Quarterly Report • May 12, 2011
Quarterly Report
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1 January to 31 March
specialists for surface technologies
€ 000s
Sales revenues
of which - Germany
EBITDA
EBITDA margin in %
EBIT
EBIT margin in %
EBT
Consolidated net profit
Earnings per share in €
Net financial debt in € 000s
Gearing (level of debt) in %
Equity ratio in %
Number of employees
Net financial debt in € 000s
Gearing (level of debt) in %
Equity ratio in %
Number of employees
REPORT FOR THE FIRST QUARTER 2011Q1
| Q1 | ||
|---|---|---|
| 1/1/-31/3/ 2010 |
1/1/-31/3/ 2011 |
Variation in % |
| 90,308 | 107,958 | +20 |
| 31,441 58,867 |
36,519 71,439 |
+16 +21 |
| 15,160 16.8 |
18,194 16.9 |
+20 |
| 10,175 11.3 |
12,826 11.9 |
+26 |
| 8,073 | 8,720 | +8 |
| 5,304 | 5,560 | +5 |
| 0.48 | 0.50 | +5 |
| 31/3/2010 | 31/3/2011 | Variation in % |
|---|---|---|
| 131,970 | 121,715 | -8 |
| 66 | 56 | -15 |
| 43.3 | 45.9 | +6 |
| 1,947 | 2,040 | +5 |
| 31/12/2010 | 31/3/2011 | Variation in % |
|---|---|---|
| 123,163 | 121,715 | -1 |
| 58 | 56 | -3 |
| 44.3 | 45.9 | +4 |
| 2,003 | 2,040 | +2 |
Experts are portraying an increasingly positive picture for the development of the global economy in 2011, even though development at two speeds is expected once again. The forecast by the International Monetary Fund (IMF) in April 2011 anticipates global growth of 4.4 %. A dynamic increase of 6.5 % is anticipated for the emerging economies, while the industrial nations are only expected to expand by a modest 2.4 %. The Japanese economy is likely to suffer significantly from the catastrophic earthquake of 11 March 2011 and its consequences. Accordingly, the IMF has reduced its growth expectations for the country to 1.4 %. The extent to which this effect will impact on the rest of the economic world still remains uncertain. Most economists are only expecting a temporary negative effect. Accordingly, the USA continues to hope for growth of 2.8 %. The expectations for Europe are assuming economic growth of 1.6 %. Germany can expect an increase of 2.5 % due to its strong exports. On the other hand, other EU nations are having to battle with structural economic problems and massive government debt.
The emerging economies will continue their success story in 2011. The IMF is predicting expansion of 8.4 % in economic output for the emerging economies in South and South-east Asia. A high growth rate is also forecast for the emerging BRIC countries: Brazil (+4.5 %), Russia (+4.8 %), India (+8.2 %), China (+9.6 %).
Apart from the uncertainties caused by the effects of the natural catastrophe in Japan, the main risks perceived by the experts are the high level of government debt in key industrial countries and the global economic imbalances that result from the high level of growth in the emerging economies and the home-grown problems of various industrial countries. The European Central Bank slightly increased the European base rate by 0.25 percentage points to 1.25 % at the beginning of April in order to ward off the risk of inflation.
The emerging positive economic development and particularly the reviving consumer climate in Germany are grounds for cautious optimism in relation to the sale of SURTECO products in the particularly important furniture and wood-based industry during 2011. The associations of the German wood and furniture industries (VDM and HDH) anticipate a slight increase in growth of 2-3 %. The start of the New Year was auspicious. According to figures released by the Federal Office of Statistics, January sales in the furniture industry rose significantly by 9.5 %. The industry associations mainly identify risks on account of unpredictable currency fluctuations and noticeably increasing raw material prices. By contrast, the upward trend in the employment market and the ongoing favourable consumer sentiment are continuing to exert a significant positive effect. The rapidly growing new-build business with low construction-loan interest rates should exert a positive effect on domestic demand. Exports are again likely to develop significantly more dynamically in 2011. After German kitchen furniture, shop fittings and other seating furniture enjoyed increased exports to foreign customers measured in the double-digit percentage range during the course of 2010, the Association of the German Furniture Industry (VDM) is continuing to forecast steady growth for foreign business in a sustained positive economic environment.
