Earnings Release • Nov 3, 2011
Earnings Release
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Paris, November 3, 2011
On Thursday, November 3, 2011, Imerys' Board of Directors examined the non-audited consolidated results to September 30, 2011.
| CONSOLIDATED RESULTS non-audited (€ millions) |
09/30/2011 | 09/30/2010(4) | Current change % |
|---|---|---|---|
| Sales Current operating income(1) |
2 750.2 381.9 |
2 515.2 325.5 |
+ 9.3% + 17.3% |
| Operating margin | 13.9% | 12.9% | + 1 point |
| Net income from current operations, Group share(2) | 237.9 | 191.2 | + 24.4% |
| Net income, Group share | 230.5 | 188.6 | + 22.2% |
| Net income from current operations, Group share, per share(2)(3) |
€3.16 | €2.53 | + 24.6% |
(1) Operating income before other operating revenue and expenses but including share of joint operations.
(2) Group's share of net income before other operating revenue and expenses, net.
(3) The average weighted number of outstanding shares was 75,328,051 for the first 9 months of the 2011, compared with 75,436,646 for the first 9 months of 2010.
(4) Results for the first 9 months of 2010 have been restated following the change in accounting method related to the recognition of employee benefits, applied on January 1, 2011 and detailed in appendix to the present press release.
Chairman & CEO Gilles Michel stated, "Over the first 9 months of 2011, growth in Imerys' sales has been firm whereas the basis of comparison for 2nd and 3rd quarters of last year was high, and operating performance improved. In a macroeconomic environment that has become more uncertain, the prospects for a slowdown that appeared in August will be reflected in some of the Group's markets by the end of 2011. However, the momentum of most end markets and the favorable trend in the geographic and product mix, together with a strict cost management, enable Imerys to confirm its full year 2011 target of over + 20% growth in net income from current operations."
After a 1st half marked by significant growth on Imerys' end markets, activity remained firm in the 3rd quarter, whereas levels were high in 2nd and 3rd quarters of 2010 (inventory rebuilding in some industries). Demand in most emerging countries has also been well orientated and the signs of economic slowdown that appeared in the summer have not had so far any tangible effect on the Group's main markets.
The strong capital expenditure (machine tools, aerospace, etc.) and demand for consumer durables (automotive, household appliances, etc.) carried over into the 3rd quarter, as seen in the + 8% rise in global steel production or trends in manufacturing indexes.
Fast-moving consumer goods (food, health, electronics, etc.) and packaging remained in line with global growth, while production of printing and writing paper slumped in mature countries but continued to grow in emerging zones.
The single-family housing sector in France benefited from healthy trends for building permits in 2010. Over the first 9 months, construction starts rose + 9% compared with the same period of the previous year. The construction market was contrasted in the rest of Europe and stagnant in the United States, where indicators remained at historically low levels while, in China, measures to prevent economic overheating led to a slowdown.
Since the beginning of the year, the cost of some raw materials and, to a lesser extent, energy, has risen, in addition to highly volatile exchange rates.
After the creation of "The Quartz Corp SAS", a joint venture with the Norwegian group Norsk Mineral, at the end of the first quarter(1), the closing of the acquisition of Luzenac Group, is a new milestone in Imerys' strategy that enables the Group to consolidate its leadership by broadening its functional minerals offering.
With sales of USD395 million in 2010, Luzenac Group is the world leader in talc processing. Completed on August 1, 2011, the acquisition was paid in cash for an enterprise value of USD340 million (€232 million), which represents an EBITDA ratio in line with the ratios historically paid by Imerys. Since that date, Luzenac Group has been fully consolidated. On the basis of current market conditions, the project should create value with a return on capital employed greater than the Group's cost of capital from 2013.
