity for the quarter amounted to €50 million, adversely affected by a €24 million negative currency effect. At constant exchange rates, it stood at €74 million, stable compared with €73 million in first-quarter 2013.
Net debt at 31 March 2014 amounted to €412 million, virtually unchanged from 31 December 2013. The very healthy cash flow from operations was used mainly for the acquisition of the new headquarters building.
In a slightly positive small domestic equipment market, the Group's first-quarter revenue was up 2.5%, a more sustained pace of growth than in second-half 2013. This modest acceleration was due to a solid dynamic in electrical appliances that offset a decline in cookware, in line with the market. Early-year successes included our new product offering in steam generators, buoyant sales of vacuum cleaners, a solid performance by the Cookeo multicooker, a recovery in Nespresso coffeemakers and solid advances in food preparation appliances. In this segment, growth was driven by kitchen machines and the Cuisine Companion cooking food processor, which confirmed its rapid development.
In other Western European Countries, the trends in the small domestic equipment market noted in 2013 continued in the first quarter of 2014, with growth in Northern Europe and a stabilized situation in Southern Europe. After an exceptional year in 2013 – albeit sluggish in the first three months – the Group's sales in early 2014 remained brisk and translated into a double-digit organic growth. As a matter of fact, revenue was higher in nearly all countries. In Germany, at a time when a number of customers tightened their inventory management, sales were energized by the tail-end of a cookware loyalty programme launched in fourth-quarter 2013. The same was true in Belgium, where sales were boosted by two loyalty programmes. In the United Kingdom, the Group maintained a robust pace of growth, led by cookware, Optigrill and Nespresso and Dolce Gusto single-serve coffeemakers. Sales improved in the Netherlands and continued to trend upwards in Southern Europe. The gains were moderate in Italy but business was vigorous in Greece and Spain, where the upswing was led by cookware, steam generators and vacuum cleaners.
At 31 March 2014, the Group's revenue at constant exchange rates and scope of consolidation was unchanged in North America, due in large part to winter storms that significantly impacted store traffic and consumer spending. In addition, the prior-year comparisons for the first quarter were rather demanding. Beyond these considerations, the Group's small electrical appliance performance in the US was contrasted. Demand rose in the ironing segment (Rowenta and T-fal) and accelerated with Optigrill but remained complicated in coffeemakers for Krups. In cookware, T-fal sales slowed while Imusa sustained its growth and All-Clad continued to expand with certain customers and to gain new retail store slots. In Canada and Mexico, sales expressed in euros were impacted by the decline in the Canadian dollar and the peso against the euro. Nonetheless, sales in Canada continued to trend favourably, led by Actifry, Optigrill and vacuum cleaners, which were all supported by significant investments. In Mexico, local sales declined mainly due to a smaller loyalty programme with a retailer this year.
In a region impacted by economic uncertainty and enormous currency challenges, the Group achieved an organic revenue growth of 2.9% for the quarter, although reported revenue declined by 15.7%. This difference of nearly 19 points is due to the on-going decline in nearly all of the region's currencies against the euro for many months. Moving beyond these exchange rate issues, performance varied considerably from country to country. In Brazil, in an environment marked by a slowdown in consumer spending, the Group had to raise prices significantly to respond to the sharp drop of the real. This obviously complicated negotiations with retailers and had consequences on the business, both in cookware and in small electrical appliances, especially in the ironing, personal care and coffeemaker segments. On the other hand, sales held up well in food preparation appliances, thanks to several recently launched new products. They were higher for vacuum cleaners and robust for fans, driven by a very hot summer and by strong advertising support for the Turbo Silencio Repellente fan. In Colombia, the Group's sales grew at a faster pace in nearly all product categories, including cookware and utensils, irons, blenders and coffeemakers. In addition, Actifry got off to an encouraging start. This vigorous performance was boosted by advertising campaigns and in-store operations.