The positive dynamic growth posted in the previous year continued in the first quarter of 2011 and resulted in a tangible increase in sales compared to the equivalent year-earlier period. The organic growth was supported by takeovers initiated by the Strategic Business Unit (SBU) Paper in the business year 2010, which therefore succeeded in generating above-average growth.
The exorbitant price increases for important intermediary products, in particular plastics and technical papers, led to new highs in material costs, which exerted a significant negative effect on the development of earnings. Nevertheless, the EBITDA margin continued to be held at a high level.
REPORT FOR THE FIRST QUARTER 2011Q1
7
The sales of the SURTECO Group increased to € 108.0 million in the first quarter of 2011 (1st quarter of 2010: € 90.3 million). This corresponds to an increase of 20 %. By comparison with the equivalent year-earlier quarter, when growth was almost exclusively due to successes in foreign markets, the picture emerging this year has been much more balanced. Sales in Germany rose by 16 % to € 36.5 million, foreign business increased by 21 % to € 71.5 million.
The SBU Plastics started the New Year successfully. The innovative product range of plastic edgebandings, plastic foils, technical extrusions (profiles) of all types and cladding systems consistently tailored to the needs of customers and consumers continued to make a positive contribution to this good start. The sales of the SBU Plastics rose in the first three months of the current year by € 7.7 million to € 60.6 million compared with the year-earlier quarter. The domestic market rose by 6 % to € 19.4 million. Even more marked stimuli came with +19 % from foreign business (€ 41.2 million) with the European markets (outside Germany) being particularly noteworthy with an increase of 21 % and business in Asia with growth of 31 %.
The sales increases were generated in all production areas of the SBU Plastics. A focused policy of streamlining ranges was introduced in previous years by discontinuing unprofitable product groups in the business supplying home-improvement stores. This led to a reduction in sales of € 0.7 million to € 2.5 million in this segment.
The paper division manufactures surface coating materials based on technical raw papers directed in particular towards the furniture industry and interior design and this segment is able to look back on a particularly gratifying start to the current business year. The demand for printed products, edgebandings and preimpregnated and fully impregnated finish foils was very positive in all important sales markets so that growth of 27 % to € 47.4 million was achieved in the first quarter of 2011 compared with the equivalent year-earlier period. While foreign business continued the trend set in the previous year with sales of € 30.3 million (+25 %), a significant upturn (+30 %) emerged in Germany with sales of € 17.1 million. Stimuli came from the markets themselves and as a result of growth derived from the takeover of the customer base in the business for edgebandings and fully impregnated foils from impress decor GmbH and the acquisition of varnishing and coating facilities in North America during the second half of 2010.
Flat foils for the coating of large areas of materials increased by 38 %. Sales rose by 16 % in the edgebandings segment for coating the narrow sides of boards. The decorative printing facility increased its volume by 14 %.
The cost of materials amounted to € 50.7 million in the first three months of the current business year. It thereby exceeded the figure for the first quarter of 2010 by € 9.0 million. The cost of materials as a proportion of total output highlighted the development of procurement prices. In the first quarter of 2010, the proportion of materials in total output was still 43.6 % but it rose to 46.0 % in the quarter under review.
9
The upward price trend for plastics has continued uninterrupted. PVC and ABS are now close to peak historic prices and there are currently no signs of any easing in prices. The sourcing prices for technical raw papers and chemical components have also been subject to significant increases. Availability is also partly restricted so that procurement continues to be difficult in terms of volume and scheduling.
The number of employees again rose noticeably on the back of the global economic recovery. A workforce of 2,040 employees at the end of the first quarter of 2011 represented an increase of 5 % above the level of 31 March 2010 and was 2 % higher than at the beginning of 2011.
The impact of costs in the area of human resources eased when costs as a proportion of total output rose less strongly than in the same quarter for the previous year. As a result of improved utilization of capacity, the personnel costs as a proportion of total output fell by 1.7 percentage points from 25.3 % (1st quarter of 2010) to 23.6 % (1st quarter of 2011). Personnel expenses in the period under review amounted to € 26.0 million (1st quarter of 2010: € 24.2 million).