Furthermore, Imerys announced on September 20, 2011 the inauguration of a production plant for ceramic proppants (essential rock support agents) for the unconventional gas and oilfield operations segment. The Group has developed an innovative offering for this fast-growing market and filed several patents. Built on the Andersonville (Georgia, United States) site, the plant benefits from the unit's infrastructure and has a direct access to its mineral reserves. The new line, which represents USD60 million in capital expenditure, will be fully operational at the end of 2011. Its production should exceed 100,000 tons per year and is covered by multi-annual contracts. In a context of firm demand growth, the project will create value from its first year in operation.
Since the end of the summer, economic uncertainties are high and signs of slowdown appeared in the 3rd quarter. They will be reflected in some of Imerys' markets by the end of 2011, without however calling into question the Group's forecast of over + 20% growth in net income from current operations compared with 2010.
In response to the uncertainties weighing on market conditions, targeted measures have been taken (selectivity of strategic capital projects, control of working capital requirements, cost commitments) and the Group will continue to show discipline in managing its costs and cash.
1 Press release of April 28, 2011.
| 2011 sales (€ millions) |
2010 sales (€ millions) |
Change in sales (% previous year) |
Current change (2) (% previous year) |
Of which Volume effect |
Of which Price/Mix effect |
|
|---|---|---|---|---|---|---|
| 1st quarter(3) | 882.7 | 751.6 | + 17.4% | + 13.7% | + 10.2% | + 3.5% |
| 2nd quarter(3) | 924.7 | 871.4 | + 6.1% | + 10.8% | + 5.2% | + 5.7% |
| 3rd quarter(3) | 942.8 | 892.2 | + 5.7% | + 3.8% | - 1.1% | + 4.9% |
| 9 months(3) | 2,750.2 | 2,515.2 | + 9.3% | + 9.2% | + 4.4% | + 4.8% |
Sales to September 30, 2011 totaled €2,750.2 million (+ 9.3% vs. first 9 months 2010). This rise factors in:
At comparable Group structure and exchange rates, turnover for the first months rose + 9.2% compared with the same period in 2010, with an equivalent contribution from the product price/mix component and volumes.
After a particularly high 2nd quarter, 3rd quarter turnover increased + 3.8% in 2011 at comparable Group structure and exchange rates. Volumes were close to 3rd quarter 2010, thanks to continued firm demand. The price/mix effect was again positive.
| (€ millions) | Sales to 09/30/11 | Sales to 09/30/10 | % change vs. 09/30/10 |
% consolidated sales 09/30/11 |
|---|---|---|---|---|
| Western Europe | 1 322.8 | 1 207.1 | + 10% | 48% |
| Of which France | 476.8 | 426.0 | + 12% | 17% |
| United States / Canada | 531.9 | 522.6 | + 2% | 20% |
| Emerging countries | 750.7 | 660.6 | + 14% | 27% |
| Others (Japan / Australia) | 144.8 | 124.9 | + 16% | 5% |
| Total | 2,750.2 | 2,515.2 | + 9.3% | 100% |
Over the first 9 months of the year, the Group's sales in emerging zones benefited from dynamic markets and from the developments made in those zones (acquisition of PPSA, etc.). Moreover, the depreciation of the US dollar against the euro is reflected in slower sales growth in North America.
(2) At comparable Group structure and exchange rates.
(3) Non-audited quarterly data.