In the Asia-Pacific region, organic sales rose by 12.7%, reflecting strong sales in China, solid advances in most markets, a decline in Australia and a sharp drop in Japan where the Group is hard hit by the massive decline in the yen against the euro, following the expiration of currency hedges at the end of 2013. The announcement in fourth-quarter 2013 of major, although only partially offsetting, price increases – effective 1 January 2014 – led retailers to build up their inventory before that date, resulting in a sharp fall in the Group's first-quarter sales. Despite a successful promotion for pressure cookers, new gains in vacuum cleaners and the encouraging startup of the Fresh Express shredder, local revenue was substantially down. On the other hand, Supor turned in an excellent first-quarter performance in China. Growth was led by newly-launched products such as the sphericalpot rice cookers, soymilk makers, frying pans, woks or Clipso pressure cookers as well as by business expansion in new consumer regions and the on-going development of e-commerce. Besides China, sales were brisk in South Korea, Thailand and Malaysia.
This was the only region in decline in the first quarter, adversely impacted by the slowdown of consumer spending in Russia since last summer as well as the consequences of recent events in Ukraine. In addition, the collapse of the rouble, the Turkish lira and the Ukrainian hryvnia, in particular, seriously disrupted the local markets and modified the competitiveness challenges. In Russia, demand has been sluggish and in an increasingly competitive environment, the entire industry has been suffering. Nonetheless, the Group introduced targeted price increases in 2013 and early 2014 with the goal of at least partially offsetting the decline in the rouble. But in this difficult environment, business was severely strained and the Group's revenue was down sharply. In Ukraine, after a positive start to the year – in line with late 2013 – sales came suddenly to a halt in March due to the destabilization of the country and regional tensions. In Central Europe, business improved despite the price increases, but the discontinuation of a loyalty programme with a retailer in Poland weighed on the Group's performance. Lastly, the Group's situation in Turkey is gradually stabilizing thanks to certain flagship products like Actifry, irons and vacuum cleaners, which are supported by advertising and marketing investments. Nonetheless, the environment remains complicated and tense. However, both the United Arab Emirates and Egypt saw a sustained increase in sales.
The Group's performance varied not only from region to region but also from one product category to another.
Operating Result from Activity in first-quarter 2014 amounted to €50 million, adversely affected by a €24 million negative currency effect. At constant exchange rates, first-quarter Operating Result from Activity came to €74 million, in line with the first-quarter performance in 2013. This stability at constant exchange rates, at a time when sales grew by an organic 6.2%, was largely due to an unfavourable country mix while the impact of price increases and other offsetting actions have not yet been felt.
It should be emphasized that first-quarter Operating Result from Activity is traditionally low, not representative of the full year and thus should not be extrapolated.
Net debt stood at €412 million at 31 March 2014, nearly unchanged from 31 December 2013 (€ 416 million).
In the first quarter, the Group generated a strong €101 million in cash from operations, most of which stemmed from a significant improvement in working capital requirement. However, the Group had a number of one-off outlays, including a payment for the new headquarters amounting to €63 million and share buybacks for approximately €15 million.
As anticipated, 2014, and in particular the first half of the year, will be significantly impacted by the decline in many currencies that occurred mainly during second-half 2013. In addition to this headwind, market conditions are more difficult than expected in a number of countries, especially Russia and Ukraine, and development in consumer spending is uncertain. In this complicated environment, the Group is implementing the necessary actions to ensure, on a full-year basis, sustained growth in sales and Operating Result from Activity at constant exchange rates. Nevertheless and given current market conditions, the first half-year – like the first quarter – will only partially reflect the impact of these measures.
Annual General Meeting: 15 May 2014 – Paris, Palais Brongniart, 2:30 pm First-half 2014 revenue and earnings: 24 July – 6:30 am
Investors / Analysts Groupe SEB Investor Relations Isabelle Posth Emmanuel Fourret BP 172 69134 Ecully Cedex, France
Phone: 33 (0) 4 72 18 16 40 [email protected]
Media Relations Image Sept Estelle Guillot-Tantay Caroline Simon 7, rue Copernic 75116 PARIS
Phone: +33 (0) 1 53 70 74 93 Fax: +33 (0) 1 53 70 74 80
The world leader in small domestic equipment, Groupe SEB operates in nearly 150 countries with a unique portfolio of top brands including Tefal, Rowenta, Moulinex, Krups, Lagostina, All-Clad, and Supor, marketed through multi format retailing. Selling some 200 million products a year, it deploys a long-term strategy focused on innovation, international development, competitiveness and service to clients. Groupe SEB has nearly 25,000 employees worldwide.
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