Other operating expenses only slightly exceeded the value for the equivalent year-earlier quarter (€ 15.3 million) at € 16.0 million.
The operating result (EBITDA) rose by 20 % during the quarter under review – in line with sales – and reached € 18.2 million. Despite the pressure on cost of materials, the EBITDA margin at 16.9 % remained at the level of the previous year. Lower percentage depreciation and amortization meant that EBIT increased by 26 % to € 12.8 million, while the corresponding margin increased by 11.3 % to 11.9 %.
The negative impact on the financial result because of the further impairment on the share package held by SURTECO in Pfleiderer AG, Neumarkt, amounting to € 1.3 million, meant that the EBT on 31 March 2011 was only 8 % above the equivalent year-earlier level at € 8.7 million. During the first three months of 2011, consolidated net profit reached € 5.6 million (1st quarter of 2010: € 5.3 million). Earnings per share rose accordingly – based on an unchanged number of shares at 11,075,522 no-par-value shares – from € 0.48 to € 0.50.
The significant increase in business volume by comparison with the previous quarter is also reflected in the balance sheet ratios to 31 March 2011. Following forward-looking procurement of raw materials and the resultant safeguarding of production and supply capability, working capital increased by € 11.0 million to € 88.3 million compared with 31 December 2010. Only modest investments in fixed assets were initiated in the first quarter with the focus on measures to generate process improvements.
As a result of the further decrease in the share price of Pfleiderer AG, Neumarkt, an impairment of € 1.3 million had to be carried out on the package of shares held on 31 March 2011 on account of the market valuation laid down in accordance with IFRS. The book value of the shares amounted to € 2.6 million at the end of the first quarter of 2011.
The reduction in other non-current financial assets is based on the fair value of financial instruments in connection with hedging the US private placement.
As a result of the expansion of working capital and the scheduled settlement of the long-term loan, cash and cash equivalents came down by € 12.1 million so that the balance sheet total was € 5.5 million lower.
Net financial debt has been reduced further by € 1.4 million to € 121.7 million since the close of 2010. Since shareholders' equity increased by € 5.0 million to € 218.4 million at the same time, the level of debt (gearing ratio) fell from 58 % (31 December 2010) to 56 %. The equity ratio rose correspondingly from 44.3 % to 45.9 %. Non-controlling interests fell back slightly within equity due to currency effects.
As a consequence of the favourable developments in business, the cash flow from operating activity and the free cash flow in the reporting period increased significantly.
| € 000s | 1/1/-31/3/ 2010 |
1/1/-31/3/ 2011 |
|---|---|---|
| Cash flow from operating activities |
-1,100 | 7,371 |
| Payments for income tax | -3,053 | -1,964 |
| Cash flow from current business operations |
-4,153 | 5,407 |
| Cash outflow from investment activities (less financial investments) |
-2,350 | -3,019 |
| Free cash flow | -6,503 | 2,388 |
REPORT FOR THE FIRST QUARTER 2011Q1
13
Digital printing technology is being intensively optimized and refined at SURTECO. Designers and architects have a choice of fantasy designs or realistic photographic motifs for plastic edgebandings. Since print cylinders are no longer necessary and colour settings can be implemented quickly, small batches can be produced at attractive prices. SURTECO customers can directly influence the decorative design, deliver a fast response to the design and colour requirements of their customers, and offer furniture tailored to individual aspirations at a favourable price.
Haptic flat foils that can be offered as edgebandings, pre-impregnated or fully impregnated foils offer a tactile and appealing texture. These paperbased surfaces have now been expanded by an additional variant since the match of the surface patterns can be synchronized with the underlying decorative design. The result is a virtually perfect match with the natural materials.
Concerns about the cost situation in the procurement market continue to be a major factor in driving the intensive and ongoing work in the Group's research and development departments directed towards generating more cost-effective and more efficient production methods and the use of cheaper alternative raw-material components with quality that is at least equivalent.