| (non-audited, € millions) | Q3 2011 | Q3 2010 | Current change % |
Structure effect % |
Foreign exchange effect % |
Comparable change(4) % |
|---|---|---|---|---|---|---|
| Sales of which: | 942.8 | 892.2 | + 5.7% | + 4.9% | - 3.0% | + 3.8% |
| Minerals for Ceramics, Refractories, | ||||||
| Abrasives & Foundry | 290.2 | 288.8 | + 0.5% | - 2.7% | - 2.5% | + 5.7% |
| Performance & Filtration Minerals* | 199.3 | 156.0 | + 27.7% | + 30.3% | - 6.2% | + 3.6% |
| Pigments for Paper & Packaging | 202.3 | 209.4 | - 3.4% | + 2.2% | - 3.5% | - 2.1% |
| Materials & Monolithics | 264.6 | 250.0 | + 5.8% | + 0.2% | - 1.0% | + 6.5% |
| Holding Company & Eliminations | (13.6) | (12.0) | n.s. | n.s. | n.s. | n.s. |
| (non-audited, € millions) | 09/30/2011 | 09/30/2010 | Current change % |
Structure effect % |
Foreign exchange effect % |
Comparable change(4) % |
|---|---|---|---|---|---|---|
| Sales of which: | 2,750.2 | 2,515.2 | + 9.3% | + 2.3% | - 2.2% | + 9.2% |
| Minerals for Ceramics, Refractories, Abrasives & Foundry |
891.2 | 825.4 | + 8.0% | - 2.8% | - 3.0% | + 13.8% |
| Performance & Filtration Minerals* | 502.1 | 456.4 | + 10.0% | + 9.7% | - 4.2% | + 4.4% |
| Pigments for Paper & Packaging | 607.9 | 565.6 | + 7.5% | + 6.5% | - 1.8% | + 2.8% |
| Materials & Monolithics | 789.8 | 701.4 | + 12.6% | + 0.2% | - 0.2% | + 12.6% |
| Holding Company & Eliminations | (40.8) | (33.6) | n.s. | n.s. | n.s. | n.s. |
* including Talc.
Demand in the industries served by Minerals for Refractories, Fused Minerals, Graphite & Carbon (steelmaking, foundry, aluminum, cement, glass, mobile energy, etc.) was firm in the 1st half and remained high in the 3rd quarter, driven by the dynamism seen in capital goods and some consumer durables (machine tools, aerospace, automotive, electronics, etc.) since 2010. The weak US construction market weighed on demand in Minerals for Ceramics.
Analysis of the + 8.0% increase in sales to €891.2 million as on September 30, 2011, shows:
Over the first 9 months of 2011, growth at comparable structure and exchange rates has been + 13.8%, to be compared with the sharp rise recorded in the first 9 months of 2010 in relation to inventory rebuilding (+ 39% at comparable Group structure and exchange rates vs. first 9 months of 2009).
In addition to a significant rise in volumes resulting from market growth, the price/mix component also had a positive impact. Minerals for Ceramics benefited from the repositioning of their product portfolio and their geographic developments. On a stretched market for zircon-based products in China (prices, availability), Fused Minerals focused their activity on high value-added industrial outlets.
(4) At comparable structure and exchange rates.
The business group's end markets, particularly fast-moving consumer goods (food, health, etc.) and intermediate industries (plastics, rubber, filtration, catalysis, etc.) held out well. The construction market, however, remained contrasted in Europe and at historically low levels in the United States. After a brisk start to the year, the markets served by the Talc activity (plastics, paint, paper, ceramics, beauty & health) were also well orientated.
The + 10.0% rise in sales to €502.1 million for the first 9 months of 2011, factors in:
At comparable structure and exchange rates, growth in sales (+ 4.4%) reflects the improvement in the product price/mix and takes into account an unfavorable basis of comparison (effect of significant inventory rebuilding in first 9 months 2010).
Global production of printing and writing paper in the first 9 months of 2011 was on a par with the same period in 2010, which did however reflect an inventory rebuilding movement. Production rose in emerging markets (+ 5.7%) offsetting erosion in mature countries.
The + 7.5% increase in sales to €607.9 million as on September 30, 2011 takes into account:
At comparable Group structure and exchange rates, the increase in sales (+ 2.8%) reflects development of the product offering, particularly in the Packaging segment. The restructuring announced by papermakers during the 3rd quarter in Europe and the United States had limited impact.
In France, the increase in building permits of new single-family homes observed, that took place over several quarters, has translated into a + 12%(5) rise in the construction starts for the first 9 months of 2011, compared with the same period of the previous year. Demand in renovation's segment (+ 4.0%) was also firm, after catch-up effect at the start of 2011 following harsh weather conditions in late 2010. Compared with the 1st half of 2010, volumes of clay products(6) increased + 8% for roofing products and + 20% for bricks thanks to their intrinsic qualities (thermal resistance, energy savings, …).
