Earnings Release • Oct 23, 2014
Earnings Release
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Regulated information – 3Q 2014 trading update Under embargo until Thursday 23 October 2014 at 7:00 a.m. CET
"The weakening of the macroeconomic environment of the Eurozone weighed on Deceuninck's sales performance of the third quarter.
The new construction performance and consumer confidence in France continued as expected. The government tax incentives to support energy efficient construction and renovation, initially
announced in July to take effect as of September, have been delayed. We expect that the fiscal incentive "credit d'impôt transition énergétique" will only start supporting the industry as of 2015.
The sales decline in Germany as of August was unexpected and this trend continues into 4Q.
The economic picture in continental Europe contrasts strongly with the robust construction activity in the US and in the UK, where we enjoy double digit growth. Also Spain and Italy show double digit volume growth through competitive wins albeit in a weak environment.
Meanwhile we continue to invest for sustainable growth in the US and Turkey & Emerging Markets.
We have received final approval for the acquisition of Pimapen, the most recognized brand for windows in Turkey. Pimapen now enters the Deceuninck Group with factories in Istanbul, (Turkey) and Rostov-on-Don (Russia) (under the brand EnWin) ; and adds for € 60 million (*) in annual sales.
In Brazil we acquired our window profile distributor Althera and founded Deceuninck do Brazil.
We expect the sales trends in the different regions to continue into 4Q. The current economic uncertainty in key markets, combined with the short order book, typical to our industry, does not allow to give a quantified guidance for full year 2014.
However, Deceuninck is well positioned to overcome temporary economic weakness with a solid balance sheet, rigorous cost control and continued efficiency improvements in our factories. As a result, we maintain our commitment to be profitable for full year 2014.
| Sales breakdown per quarter and 9M 2014 |
|---|
| ----------------------------------------- |
| % of sales | 1Q 2014 | 2Q 2014 | 3Q 2014 | 9M 2014 |
|---|---|---|---|---|
| Exchange rate | -8,4% | -7,0% | -3,1% | -6,0% |
| Volume | 11,4% | 1,2% | -2,3% | 2,7% |
| Mix (country, price, product) | 0,9% | 3,7% | 2,0% | 2,3% |
| TOTAL | 3,8% | -2,0% | -3,4% | -0,9% |
(*) Last Twelve Months (LTM) ending June 30, 2014
| In € million | Var. 1Q | Var. 2Q | 3Q | Var. 3Q | Var. 3Q | 9M | Var. 9M | Var. 9M |
|---|---|---|---|---|---|---|---|---|
| 2013/2014 | 2013/2014 | 2014 | 2013/2014 | Loc. Curr. | 2014 | 2013/2014 | Loc. Curr. | |
| Western Europe | 6,7% | -1,6% | 41,1 | -4,8% | 137,4 | 0,0% | ||
| Central & Eastern Europe | 8,5% | -6,8% | 44,8 | -12,3% | -6,2% | 115,3 | -5,7% | -0,2% |
| Turkey & Emerging Markets | -3,8% | -3,3% | 31,1 | 3,2% | 10,0% | 91,5 | -1,3% | 15,5% |
| North America | 0,5% | 9,3% | 24,3 | 10,9% | 10,8% | 61,3 | 7,7% | 10,4% |
| TOTAL | 3,8% | -2,0% | 141,3 | -3,4% | 405,6 | -0,9% |
3Q 2014 sales in Western Europe decreased 4.8% to € 41.1 million. 9M 2014 sales were stable at € 137.4 million.
The picture of the region Western Europe during the third quarter is mixed. France, by far the largest market of the region, and the Netherlands show a double digit decline. Decline in Belgium was moderate. This contrasts with the strong growth in UK, Spain and Italy.
The weakness of the residential building market in France continues. Single family and multifamily housing starts further decline, but also renovation continued to weaken, impacting mainly small and medium sized artisans.
In Belgium residential newbuild activity is weak in an increasing competitive environment.
Residential renovation slightly improved but did not compensate the volume decline from newbuild. The weak market is the result of an uncertain economic environment and lack of incentives promoting renovation for improved energy efficiency.
In UK both home improvement and residential newbuild continued to grow with the sharpest rise in homebuilding since 2003.
Deceuninck in UK, Italy and Spain continues to outperform the market with double digit sales growth as result of customer intimacy and competitive wins.
The number of window manufacturers that have adapted their window manufacturing equipment to process highly energy efficient window frames with linktrusion technology is steadily increasing. Linktrusion® offers 30% better insulation at 40% lower material consumption.
