2013

25 July 2013

TenCate records € 13 million net profit in first half of 2013

Summary of first half of 2013  

  • Decline in revenues of 5% to € 514 million (organic -6%, currency effect -1%, acquisitions / divestments 2%).
  • Defence-related revenues in the US declined by US $17 million; delay in revenues of the Geosynthetics & Grass sector due in part to adverse weather conditions.
  • Increased order positions and recovery in revenues in the second quarter, mainly at TenCate Advanced Armor USA and the Geosynthetics & Grass sector.
  • EBITA declined by 8% to € 29 million (organic -9%, currency effect -1%, acquisitions / divestments 2%).
  • Net profit € 13 million (H1 2012: €14 million).
  • Earnings per share € 0.50 (H1 2012: €0.54).
  • Decline in FTEs by approximately 470 since June 2012 on a comparable basis.
  • Steep decline in net interest-bearing debt (€ 74 million) at the end of June despite acquisition of Amber Composites; net debt / EBITDA ratio 2.8.

Outlook
Market conditions in the second half of the year are expected to remain challenging as a result of constant pressure on government expenditure. However, the increased order positions and the recovery that occurred during the second quarter inspire confidence for the second half of 2013.

In the Advanced Textiles & Composites sector there is a more positive picture in respect of the second half of the year. The growth in revenues of TenCate Protective Fabrics for protective fabrics in the global industrial market will continue. Deliveries of TenCate Defender™ M to the US Army are expected to remain at the current low level. Sales within TenCate Advanced Composites of aerospace composites for the Airbus A380 and A350 will increase in the second half of the year.

The outlook in respect of the revenue trend within the Geosynthetics & Grass sector is favourable for the second half of the year. The increased capacity utilization rate and cost savings in the Grass group will make a positive contribution to further profit recovery.

Ir. Loek de Vries, President and CEO : ‘ Despite the continuing unfavourable market conditions, the decline in revenues remained relatively limited in the first half of 2013. Revenues in the US market from aerospace composites and the revenues from industrial protective fabrics have projected a positive profile.

The number of orders booked in the Geosynthetics & Grass sector showed an upward trend in the second quarter.

Since June 2012 TenCate has adapted its cost base to changing market demand, and staffing levels have been reduced by approximately 470 FTEs, excluding acquisitions.

In the Advanced Textiles & Composites sector there was a continuing government policy of restraint in respect of defence expenditure. Defence expenditure in Europe is currently at its lowest level in ten years. Exposure to defence-related markets has decreased sharply and amounts to approximately 10% of corporate revenues.

TenCate Defender
M is increasingly being deployed in defence markets outside the US and for use in the emergency response market.

As a result of the measures taken that relate to both cost control and product development, TenCate is well positioned in the armour market.

In the field of digitization of production processes, progress was made with the commissioning of the first digital inkjet machine for the finishing of protective and outdoor fabrics.

Driven by European legislation which has the objective of substantially reducing carbon emissions for the automotive industry, TenCate sees great interest in thermoplastic composite technology. This market will develop gradually in the years ahead. The recently
acquired Amber Composites, which will strengthen growth in the field of automotive composites and other sectors, has developed in line with expectations.

The sales organization within the Geosynthetics group was strengthened in order to be able to respond to the growing global market for water management and environmental solutions. TenCate Geosynthetics supplied TenCate Geotube® systems for a number of attractive projects. This solution-focused approach will be further promoted and it forms one of the growth areas within this market group.

TenCate is positioning itself to an increasing extent with high-grade synthetic turf systems. The granting of the tender by the Coöperatie Eerste Divisie (Dutch first division) to TenCate Grass / GreenFields represents a breakthrough in this field in professional football. The Netherlands is a leader with this development, with the largest number of synthetic turf pitches in professional football.’

Performance by sector

Advanced Textiles & Composites Sector
The revenues of the Advanced Textiles & Composites sector declined by 5% to € 228 million in the first half of 2013 (organic -9%, acquisitions / divestments 4%). EBITA decreased relatively more sharply by 26% to € 14.1 million.


Key figures (x € 1m)

H1 2013

H1 2012

Change

Revenues

228.4

240.9

-5%

EBITA

14.1

19.0

-26%

EBITA margin

6.2%

7.9%

 

Investments in tangible and intangible fixed assets

2.9

5.7

-49%

Depreciation

5.3

5.3

0%

Amortization

3.9

2.6

50%

Average net capital invested

309.4

313.9

-1%

FTE excluding temporary personnel (end of half-year)

1,518

1,657

-8%

 

Deliveries of TenCate Defender™ M to the US Army unexpectedly did not continue in the second quarter. Currently there are dozens of armies outside the US actively conducting wearing trials. The revenues from the TenCate Tecasafe™ portfolio (industrial markets) grew by more than 20% compared with the first half of 2012. However, margins outside the defence market are at a lower level. By contrast, the sales potential of the international industrial market is great. Based on the requirement for higher levels of employee protection, this will continue to be a growth market

TenCate Advanced Composites as a whole showed 14% growth in revenues.
Revenues in the United States were positively affected by deliveries to the space sector. In time the growth in revenues will be positively impacted in the long term by deliveries to Airbus Industries, when deliveries for the Airbus A380 and Airbus A350XWB have reached the expected level.