Monolithic Refractories activity was supported by firm business in steel industry and in other segments (cement, incineration, petrochemicals, etc.). Demand in maintenance and launch of new plant construction projects also contributed to the health of this sector.
The business group's sales grew + 12.6% in the first 9 months of 2011 compared with the same period in 2010, at €789.8 million. This factors in:
At comparable structure and exchange rates, sales also grew + 12.6% with robust volumes and a positive contribution from the price/mix component.
(5) Source: Single-family housing starts – French Ministry of Environment, Sustainable Development, Transport and Housing.
(6) Source: Fédération Française des Tuiles et Briques (French roof tiles & bricks federation – provisional data).
| (€ millions) | 2011 | 2010 | % Change | % Comparable change (8) |
|---|---|---|---|---|
| 1st quarter | 116.4 | 84.8 | + 37.3% | + 35.5% |
| Operating margin | 13.2% | 11.3% | ||
| 2nd quarter | 136.4 | 124.5 | + 9.6% | + 13.1% |
| Operating margin | 14.8% | 14.3% | ||
| 1st half | 252.9 | 209.3 | + 20.8% | + 22.2% |
| Operating margin | 14.0% | 12.9% | ||
| 3rd quarter | 129.0 | 116.2 | + 11.0% | + 7.3% |
| Operating margin | 13.7% | 13.0% | ||
| September 30 | 381.9 | 325.5 | + 17.3% | + 16.9% |
| Operating margin | 13.9% | 12.9% |
The + 17.3% growth in current operating income to €381.9 million for the first 9 months of 2011, reflects:
At comparable structure and exchange rates, current operating income rose + €54.9 million compared with the first 9 months of 2010, thanks to the substantial contribution of sales volumes (+ €52.0 million). The product price/mix component (+ €115.5 million) offset the rise in variable costs (- €64.3 million, mostly as a result of inflation in some raw materials). Fixed production costs and general expenses remain under control (- €43.4 million), in line with the increase in production volumes and the related costs (personnel, maintenance).
In that context, the Group's operating margin improved by one point compared with the first 9 months of the previous year.
Up + 24.4% to €237.9 million, net income from current operations reflects:
(7) Operating income before other operating revenue and expenses.
(8) At comparable Group structure and exchange rates.
(9) Mainly: acquisition of Pará Pigmentos S.A. (PPSA) in Brazil (01/08/2010), deconsolidation of North American high-purity quartz activities contributed to The Quartz Corp SAS joint venture (01/01/2011), consolidation of Luzenac Group (08/01/2011).
(10) Group's share of net income, before other operating revenue and expenses, net.
The + €41.9 million increase in the Group's share of net income to €230.5 million takes into account other revenue and expenses, net of tax (- €7.4 million, mainly concerning acquisition costs for Luzenac Group).
As on September 30, 2011, net financial debt increased as expected (€1.1 billion as against €0.9 billion on June 30, 2011) following the acquisition of Luzenac Group on August 1, 2011 for €232 million, and the development of the proppant plant in the United States.
***
| January 12 | Investors' day - Paris |
|---|---|
| February 15 | 2011Financial results |
| April 26 | Shareholders' General Meeting – 1st quarter 2012 results |
| July 27 | 1st half 2012 results |
| November 5 | 3rd quarter 2012 results |
These dates are given for guidance only and may be updated on the Group's website at the address www.imerys.com, in the Investors & Analysts / Financial Agenda section.
This press release is available from the Group's website www.imerys.com, with access via the homepage in the "Press releases" section.
Imerys is holding a conference call today at 6:15 pm (CET), during which the first 9 months of 2011 results will be commented on. The conference call will be webcast live (with English translation) on the Group's website www.imerys.com and a replay will be available.
