26 八月 2009

Net profit of €15.2 million in first half of 2009 (2008: €25.4 million)

Highlights of first half of 2009

  • Sales €433.6 million (-15%; organic -23%; currency effect +5%)
  • EBITA €20.9 million (-54%; organic -61%; currency effect +6%)
  • EBITA margin 4.8% (first half of 2008: 8.9%)
  • Net profit €15.2 million (2008: €25.4 million)
  • Net earnings per share €0.61 (H1 2008: €1.08)
  • Net profit positively impacted by €5.2 million (net) from book profit on sale of Geofabrics Australasia pty ltd and write-down of a minority interest
  • Debt/EBITDA ratio comfortably within bank covenant (3); ratio at end- June: 2.5
  • Free cash flow rose by €71.3 million in first six months to €35.0 million

Loek de Vries, Executive Board Chairman and CEO: ‘TenCate is well positioned in long-term niche markets in which the trends that are important for our growth remain fully in place. The foundations of these core markets are still intact. We are continuing to pursue our “buy & build” strategy and will continue to exploit growth opportunities, just as we have done successfully in the past. We have a strong balance sheet position and have achieved substantial growth in our cash flow.
The situation currently prevailing among banks, resulting in tightness in the supply of finance, has led to reticence among customers, even though projects are still being implemented. Inventory reduction has taken place on a large scale. Even governments and local authorities – an important group of customers for TenCate – are postponing decisions, with delays in the provision of budget resources.

In view of this situation, from mid-April of this year we gave priority to the maintenance of a healthy financial position. This avoided considerable additional financing costs and/or profit dilution and the attendant undesirable long-term effects.

In view of the foundations underpinning our markets and the measures which have and are being taken in the cost area, TenCate has the potential to stage a strong recovery when the markets recover.’

Performance in the second quarter of 2009

Sales in the second quarter totalled €230.4 million (organic: -29%).

The same period of 2008 had included a substantial order for vehicle armour for the US Army, whereas no such order was recorded in the current period. The market for vehicle armour remains a growth market, but the volumes are liable to fluctuate.

The European market for workwear for industrial end-users was under heavy pressure.

The trends in the American market for geosynthetics were unfavourable as a result of the postponement of infrastructure projects due to the insufficient release of public-sector funding.

The synthetic turf market is a seasonal market in which inventories are accumulated on the basis of the projects scheduled to be implemented over the summer months. The usual inventory accumulation did not take place.

One of the consequences of the tight financial policy was a loss due to underutilisation of capacity, which put additional pressure on earnings.
Second-quarter EBITA (earnings before interest, tax and amortisation) decreased by 58% to €13.4 million (organic -63%; currency effect +5%). The EBITA margin amounted to 5.8% (Q2 2008: 10.5%).

The net profit in the second quarter of 2009 amounted to €13.4 million (Q2 2008:
€18.1 million).


The strong growth in cash flow and control of working capital led to an improvement in the net debt/EBITDA ratio. At the end of the second quarter, it stood at 2.5 (bank covenant: 3).

Investments had already been scaled back at an early stage (beginning of 2008). The investment policy remained very restrained in 2009. Total investments in the first six months amounted to €8.1 million (H1 2008: €29.4 million).

Net financing expenses rose, mainly due to the write-down of a €4.9 million non-strategic interest held by the Geosynthetics group. The balance of the interest income/expenses in this item in the first half of 2009 was approximately €0.7 million lower than in the comparable period in the previous year. The interest rate on the external debt was lower. In contrast to the previous year, no currency options were purchased to hedge the translation risk, so no option premiums were paid.

The net interest-bearing debt at the end of June 2009 decreased to €287 million (2008: €349 million).

The tax charge in respect of the first six months amounted to 27% (2008: 30%).


The workforce comprised approximately 4,200 employees at the end of June 2009. The number of employees worldwide has been reduced by -14% in the last 12 months, including agency personnel. In view of the particular circumstances, consideration is being given to integrating production in the Netherlands with a view to achieving substantial cost reductions and an outlook driven by innovation.

Outlook for the current financial year

The market outlook remains unchanged for the rest of the year. The upturn in demand seen at the end of March was due to the (temporary) rebuilding of production inventories and hence proved not to be structural. Control of working capital is a continuous process in production chains at present, as a result of which there is a continued lagging trend in sales.

TenCate expects for the remainder of the year that the revenues will at least be on the same level as in the fist half of the year.

The cost-reduction measures will have a positive effect over time. The strong financial position and the strongly increased cash flow provide a good basis for further growth. TenCate has promising, innovative projects which will give a positive impetus to future developments.

No forecast is being issued with regard to profit in the current financial year.

Notes on performance by sector

Advanced Textiles & Composites

(x €m) H1 2009  H1 2008*)
Net sales 215.3 246.0
EBITA 20.3 31.2
EBITA margin  9.4% 12.7%

*) Figures adjusted for comparison purposes

The Advanced Textiles & Composites sector showed an overall organic decrease of 24% in sales in the first half of the year. The decrease occurred mainly in the TenCate Advanced Composites and TenCate Advanced Armour market groups. Most of the decrease related to inventory reductions in the aviation sector, delays in the introduction of new aircraft and the absence of major projects in the US armour market.

The currency effect on sales in the first half of the year amounted to +7%.

The organic decrease in EBITA in the first six months amounted to 48%. The currency effect amounted to +10%.
The Protective Fabrics market group showed an overall rise in sales in the first half of the year. Sales of flame-retardant fabrics for US Army uniforms grew considerably. On the other hand, there was a substantial decrease in sales in the European market for workwear for industrial end-users.

