2011

2 March 2011

TenCate net profit up 92% to € 46.0 million in 2010

Highlights of 2010

  • Sales in 2010: €984.5 million (2009: €842.1 million; 17% of which +10% autonomous).
  • EBITA in 2010: € 85.0 million (2009: €41.5 million; +109% autonomous).
  • EBITA margin in 2010: 8.6% (2009: 4.9%).
  • Net profit in 2010: € 46.0 million (2009: € 23.9 million).
  • EBITA Advanced Textiles & Composites sector up 38% to € 43.8 million.
  • EBITA Geosynthetics & Grass sector increases by 87% to € 31.4 million.
  • Considerable recovery in the result of synthetic turf activities.
  • Strong growth in sales of TenCate Defender™ M products; sales in fourth quarter approx. US $ 60 million.
  • Dividend proposal: € 0.75 per share, in cash or as a stock dividend, at shareholder’s discretion (2009: € 0.60 per share, stock dividend option).

Loek de Vries, Chairman of the Executive Board and CEO: ‘In 2010 TenCate achieved an autonomous growth in sales of 10%, in an uncertain economic climate. There is a positive operational trend, partly in view of the quality of the composition of the profit.
The TenCate companies in the Netherlands also made a positive contribution as a result of a successful restructuring process. Production costs were reduced and a greater focus was brought to bear on the composition of the product portfolio.
The results for 2010 form a good basis for the continuation of this growth’.

General performance in the second half of 2010
Sales in the second half of 2010 increased by 16% on an autonomous basis (+8% currency effect) to € 529.9 million. Orders for TenCate Defender™ M and armour composites (antiballistics) made a strong contribution here.

The Advanced Textiles & Composites sector achieved an autonomous growth in sales of 28%, compared to the second half of 2009.

The operating result before the amortization of intangible fixed assets (EBITA) amounted to € 46.8 million and rose by 127% (autonomous 132%) as a result of this positive development, which was also considerable (second half 2009: € 20.6 million). The EBITA margin in the second half of 2010 was 8.8% (second half of 2009: 5.0%).

The net result for the second half of 2010 amounted to € 26.4 million (2009: € 8.7 million).

Annual figures for 2010
Sales in 2010 as a whole amounted to €985 million (2009: €842 million). On an autonomous basis the increase in sales amounted to 10% (currency effect +4%; effect of acquisitions/ divestments +3%).

The dominant theme of the year 2010 was recovery. TenCate Protective Fabrics and the TenCate Grass group showed the greatest increase in sales and result.
On the back of the reorganizations implemented in 2009, TenCate Enbi produced an excellent result.

The buy & build strategy was continued in 2010, after priority had been given to cash management and balance sheet management in 2009. In 2010 AML UK (armour composites) was acquired, which has brought about strategic strengthening of the European armour activities.

EBITA rose in 2010 to €85.0 million (autonomous +109%; currency effect +14%; acquisitions / divestments -18%).

The EBITA margin is 8.6% (2009: 4.9%). The EBITA (margin) was affected by tight conditions and price increases on the raw materials market. These increases in the price of raw materials were passed on to the market with a time lag.

The EBITA margin at sector level came under pressure and decreased by 1% as a result of an internal reallocation of costs, which are treated as gains at holding level. The total impact of this amounts to approx. €8 million.

Net profit in 2010 was up by 92% to €46.0 million (2009: €23.9 million). Net earnings per share amounted to €1.84 (2009: €0.97).

Dividend proposal
The dividend policy is based on a pay-out ratio of approximately 40% of net profit, payable at shareholders’ discretion either in cash or shares charged to the share premium reserve.

It is proposed to set the dividend for 2010 at €0.75 per €2.50 par value share, payable at shareholders’ discretion either in cash or in shares charged to the share premium reserve.

Financial
In 2010 TenCate once again pursued a cautious investment policy, in view of the economic climate. In the field of aerospace composites in particular, investments in recent years have been of such an order that capacity is now sufficient to meet the expected growth in demand.