***
The world leader in adding value to minerals, Imerys is active in 47 countries with more than 240 sites and achieved more than €3.3 billion in sales in 2010. Combining high-quality mineral resources with advanced industrial know-how and technologies, the Group designs, manufactures and sells mineral-based specialties that enable its customers to improve product performance or process efficiency. Imerys' specialties have applications in a wide range of industries, including construction, food, personal care, paper, paint, plastics, ceramics, telecommunications and energy. More comprehensive information on Imerys can be found on the Group's website (www.imerys.com).
More comprehensive information about Imerys may be obtained from its Internet website (www.imerys.com) under Regulated Information, particularly in its Registration Document filed with Autorité des marchés financiers on March 31, 2011 under number D.11-0205 (also available from the Autorité des marchés financiers website, www.amf-france.org). Imerys draws the attention of investors to chapter 4, "Risk Factors", of its Registration Document.
***
Warning on projections and forward-looking statements: This document contains projections and other forward-looking statements. Investors are cautioned that such projections and forward-looking statements are subject to various risks and uncertainties (many of which are difficult to predict and generally beyond the control of Imerys) that could cause actual results and developments to differ materially from those expressed or implied.
Analyst/Investor Relations Pascale Arnaud – +33 (0)1 49 55 63 91 [email protected]
***
Press Contacts: Pascale Arnaud – +33 (0)1 49 55 63 91 Matthieu Roquet-Montégon – +33 (0)6 16 92 80 65
| Quarterly change at comparable Group structure and | Q1 11 | Q2 11 | Q3 11 | |
|---|---|---|---|---|
| exchange rates2011 vs. 2010 | + 13.7% | + 10.8% | + 3.8% | |
| Q1 10 | Q2 10 | Q3 10 | Q4 10 | |
| Reminder 2010 vs. 2009 | + 9.5% | + 22.7% | + 16.7% | + 11.1% |
| Quarterly change | Q1 11 | Q2 11 | Q3 11 | 09/30/11 |
|---|---|---|---|---|
| IMERYS GROUP – Current change | + 17.4% | + 6.1% | + 5.7% | + 9.3% |
| IMERYS GROUP – Comparable change of which: |
+ 13.7% | + 10.8% | + 3.8% | + 9.2% |
| Minerals for Ceramics, Refractories, Abrasives & Foundry |
+ 16.7% | + 19.3% | + 5.7% | + 13.8% |
| Performance & Filtration Minerals | + 7.0% | + 3.0% | + 3.6% | + 4.4% |
| Pigments for Paper & Packaging | + 8.0% | + 3.8% | - 2.1% | + 2.8% |
| Materials & Monolithics | + 19.5% | + 12.7% | + 6.5% | + 12.6% |
| Sales by business group | 09/30/11 | 09/30/10 |
|---|---|---|
| Minerals for Ceramics, Refractories, Abrasives & Foundry | 31% | 32% |
| Performance & Filtration Minerals | 18% | 18% |
| Pigments for Paper & Packaging | 22% | 22% |
| Materials & Monolithics | 29% | 28% |
| TOTAL | 100% | 100% |
| Sales by geographic destination | % of consolidated sales |
% of consolidated sales |
|
|---|---|---|---|
| 09/30/11 | 09/30/10 | ||
| Western Europe | 48% | 48% | |
| - of which France | 17% | 17% | |
| United States / Canada | 20% | 21% | |
| Emerging countries | 27% | 26% | |
| Others (Japan / Australia) | 5% | 5% | |
| TOTAL | 100% | 100% |
In 2011, the Group performs a change in accounting method related to the recognition of employee benefits. From January 1, 2011, Imerys applies the SoRIE method (Statement of Recognised Income and Expense) and from now on records in provision the entirety of the actuarial differences generated at each closing by the defined benefit obligations and their financing assets against the Group equity. 2010 comparative information has been restated.