SURTECO made a good start to the year 2011 on the stock exchange. The company's share gained 8.2 % in value during the months January to March and ended the quarter with a closing price of € 28.95. Publication of preliminary figures for the business year 2010 exceeding the expectations of the market has been particularly influential in generating a high demand for SURTECO shares. Shares have been traded at a price up to € 32.00. The buoyant price performance has released SURTECO from the relatively disoriented development of the remaining market. The SDAX (the index for small and medium-sized companies listed on the stock exchange) even entered negative territory during the quarter under review.
The market capitalization of SURTECO SE amounted to € 320.6 million on 31 March 2011 with the number of shares remaining unchanged at 11,075,522 no-par-value shares. The percentage of shares in free float is at 22.6 %. The company continues to retain the objective of a listing in the SDAX. As far as the relevant criteria of market capitalization (based on free float) and trading volume for a listing are concerned, the statistics of the German Stock Exchange (Deutsche Börse) indicate that SURTECO is currently ranked in position 112 for market capitalization (companies relevant for MDAX and SDAX) and in position 133 by trading volume. SURTECO would have to be ranked in the top 110 in order to meet the two criteria for inclusion in the SDAX as planned in the medium term.
| January - March 2011 | |
|---|---|
| Number of shares | 11,075,522 |
| Free float in % | 22.6 |
| Price on 3/1/2011 in € | 26.75 |
| Price on 31/3/2011 in € | 28.95 |
| High in € | 32.00 |
| Low in € | 26.17 |
| Market capitalization as at 31/3/2011 in € 000s |
320,636 |
REPORT FOR THE FIRST QUARTER 2011Q1
The development in the employment market and the associated increase in purchasing power are likely to indicate signs of a modest upswing in the domestic market. SURTECO is also projected to participate in the sustained growth abroad so that satisfactory demand is anticipated throughout the year 2011.
The development of raw material prices will continue as a dominant theme in 2011. Additional price increases for plastics and technical raw papers cannot be excluded during the course of 2011. All internal efforts to optimize costs in all areas of the company must therefore be pursued with unrelenting zeal. These include measures for enhancing productivity and efficiency, streamlining processes and systems, and a high level of discipline for costs and investments.
If all these measures are continued, projected growth in sales should also lead to an improvement in the result.
| Sales revenues |
|---|
| Changes in inventories |
| Own work capitalized |
| Total |
| Cost of materials |
| Personnel expenses |
| Other operating expenses |
| Other operating income |
| EBITDA |
| Amortization and depreciation |
| EBIT |
| Financial result |
| EBT |
| Income tax |
| Net income |
Group share (consolidated net profit)
Non-controlling interests
Basic and diluted earnings per share in €
Number of shares
QUARTERLY FINANCIAL STATEMENTS (SHORT VERSION) REPORT FOR THE FIRST QUARTER 2011Q1
19
| Q1 | ||
|---|---|---|
| 1/1/-31/3/ | ||
| 2011 | ||
| 107,958 | ||
| 1,965 | ||
| 241 | ||
| 110,164 | ||
| -50,712 | ||
| -25,959 | ||
| -15,999 | ||
| 700 | ||
| 18,194 | ||
| -5,368 | ||
| 12,826 | ||
| -4,106 | ||
| 8,720 | ||
| -3,129 | ||
| 5,591 | ||
| 5,560 | ||
| 31 | ||
| 0.50 | ||
| 11,075,522 | ||
Net income
Difference from currency translation
Financial instruments available-for-sale
Total Comprehensive Income
Group share
Non-controlling interests
21
REPORT FOR THE FIRST QUARTER 2011Q1
| Q1 | ||
|---|---|---|
| 1/1/-31/3/ 2010 |
1/1/-31/3/ 2011 |
|