Independent tests showed that the TenCate Defender™ M product portfolio offers the highest degree of protection. This material is currently being used in various components of the standard personal equipment issued to the US Army. Protection of military personnel remains an important spearhead of innovation and growth.

The expected growth in aerospace composites in 2009 has so far failed to materialise, due to the delays in the production of the Airbus A380 and the Boeing 787. Moreover, aircraft build rates have been adjusted downwards, and this is being accompanied by a reduction in inventories across the entire value chain. TenCate has invested considerable sums in the past in order to accommodate the expected growth. Costs will now be cut where possible, while retaining growth potential.

The recent development co-operation between the Dutch aviation cluster and both Airbus (TAPAS consortium) and Boeing (TPRC) indicates the importance of joint efforts to generate strong growth in the share of composites in aviation.

TenCate maintains close relationships with various OEMs (original equipment manufacturers) producing army vehicles in the United States. TenCate is involved in providing protection solutions for high-profile vehicle programmes, such as the Humvee, the Stryker, the Mine Resistant Ambush Protected Vehicle (MRAP), the Medium Tactical Vehicle (FMTV) series and the Joint Light Tactical Vehicle (JLTV). TenCate is currently in consultations with Oshkosh Defense, which recently won the contract to supply 3,944 vehicles of the MRAP All Terrain Vehicle (M-ATV) type, and with direct suppliers in order to ascertain where our technology and capacities can offer added value. As these discussions are still ongoing, it is too early to issue any statements on them.

Growth was achieved in the US in the field of composites for the military aviation and the space industry. An important producer of small private aircraft also showed a substantial recovery in build rates at the end of the second quarter.

Geosynthetics & Grass

(x €m) H1 2009  H1 2008
Net sales  192.8 236.5
EBITA 4.5 16.9
EBITA margin 2.3% 7.1%

The decrease in sales in the Geosynthetics & Grass sector was attributable mainly to the Geosynthetics group, particularly as a result of the market situation in the US.
The organic decrease in sales in the sector as a whole in the first half of the year amounted to 23%. The currency effect on sales was +4%.

EBITA declined much more than sales in relative terms (organic decrease in EBITA of 72%), due to considerable underutilisation of capacity. Active control of working capital and the deferral of production in response to the decrease in sales also contributed to this decline.

The Geosynthetics group in the US, where the economic downturn was already a factor from 2007, was gradually able to bring its cost level into line with the market situation. As a result, the negative effect on the result was relatively more limited than in the Grass group. The lag in sales in the synthetic turf market was due mainly to the shortage of liquidity among customers (marketing/installation companies) and the reduction in credit limits by credit insurance companies. The synthetic turf market has not yet reached maturity, due to the recent strong growth of the football market. As a result, TenCate is exercising restraint with regard to credit risks for parties with lower solvency and is strengthening ties with a number of leading parties in the market (participating interest in TigerTurf in the first half of this year), which is having a positive effect on the quality and stability of the market.

Technologies / Technical Components / Holding & Services

(x €m) H1 2009  H1 2008 *)
Net sales  25.5 29.1
EBITA -3.9 - 2.8

*) Figures adjusted for comparison purposes

From 2009, the figures for the new Technologies sector are being included in this third sector (the 2008 figures have been adjusted for comparison purposes). The Technologies sector, which was introduced in 2008, includes the activities of Xennia Technology Ltd (78.95% interest) and various innovative technological development projects.

The organic decrease in sales in this sector amounted to 15%. Although the sales of TenCate Enbi decreased, the company continues to generate attractive replacement sales in markets other than that of printers and copiers. In view of the impaired market situation, the break-even level has been further reduced. The associated costs have a one-off impact on the result for the current financial year.

Xennia Technology made good progress and expanded its geographic market for industrial applications of inkjet technology. For the further development and market introduction of innovative digital printing and textile finishing processes, partnerships were entered into and, in addition to the existing European subsidy scheme, subsidies were received from both the Province of Overijssel and the Regional Innovation Platform. The aim is to have an initial version of an industrial production process for finishing ready towards the end of this year for test series of products for TenCate Advanced Textiles.

Statement of the Executive Board
‘The Executive Board hereby declares that, to the best of their knowledge, the semi-annual financial statements, which have been prepared in accordance with lAS 34, "lnterim Financial Reporting", give a true and fair view of the assets, liabilities, financial position and profit of Royal TenCate and the undertakings included in the consolidation as a whole, and the semi-annual management report includes a fair review of the information required pursuant to section 5:25d,  subsections 8 and 9 of the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht).’

Almelo, Wednesday 26 August 2009
Royal Ten Cate

For further information:

F.R. Spaan, Director of Investor Relations & Corporate Development
Telephone : 0546 544 338
Mobile  : 0612 96 17 24
E-mail  : f.spaan@tencate.com
Internet  : www.tencate.com

Royal Ten Cate’s press conference on the 2009 half-year figures will take place on Wednesday 26 August at 10.30 at the Hilton Hotel, Apollolaan 138 in Amsterdam. Prospective attendees can register by e-mail at media@tencate.com.

Royal Ten Cate
Royal Ten Cate (TenCate) is a multinational company which combines textile technology, chemical processes and material technology in the development and production of functional materials with distinctive characteristics. TenCate’s systems and material can be divided into four areas of application: safety & protection, aerospace, environment & infrastructure and sport & leisure. TenCate occupies leading positions in safety fabrics, composites for aerospace, antiballistics, geosynthetics and synthetic turf. TenCate is listed on NYSE Euronext.

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