This method improves the view over the Group's obligations and makes its accounting principles evolve consistently with the choices of the IASB and the majority of the significant issuers listed on NYSE Euronext Paris Stock Exchange.
| (€ millions) | 2010 | 2010 | |
|---|---|---|---|
| published | Adjustment | restated | |
| IMPACT ON CONSOLIDATED INCOME STATEMENT |
|||
| Revenue | 3,346.7 | 3,346.7 | |
| Current operating income(1) | 419.0 | 2.5 | 421.5 |
| Current financial expense | (74.7) | (74.7) | |
| Current income tax | (99.5) | (0.9) | (100.4) |
| Minorities | (4.5) | 0.1 | (4.4) |
| Net income from current operations(2) | 240.3 | 1.7 | 242.0 |
| Other revenue & expenses, net | 0.5 | 1.2 | 1.7 |
| Net income(2) | 240.8 | 2.9 | 243.7 |
| IMPACT ON CONSOLIDATED STATEMENT OF FINANCIAL POSITION |
|||
| Assets | |||
| Other financial assets | 33.7 | (12.6) | 21.1 |
| Differed tax assets | 45.5 | 23.2 | 68.7 |
| Liabilities | |||
| Equity (including net income) | 2,196.4 | (64.6) | 2,131.8 |
| Provisions for employee benefits | 94.7 | 75.2 | 169.9 |
| (non-audited, € millions) | Q3 2011 | Q3 2010 (restated) |
Change | Q3 2010 (published) |
|---|---|---|---|---|
| SALES | 942.8 | 892.2 | + 5.7% | 892.2 |
| CURRENT OPERATING INCOME(1) | 129.0 | 116.2 | + 11.0% | 115.1 |
| Current financial income(3) | (15.4) | (19.7) | (19.7) | |
| Current taxes | (32.0) | (27.2) | (27.1) | |
| Minority interests | (0.8) | (1.5) | (1.5) | |
| NET INCOME FROM CURRENT OPERATIONS(2) |
80.9 | 67.8 | + 19.4% | 66.8 |
| Other operating revenue and expenses, net | (5.3) | + 0.3 | + 0.3 | |
| NET INCOME(2) | 75.6 | 68.1 | n.s. | 67.1 |
__________________________________ (1) Operating income before other operating revenue and expenses.
(2) Group's share.
(3) A foreign exchange gain of + €10.2 million realized in the 1st half of 2010 as a consequence of a restructuring of financings of businesses in US Dollar presents a non-recurring and significant character. This foreign exchange gain has been classified in "Other net operating revenue and expenses, Group share" (that measures the recurring performance of the Group) so as to stress its non-recurring and significant character.
| (€ millions) | Q3 2011 | Q3 2010 | Change % | 09/30/2011 | 09/30/2010 | Change % |
|---|---|---|---|---|---|---|
| SALES | 942.8 | 892.2 | + 5.7% | 2,750.2 | 2,515.2 | + 9.3% |
| CURRENT OPERATING INCOME(1) | 129.0 | 116.2 | + 11.0% | 381.9 | 325.5 | + 17.3% |
| Current financial income(2) | (15.4) | (19.7) | (45.7) | (51.9) | ||
| Current taxes | (32.0) | (27.2) | (95.8) | (78.7) | ||
| Minority interests | (0.8) | (1.5) | (2.5) | (3.7) | ||
| NET INCOME FROM CURRENT OPERATIONS(3) |
80.9 | 67.8 | + 19.4% | 237.9 | 191.2 | + 24.4% |
| Other operating revenue and expenses, net | (5.3) | + 0.3 | (7.4) | (2.6) | ||
| NET INCOME(3) | 75.6 | 68.1 | n.s. | 230.5 | 188.6 | n.s. |
| NET INCOME PER SHARE(3) (IN EUROS) | €1.08 | €0.90 | + 19.7% | €3.16 | €2.53 | + 24.6% |
__________________________________ (1) Operating income before other operating revenue and expenses.
(2) A foreign exchange gain of + €10.2 million realized in the 1st half of 2010 as a consequence of a restructuring of financings of businesses in US Dollar presents a non-recurring and significant character. This foreign exchange gain has been classified in "Other net operating revenue and expenses, Group share" (that measures the recurring performance of the Group) so as to stress its non-recurring and significant character.
(3) Group's share.
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