| 5,366 | 5,591 | |
| 5,326 | -1,362 | |
| -2,246 | 809 | |
| 3,080 | -553 | |
| 8,446 | 5,038 | |
| 8,384 | 5,007 | |
| 62 | 31 |
Cash and cash equivalents
Trade accounts receivable
Inventories
Current income tax assets
Other current assets
Current assets
Property, plant and equipment
Intangible assets
Goodwill
Investments in associated enterprises
Financial assets
Non-current income tax assets
Other non-current assets
Other non-current financial assets
Deferred taxes
Non-current assets
please turn over
Short-term financial liabilities
Trade accounts payable
Income tax liabilities
Short-term provisions
Other current liabilities
Current liabilities
Long-term financial liabilities
Pensions and similar obligations
Deferred taxes
Non-current liabilities
Capital stock
Capital reserves
Retained earnings
Consolidated net profit
Capital attributable to shareholders
Non-controlling interests
Equity
| 31/12/2010 | 31/3/2011 |
|---|---|
| 12,666 | 13,311 |
| 22,918 | 24,355 |
| 4,040 | 4,772 |
| 1,695 | 2,272 |
| 22,202 | 22,356 |
| 63,521 | 67,066 |
| 172,892 | 158,714 |
| 10,400 | 10,540 |
| 21,292 | 21,261 |
| 204,584 | 190,515 |
| 11,076 | 11,076 |
| 50,416 | 50,416 |
| 129,554 | 150,706 |
| 21,705 | 5,560 |
| 212,751 | 217,758 |
| 688 | 678 |
| 213,439 | 218,436 |
| 481,544 | 476,017 |
Reconciliation to cash flow from current business operations
Change in assets and liabilities (net)
Cash flow from investment activities
Cash flow from financial activities
Cash and cash equivalents
1 January
Effect on changes in exchange rate on cash and cash equivalents
| Q1 | |||
|---|---|---|---|
| 1/1/-31/3/ 2010 |
1/1/-31/3/ 2011 |
||
| 8,073 | 8,720 | ||
| 5,133 | 10,730 | ||
| 13,206 | 19,450 | ||
| -17,359 | -14,043 | ||
| -4,153 | 5,407 | ||
| -2,350 | -3,019 | ||
| -23,491 | -14,127 | ||
| -29,994 | -11,739 | ||
| 84,846 | 62,395 | ||
| 821 | -346 | ||
| 55,673 | 50,310 |
SURTECO GROUP
| € 000s | Capital stock |
Additional capital paid in |
Fair value measure ment for financial instruments |
|---|---|---|---|
| 31 December 2009 | 11,076 | 50,416 | 6,975 |
| Net income | 0 | 0 | 0 |
| Other changes | 0 | 0 | -2,246 |
| 31 March 2010 | 11,076 | 50,416 | 4,729 |
| 31 December 2010 | 11,076 | 50,416 | 1,975 |
| Net income | 0 | 0 | 0 |
| Other changes | 0 | 0 | 809 |
| 31 March 2011 | 11,076 | 50,416 | 2,784 |
REPORT FOR THE FIRST QUARTER 2011Q1
| Retained earnings | |||||
|---|---|---|---|---|---|
| Other compre hensive income |
Currency translation adjust ments |
Other retained earnings |
Consoli- dated net profit |
Non controlling interests |
Total |
| 201 | -12,644 | 126,172 | 9,239 | 380 | 191,815 |
| 0 | 0 | 0 | 5,304 | 62 | 5,366 |
| 0 | 5,326 | 9,239 | -9,239 | 0 | 3,080 |
| 201 | -7,318 | 135,411 | 5,304 | 442 | 200,261 |
| 107 | -3,509 | 130,981 | 21,705 | 688 | 213,439 |
| 0 | 0 | 0 | 5,560 | 31 | 5,591 |
| 0 | -1,362 | 21,705 | -21,705 | -41 | -594 |
| 107 | -4,871 | 152,686 | 5,560 | 678 | 218,436 |
Sales revenues
€ 000s
1/1/-31/3/2011
External sales
Internal sales
Total sales
External sales
Internal sales
Total sales
Segment earnings (EBT)
€ 000s
SBU Plastics
SBU Paper
Reconciliation
31
REPORT FOR THE FIRST QUARTER 2011Q1
| SBU Plastics |
SBU Paper |
Recon ciliation |
SURTECO Group |
|---|---|---|---|
| 60,622 | 47,336 | 0 | 107,958 |
| 404 | 530 | -934 | 0 |
| 61,026 | 47,866 | -934 | 107,958 |
| 52,907 | 37,401 | 0 | 90,308 |
| 180 | 286 | -466 | 0 |
| 53,087 | 37,687 | -466 | 90,308 |
| 1/1/-31/3/2010 | 1/1/-31/3/2011 |
|---|---|
| 5,789 | 6,081 |
| 5,933 | 6,974 |
| -3,649 | -4,335 |
| 8,073 | 8,720 |
Sales revenues SURTECO Group
€ 000s
Germany
Rest of Europe
America
Asia, Australia, Others
Sales revenues SBU Plastics
€ 000s
Germany
Rest of Europe
America
Asia, Australia, Others
Sales revenues SBU Paper
€ 000s