Investments in tangible fixed assets and intangible assets (capitalization of development costs) amounted to €16.2 million and €5.1 million respectively, at a depreciation and amortization level of €44.9 million.

The net interest-bearing debt amounted to €240.7 million at the end of 2010 (end of December 2009: €195.5 million). The debt position has increased, in part as a result of the increase in working capital (growth in sales). The debt ratio at the end of 2010 (debt / EBITDA ratio) amounted to 2.09 (end of 2009: 2.36).

Net financing expenses decreased from €12.7 million to €10.0 million in 2010, in part attributable to the decrease in the average debt.

The tax rate remained at approximately 28%, which is virtually the same as the previous year. The improved potential of the Dutch TenCate companies will have the effect of lowering the future tax rate.

Current performance and outlook
The order intake is developing favourably on the whole. Public sector bodies and related groups of customers represent a considerable share of sales. No significant negative effect is expected from reduced public expenditure for the group as a whole because TenCate materials are underpinned by global trends, which are of importance for these market groups.

A number of promising developments are taking place in the markets in which TenCate operates.
 
Activities in the aerospace industry are increasing and, after some initial delays, new aircraft programmes have now reached the production stage. Another promising development is the Active Blast Defence System (ABDS™). This is a patented concept intended to better protect military vehicles against roadside bombs.

In the synthetic turf market TenCate has introduced a development focused on increasing integration and collaboration within the value chain, with particular attention to sustainable synthetic turf systems. The priority here lies in margin growth (upstream in combination with downstream activities).

In summary, the developments below form the main pillars for further growth:

  • Continued strong performance of TenCate Defender™ M and expansion of applications (for example, riot police) and new geographic markets;
  • Growth in market share of the industrial market for protective fabrics;
  • Recovery in the aviation industry;
  • The marketing of earlier technological developments (such as new synthetic turf systems and expansion of applications for composites);
  • Good starting position in armour markets (EU and US);
  • Growth in Asian and South American markets (geotextiles, protective fabrics);
  • Increased profit margin of geosynthetics activities.

In view of the above developments, barring unforeseen circumstances, further growth in sales and net profit is expected.

Performance by sector

Advanced Textiles & Composites Sector

(x € mln.) H2 2010* H2 2009  2010* 2009
Net revenue 255.4 182.0 448.4 397.3
EBITA 27.7 11.4 43.8 31.7
EBITA margin 10.9% 6.2% 9.8% 8.0%

The EBITA margin on an annual basis at sector level came under pressure and decreased by 1% as a result of internal reallocation of costs. This reallocation was implemented in the second half of the year.

The autonomous increase in sales in 2010 amounted to 6% (currency effect +4%; acquisitions / divestments +3%). EBITA rose in 2010 on an autonomous basis by 27% (currency effect +6%; acquisitions / divestments +5%). This increase can mainly be attributed to the strong contribution of the American composites companies and of TenCate Protective Fabrics USA. The Dutch TenCate companies also showed a marked improvement in their results.

The contribution of TenCate Protective Fabrics USA is substantial, as a result of sharply increased sales in the second half of the year. TenCate Defender™ M is the standard fire-resistant protection of the American military in Iraq and Afghanistan. The lifting of import restrictions for foreign fibres into the United States (Berry Amendment) has recently been extended to 2015.

In addition to the defence market, the industrial market also showed an increase in sales, in part as a result of an increased market share. The excellent position of the newly developed product portfolio (including TenCate Tecasafe™ Plus) will ensure that we can respond successfully to the needs of the market.

As from the second half of the year, there was an increase in sales within the TenCate Space & Aerospace Composites market group resulting from the resumption of production of new types of aircraft (mainly Airbus A380).

The European armour market was cautious, partly as a result of tight budgetary conditions in public sector bodies. In the American armour market, by contrast, TenCate was involved in a number of projects (Stryker, FMTV, MRAP programme).

The acquired company AML UK, which was integrated into the European TenCate Advanced Armour group, strengthened the market position and put in a good performance.

