Highlights of first half of 2011
- Revenue growth of 30% to €592.4 million (+27% autonomous; -4% currency effect; +7% acquisitions / divestments).
- EBITA € 56.1 million; +47% (+60% autonomous; -11% currency effect; -2% acquisitions / divestments).
- Net profit € 33.1 million (+69%).
- Revenue growth in the Advanced Textiles & Composites sector (+56% autonomous) as a result of record sales of TenCate Defender™M protective fabrics (military) and TenCate Tecasafe™ Plus (industry). Strong growth of interest in TenCate Defender™M outside the US.
- Increase in EBITA in the Advanced Textiles & Composites sector by 156% to € 41.2 million (+172% autonomous; -17% currency effect +1%; acquisition / divestments).
- Revenue growth in the Geosynthetics & Grass sector (+6% autonomous) as a result of higher sales of geosynthetics in emerging markets and new products; (upstream) revenues of TenCate Grass are stable.
- Decrease in EBITA in the Geosynthetics & Grass sector by 26% to € 13.9 million (-13% autonomous; -9% currency effect; -4% acquisition / divestments); this originates in the integration of TenCate Grass downstream activities and pressure on margins due to higher raw material costs at TenCate Geosynthetics.
- Earnings per share rose by 67% to € 1.30.
TenCate key figures for first half of 2011
|Earnings per share (€)
Loek de Vries, President and CEO: ‘TenCate’s activities showed growth across a broad front for the first six months. Against a background of constant exchange rates there was autonomous growth in revenues of 27% and EBITA grew by 60% in autonomous terms during the first half of the year.
Profit growth is the result particularly of the good performance delivered by the Advanced Textiles & Composites sector. At the Geosynthetics & Grass sector there was a decrease in EBITA as a result of, on the one hand, the integration of the downstream activities at TenCate Grass and, on the other hand, pressure on margins at TenCate Geosynthetics due to the increase in the costs of raw materials. The positive effect of passing on this increase in costs is gradually becoming visible in the results.
An important development is the integration and repositioning of the synthetic turf activities. The policy adopted, which is focused on strengthening distribution, will lead to accelerated acceptance of innovative synthetic turf systems. This in turn will result in an increase in the return and enhancement of the quality image of the TenCate brand’.
General performance in the second quarter of 2011
Revenues in the second quarter of 2011 increased by 19% to € 313.6 million.
The operating result before amortization of intangible fixed assets (EBITA) rose by 20% to € 36.0 million. The EBITA margin in the second quarter remained the same throughout the group (11.5%).
Net profit rose by 17% to € 23.2 million in the second quarter.
Other financial information for the first half year
As a result of the restrained investment policy, investments in fixed assets remained at a relatively low level (€ 13.3 million).
The balance of financial income / expenses remained almost the same at € 5.7 million (2010: €5.4 million). The interest-bearing debt amounted to €319 million. The ratio of debt to EBITDA was 2.24 at the end of June.
Earnings per share rose by 67% to € 1.30 in the first half-year.
Outlook for 2011
TenCate maintains the positive market outlook announced earlier, so that record revenues are expected for the full year 2011.
As regards the position of TenCate in defence markets, it is expected that budget cuts implemented by governments will have little impact on future growth expectations with regard to TenCate products and TenCate systems. In view of the modernization and upgrading programmes announced by various governments, the outlook also remains positive for the longer term. Worldwide, more exacting demands are being placed on the level of protection of soldiers, security services (police, fire brigades) and special services.
This trend can also be observed in the industrial market, where new geographic markets will also develop.
Sales of TenCate Defender™M products in the second half of the year are expected to decrease slightly in comparison with the first six months. This decrease is expected to be offset against further increases in sales of TenCate Tecasafe™ Plus products and continuing growth in composites for aerospace and armour. In comparison with the first half year, higher revenues are expected relating to armour systems for vehicles (including the Eurocopter project).
In view of the favourable market trends for geosynthetics in China, further investments have been made in additional production capacity at the production site in Zhuhai.
TenCate Geosynthetics expects to achieve higher revenues in particular in China and South America compared with the first half of the year.
Assuming that raw material prices remain the same, the EBITA margin of TenCate Geosynthetics will gradually recover during the second half of the year, as a result of the price increases implemented.
The integration process within TenCate Grass is expected to result in a substantial improvement in results in the second half of the year. New, sustainable system concepts will also be launched.
Xennia Technology is expected to strengthen growth in the second half of the year by means of further commercialization of developments already in progress.
Performance by sector
Advanced Textiles & Composites Sector
The autonomous increase in revenues amounted to 56% (-6% currency effect) in the first half of the year. EBITA rose in autonomous terms by 172% (-17% currency effect; +1% divestments / acquisitions).
The main contribution to the strong revenue growth was made by TenCate Defender™M products and TenCate Tecasafe™ Plus products. For both product groups, markets outside the United States and Europe developed favourably. Considerable potential exists in the Asian and East European markets in particular, where there was a substantial growth in sales.
Revenue growth was achieved in the TenCate Aerospace Composites market group, mainly as a result of increased production volume relating to the Airbus A380. Sales of armour composites also grew in comparison with the previous year. TenCate’s operations are moving towards systems that are integrated into vehicles (survivability systems).
The system development relating to ABDS™, the active blast counter-measure system (protection of vehicles against the effects of roadside bombs) is showing good progress.
Geosynthetics & Grass Sector
The autonomous revenue growth in the Geosynthetics & Grass sector amounted to 6% (-3% currency effect; +15% acquisitions / divestments).
At TenCate Geosynthetics new markets (including South America) and new products contributed to growth to a significant extent. The acquired company Emas Kiara was integrated into the Asian geosynthetics activities. This entailed initial costs.
The increase in raw material costs had an effect primarily on the EBITA margin of TenCate Geosynthetics. At TenCate Grass this effect was limited.
The synthetic turf industry is currently going through an integration phase, in which new partnerships are being formed between the producers of components, the suppliers of systems and installers. In this context market positions have been restructured. This development initially resulted in revenue loss involving a large customer and a loss of result due to the consolidation of downstream activities. This loss in revenues has now been offset.
The consolidation effect of the downstream activities caused a delay in reporting revenues.
At the beginning of 2011 work started on a development process in order to increase the effectiveness of the integrated distribution activities in the synthetic turf market. This integral market approach is focused both on a system approach, resulting in innovative and high quality concepts, and on an increase in efficiency in business operations.
This integrated market strategy has recorded good progress, thus safeguarding a strong market position.
The EBITA of the Geosynthetics & Grass sector decreased during the first half of 2011 in autonomous terms by 13% (-9% currency effect; -4% acquisitions / divestments).
Technologies / Technical Components Sector / Holding & Services
(Revenues from the other activities relate to TenCate Enbi and Xennia Technology.
Xennia Technology continued an increasing growth in revenues, which is indicative of the gradual development of commercial opportunities. This revenue growth is in part the result of an increased focus on viable inkjet printing solutions, instead of new R&D projects. In Asia in particular there is great interest in Xennia’s technology.
Statement by the Board
‘The Executive Board hereby declares that, to the best of its knowledge, the interim report, prepared in accordance with IAS 34, ‘Interim Financial Reporting’, gives a true and fair view of the assets, liabilities, financial position and profit of Royal TenCate and its consolidated businesses, and the interim report gives a true and fair view of the information required in accordance with Article 5:25d, Sections 8 and 9 of the Financial Supervision Act.’
Royal Ten Cate
Almelo, Tuesday 2 August 2011