Germany
Rest of Europe
America
Asia, Australia, Others
| 1/1/-31/3/2010 | 1/1/-31/3/2011 |
|---|---|
| 31,441 | 36,519 |
| 38,179 | 46,967 |
| 10,982 | 11,856 |
| 9,706 | 12,616 |
| 90,308 | 107,958 |
| 1/1/-31/3/2011 | 1/1/-31/3/2010 |
|---|---|
| 19,424 | 18,247 |
| 23,011 | 18,970 |
| 8,662 | 7,807 |
| 9,525 | 7,883 |
| 60,622 | 52,907 |
| 1/1/-31/3/2010 | 1/1/-31/3/2011 |
|---|---|
| 13,194 | 17,095 |
| 19,209 | 23,956 |
| 3,175 | 3,194 |
| 1,823 | 3,091 |
| 37,401 | 47,336 |
The consolidated financial statements of SURTECO SE for the period 31 December 2010 were prepared in accordance with the regulations of the International Financial Reporting Standards (IFRS), as they were adopted by the EU. This report has been prepared in accordance with the International Accounting Standard (IAS) 34 "Interim Financial Reporting". The same accounting and valuation principles as in the preparation of the consolidated financial statements for the business year 2010 are applied in drawing up the interim financial report for the quarter ended 31 March 2011. If the standards adopted by the IASB had to be applied from 1 January 2011, they were taken account of in this interim report if they exert effects on the SURTECO Group.
We refer readers to the consolidated financial statements of SURTECO SE for the period ending 31 December 2010 in respect of further information on the details of the accounting and valuation methods used. The group currency is denominated in euros (€). All amounts are specified in thousand euros (€ 000s).
The SURTECO Group interim consolidated financial statements include all domestic and foreign companies material for the net assets, financial position and results of operations in which SURTECO holds a direct or indirect majority of the voting rights. On 1 January 2011, the sales company SURTECO OOO, Russia, founded in 2009, was included for the first time.
During the period under review, the company had 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 company, nor did the company conclude any such transactions at standard commercial conditions.
After 31 March 2011 when this report went to press, there were no other events or developments that could lead to a significant change in the recognition or valuation of individual assets or liabilities.
A sustained negative development in the share price of Pfleiderer AG, Neumarkt, means that further impairments are anticipated for 30 June 2011. SURTECO SE holds a package of shares amounting to 2.74 % of the capital stock.
ticker symbol: SUR isin: DE0005176903
Chief Financial Officer Phone +49 (0) 8274 9988-563
Günter Schneller Investor Relations and Press Officer Phone +49 (0) 8274 9988-508
Fax +49 (0) 8274 9988-515 Email [email protected] Internet www.surteco.com
Johan-Viktor-Bausch-Str. 2 86647 Buttenwiesen-Pfaffenhofen Germany
Cost of materials ratio in %
Earnings per share in €
EBIT margin in %
EBITDA margin in %
Equity ratio in %
Gearing (debt level) in %
Market capitalization in €
Net financial debt in €
Personnel expense ratio in %
Working capital in €
17 June 2011
20 June 2011
11 August 2011
11 November 2011
36
REPORT FOR THE FIRST QUARTER 2011Q1
Cost of materials/Total output
Consolidated net profit/Number of shares
EBIT/Sales revenues
EBITDA/Sales revenues
Equity/Balance sheet total
Net financial debt/Equity
Number of shares x Closing price on the balance sheet date
Short-term and long-term financial liabilities - Cash and cash equivalents
Personnel costs/Total output
(Trade receivables + inventories) - Trade liabilities
Annual General Meeting at the Sheraton Munich Arabellapark Hotel
Dividend payout
Six-month report January-June 2011
Nine-month report January-September 2011
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