Automotive composites is a new activity that should contribute to the future growth of TenCate. The acquisition of Amber Composites is an addition to the existing product portfolio of composite materials and supports this ambition.

The partnership between BASF, Owens Corning and TenCate is progressing well. BASF recently announced that it will come with a specific package of products and solutions in October 2013, under the brand name Ultracom™, which will contain TenCate thermoplastic laminate and tapes (TenCate Cetex®). This is an integral solution-focused approach, for which BASF has predicted substantial market potential over time.

TenCate, in cooperation with complementary partners, follows a similar approach. TenCate is currently working with suppliers and OEMs on a number of developments, with the aim of generating new revenues within one to three years. Material developments, production technology of structural parts (parts manufacturing) and design capacities come together in this.

The results of TenCate Advanced Armour showed a mixed picture. In Europe there was a sharp decline in revenues compared with the first half of 2012, mainly as a result of delays in deliveries to Eurocopter.

Sales in the United States staged a recovery in the second quarter and consequently showed growth in revenues over the first half of 2013.
The development of the TenCate ABDS™ active blast countermeasure system is in the official qualifying phase of US government agencies.

Geosynthetics & Grass Sector

The revenues of the Geosynthetics & Grass sector declined by 5% to € 250 million (organic -4%, currency effect -1%); EBITA declined by 6% to € 14.9 million.

 

Key figures (x € 1m)

H1 2013

H1 2012

Change

Revenues

249.7

261.7

-5%

EBITA

14.9

15.8

-6%

EBITA margin

6.0%

6.0%

Investments in tangible and intangible fixed assets

1.5

3.3

-55%

Depreciation

11.0

12.4

-11%

Amortization

2.5

3.2

-22%

Average net capital invested

419.4

432.4

-3%

FTE excluding temporary personnel (end of half-year)

2,123

2,379

-11%

 

In the first half of 2013 TenCate Geosynthetics showed a decline in revenues of 7%, partly as a result of delays in projects caused by adverse weather conditions. In the course of the second quarter revenues returned to the level of last year. Demand from Europe, in particular Eastern Europe, and the United States recovered, while sales in Asia lagged behind. In the United States especially margins were under pressure. Sales of TenCate GeoTube® systems rose by approximately 20%, which had a positive effect on margins. This increase in revenues occurred mainly in Europe and Africa.

The order book of TenCate Geosynthetics showed an upward trend for the second half of the year.

TenCate Grass showed an improvement in the operating result for the first half of the year. End-users are devoting more attention to quality and sustainability. TenCate holds a strong position in synthetic turf yarns and innovative (woven) systems, which have proved their worth at top level. A further improvement in the alignment of the upstream with the downstream activities (marketing of synthetic turf systems) and strategic partners is expected to further increase effectiveness in the market and strengthen profitability.

Technologies Sector / Technical Components Sector / Holding & Services
The revenues of other activities relate to TenCate Enbi and Xennia Technology. TenCate Enbi showed an improvement in both revenues and result. During the second quarter of 2013 Xennia Technology completed a reorganization that was started in the fourth quarter of 2012. In this focus was applied and the emphasis placed on the commercialization of developed products, knowledge and skills. Consequently, Xennia’s result rose, with reduced revenues.

 

Key figures (x € 1m)

H1 2013

H1 2012

Change

Revenues

35.6

37.0

-4%

EBITA

-0.3

-3.5

-91%

Investments in tangible and intangible fixed assets

0.4

0.6

-33%

Depreciation

1.5

1.0

50%

Amortization

1.3

1.5

-13%

Average net capital invested

67.6

63.8

6%

FTE excluding temporary personnel (end of half-year)

625

626

0%

 

Other financial information for the first half of 2013

The investment policy of TenCate was cautious with € 4.8 million (2012: € 9.6 million) of investments in tangible and intangible fixed assets, and was well below the level of depreciation of € 17.8 million. The net interest-bearing debt amounted to € 238 million at the end of June 2013, which represented a decrease of € 74 million compared with the first half of 2012. Despite the acquisition of Amber Composites, the operational cash flow and the focus on working capital led to a reduction in the net interest-bearing debt in the first half year. The net debt / EBITDA ratio was 2.8 at the end of June and remained well within the covenant.

Statement by the Executive Board

‘Based on the information available to us, the Executive Board hereby states that the interim report, prepared in accordance with IAS 34, Interim Financial Reporting, gives a true and fair view of the assets, the liabilities, the financial position and the profit of Royal Ten Cate and the companies included in the consolidation, and that the interim report provides a true and fair view of the information required pursuant to Article 5:25d, subsections 8 and 9 of the Dutch Financial Supervision Act.’

Royal Ten Cate
Almelo, 25 July 2013

Download: 130725 Press release TenCate regarding half-yearly results 2013.pdf
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