3Q 2014 sales in Central & Eastern Europe decreased 12.3% to € 44.8 million (At constant exchange rates: -6.2%).
9M 2014 sales decreased 5.7% to € 115.3 million (At constant exchange rates: more or less stable at -0.2%).
The entire region of Central & Eastern Europe saw its sales unexpectedly decrease during the 3 rd quarter partly explained by the weak Russian ruble and Czech koruna. The domestic markets of Russia and Germany, the two major countries for the region, were affected most of
all, with double digit volume decreases. In Germany the deteriorating economic indicators, which were published in October, confirmed Deceuninck's finding of reduced consumer confidence and builder confidence. In Russia the weak economic environment continued throughout the quarter.
9M 2014 volumes in the region give a mixed picture: volumes increased in Poland and Czech Republic, whereas volumes decreased in Russia & Germany.
3Q 2014 sales in Turkey & Emerging Markets increased 3.2% to € 31.1 million (At constant exchange rates: +10.0 %).
9M 2014 sales in Turkey & Emerging Markets decreased 1.3% to € 91.5 million (At constant exchange rates: +15.5%).
Residential renovation and newbuild activity in Turkey remained solid during the third quarter in spite of a more difficult political environment impacted by the Islamic State activities in Syria and Iraq. Volumes slightly declined on the domestic market but the company succeeded gradually to pass on the increased raw material cost to the market.
Sales in the new export markets of South America and India are progressing well. Total export sales represented nearly 15% of the sales in the region during the quarter. Deceuninck successfully participated in the biennial Fesqua trade fair in São Paulo with a regional South American character. Besides Chile Deceuninck is increasingly focussing on Brazil with the acquisition of the local window profile distributor, Althera and the foundation of the subsidiary Deceuninck do Brazil.
3Q 2014 sales in North America increased by 10.9% to € 24.3 million (At constant exchange rates: +10.8%).
9M 2014 sales in North America increased by 7.7% to € 61.3 million (At constant exchange rates: + 10.4%).
The NAHB (National Association of Housebuilders) remodelling market index (RMI) shows modest improvement as a result of regained consumer confidence. At same time the improved economy has helped to restore builder confidence. Growing strength in the economy, employment and demographics positively influences residential new build activity.
Deceuninck North America's strategy of introducing innovative products and materials, creating brand awareness, gaining new customers, and reinforcing current customer relations paid off. This resulted in higher than market sales growth.
Willy Deceuninck, permanent representative of T.R.D. Comm VA., and Giulia Van Waeyenberge have resigned from the Board of Directors on 1 October 2014.
Francis Van Eeckhout, permanent representative of Holve nv and Benedikte Boone, permanent representative of Bene Invest bvba have been named as new members of the Board. Both new Board members replace T.R.D. Comm. VA and Giulia Van Waeyenberge and will continue their mandate until the next Annual General Meeting of Shareholders on 12 May 2015, at which their nomination as members of the Company's Board of Directors will be submitted for a final approval.
Willy Deceuninck is named Honorary Member of the Board.
Francis Van Eeckhout, permanent representative of Holve nv is named Vice Chairman.
| 25 | February | 2015 | 2014 annual results |
|---|---|---|---|
| 12 | May | 2015 | 1Q 2015 trading update |
| 12 | May | 2015 | Annual Shareholders Meeting at 11 am |
| 22 | July | 2015 | 1H 2015 results |
| 21 | October | 2015 | 3Q 2015 trading update |
End of press release
At Deceuninck, our commitment towards innovation, ecology and design provides us with a clear focus: building a sustainable home. A home that is more energy-efficient to live in and more attractive to look at. Deceuninck works worldwide with state-of-the-art materials, resulting in low maintenance, top insulating and long lasting products that can be fully recycled at end of life. Moreover, our values of Candor, Top performance and Entrepreneurship help us build a better world for our Partners and end users. Deceuninck has strong ambitions. We want to build a work environment in which people are proud to contribute, and strengthen our position within the top three market players. Alongside our ecological sustainability, Deceuninck also pursues financial sustainability.
Deceuninck employs 2700 people in 25 countries. Deceuninck has production facilities in Belgium, Czech Republic, France, Germany, Poland, Russia, Thailand, Turkey, UK and US.
Deceuninck sales in 2013 were € 536.5 million with a net positive result of € 8.4 million.
Contact Deceuninck: Ludo Debever • T +32 51 239 248 • M +32 473 552 335 • [email protected]
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