TenCate signed a collaboration agreement for the patent development of the Active Blast Defence System (ABDS™), as well as the right to acquire a majority interest in a company that is to be formed for marketing this concept. The concept offers improved protection of military vehicles against roadside bombs and has considerable market potential. At the end of 2010 a demonstrator was built for this, which showed the successful operation of the principle.

Geosynthetics & Grass Sector

(x € mln.) H2 2010* H2 2009  2010* 2009
Net revenue 242.6 199.3 469.3 392.1
EBITA 12.6 12.3 31.4 16.8
EBITA margin 5.2% 6.2% 6.7% 4.3%

The EBITA margin on an annual basis at sector level came under pressure and decreased by 1% as a result of internal reallocation of costs. This reallocation was implemented in the second half of the year.

The autonomous growth in sales of the Geosynthetics & Grass sector amounted to 12% (currency effect +5%; acquisitions / divestments +3%). The increase in sales in 2010 occurred in both market groups, although there were additional sales at the TenCate Grass group from consolidated downstream activities (acquisition effect).

EBITA for 2010 as a whole rose considerably (+87%; autonomous +118%; currency effect +20 %; acquisitions / divestments -51%), in particular as a result of a strong recovery within the upstream activities of TenCate Grass. The logistical actions implemented at the end of 2009 contributed favourably to this. The priority as regards production in Dubai produced a positive contribution to the reduction in the costs structure. There was also increased market demand for high-grade, sustainable TenCate synthetic turf fibres.

EBITA was affected in the second half of the year by the initial costs announced in the third quarter relating to the coordination of downstream activities in the synthetic turf market and by a provision taken for the planned transfer of the production of geotextiles from Almelo to Nijverdal-Noord. As a result, the upward trend of the EBITA margin did not continue in 2010.

Recovery was seen in the American geosynthetics market, which in terms of size is the most important. The improvement in its performance resulted from an increase in the number of infrastructure projects and intensive targeting of the South American market. Sales in the Asian geosynthetics market continued to grow (autonomous+7%). In Europe sales remained stable, although the number of infrastructure projects declined. Efforts to retain volumes involved some pressure on margins.

Earlier, a development had been initiated at the TenCate Grass group focused on far-reaching forms of collaboration within the value chain. To this end some minority interests were taken in the past in companies that develop and market synthetic turf systems. The interest in the TigerTurf group was increased to 80% according to contract.

Other parties have now shown an interest in aligning themselves with this strategic quality concept. The costs of continuing to follow the qualitative and organizational developments independently are too high for companies that operate only regionally. FIFA too, through its FIFA Preferred Producer programme (FPP)¸ greatly values higher quality assurance. Both Edel Grass and GreenFields are certified under the FIFA FPP programme.

Technologies Sector / Technical Components / Holding & Services 

(x € mln.) H2 2010* H2 2009  2010* 2009
Net revenue 31.9 27.2 66.8 52.7
EBITA 6.5 -3.1 9.8 -7.0

The reallocation of €8 million was implemented in the second half of the year

Sales by the other activities are mainly attributable to TenCate Enbi and Xennia Technology.

At TenCate Enbi the positive effects of the turnaround were visible. Sales were well above (approx. 32%) the level of 2009. The reduction in the break-even level led to a strong profit contribution.

Xennia Technology did not live up to financial expectations. This could mainly be ascribed to the supply problems of a strategic supplier. As a result, the inkjet project within TenCate was also delayed. Due to this development Xennia Technology increased the number of its suppliers in 2010. A start was also made on the production of its own inks, and software activities for operating systems were acquired. The potential of the selected market segments (textiles, packaging, medical applications, decoration, printed electronics) continues to develop strongly. The outlook for growth remains unchanged.

EBITA in this sector is the result of the balance between holding activities and the operational company activities of TenCate Enbi and Xennia Technology. In previous years EBITA was negative because holding costs (financing charges, etc.) were the decisive factor. In 2010 joint operational activities produced a markedly positive contribution. The result within the holding was also positively affected by the reallocation of costs to the amount of approximately €8 million.


Royal Ten Cate
Almelo, Wednesday 2 March, 2011

Download: 110302 Press release annual figures 2010 including key figures and explanatory notes
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