- Revenues 2008: € 1,033 million (+17%; +5% in autonomous terms)
- EBITA 2008: € 95.4 million (+31%)
- EBITA margin 2008: 9.2% (2007: 8.2%)
- Net result before amortization and excluding result from divested activities and exceptional items (cash earnings) 2008: € 62.7 million (+35%)
- Net result 2008: € 51.1 million (2007: € 46.4 million)
- Revenues fourth quarter 2008: € 251 million (+11%)
- EBITA fourth quarter 2008: € 24.3 million (+9%)
- Dividend proposal € 0.85 (stock and optional dividend (cash / shares); 2007: € 0.80 optional dividend (cash / shares)
General performance in the fourth quarter of 2008
TenCate operates in sustainable growth markets and recorded an 11% growth in sales in the fourth quarter. Autonomous growth in sales stagnated, however, due to the effects of the global tightness on the financial markets. There was evidence of a reduction in inventories among our customers, which had a delaying effect. Although there was still little indication of a structurally lower demand in end markets, some delay in projects did occur.
There was a peak in the sales in the fourth quarter of 2007, principally as a result of the delivery of military orders (armour). This effect did not occur to the same extent in the fourth quarter of 2008, which put pressure on the autonomous growth rate in the quarterly comparison.
EBITA rose by 9% to €24.3 million. It should be noted here that exceptional items of €4.1 million were included in the EBITA for the fourth quarter of 2007. After correction to take account of these items, EBITA increased by 34%. The currency effect was +6%.
The net result for the fourth quarter amounted to €13.8 million (-13%). When corrected to take account of the exceptional items of €3.4 million net in 2007, there was an increase of approximately 11%.
Annual figures for 2008
TenCate broke through the sales barrier of €1 billion with sales of €1,033 million (2007: €886 million). Sales increased on an annual basis by 17%, which can be attributed mainly to acquisitions. On an autonomous basis the increase amounted to 5%.
The buy & build strategy is directed at bringing about or accelerating growth in acquired companies. The pro forma autonomous growth in sales for 2008 (including the autonomous sales growth of acquired companies) amounted to 8%.
The autonomous growth was restrained in particular by TenCate Enbi and by the cautious trend in the European professional wear market.
The strongest autonomous growth was recorded in the American market for protective fabrics, primarily as a result of positive developments in the field of fire-resistant military applications (TenCate Defender™M and TenCate Gen2). The sales of armour composites developed favourably, especially following the acquisition of Composix.
The growth in revenues of the Geosynthetics & Grass sector was due mainly to synthetic turf activities. This growth is in part the result of the price increases that were implemented.
Operating result before amortization
The operating result before amortization (EBITA) rose by 31% to €95.4 million. This increase can be attributed mainly to acquisitions.
The EBITA margin rose to 9.2% (2007: 8.2%), thus approaching the financial objective of 10%.
Excluding the exceptional items in 2007 referred to above, the autonomous growth in EBITA amounted to 38%. On an annual basis the currency effect on EBITA is -5%.
The net profit before amortization and the result from divested activities and excluding exceptional items (cash earnings) is indicated as the basis for profit growth in 2008 (2007: €46.6 million).
Cash earnings for 2008 amounted to €62.7 million (+35%). Cash earnings per share amounted to €2.68 (2007: €2.04).
Net profit for 2008 amounted to €51.1 million (2007: €46.4 million). Net profit excluding the result from divested activities and exceptional items amounted to €43.0 million for 2007.
Net earnings per share for 2008 amounted to €2.18 (2007: €2.04).
In view of the performance of the global economy, Ten Cate pursued early on in 2008 a cautious investment policy and took a number of cost-cutting measures.
The ratio between the net debt position and EBITDA amounted to 2.6 (bank covenant: 3.0) at the end of December 2008.
A financial objective was formulated in which the ratio between the net debt position and EBITDA should be structurally below 2.5. TenCate has a solid balance sheet with solvency of 42%.
TenCate pursues a consistent dividend policy, which is based on a payout ratio of 40% and, at the option of the shareholders, payment in cash or as a stock dividend. In the past more than 50% of TenCate shareholders always opted for a stock dividend, in view of the growth potential of the share.
TenCate operates in sustainable growth markets and, as stated in the outlook, it expects growth prospects particularly in the current market situation. TenCate has built up a good track record in respect of acquisitions. Its buy & build strategy has resulted in a substantial growth in earnings per share in recent years. TenCate’s growth objective requires net earnings growth per share before amortization to be at least 10%.
In view of the objectives referred to above, it is proposed to set the dividend for 2008 at €0.85 per share (2007: €0.80 per share), with half payable in stock dividend and the other half either payable in cash or in the form of a stock dividend. The value of the stock dividend will slightly exceed the cash dividend.
Investments amounted to €48 million (2007: €63 million). The most important investments related to the expansion of synthetic turf production, the new geosynthetics plant in China and expansion of the production capacity for aerospace composites (including UD technology).
Working capital amounted to €262 million at the end of December 2008. In addition to the effect of acquisitions, the increase compared to 2007 was due to the restraint exercised by market players as a result of cutbacks in inventories (de-stocking).
Cash flow from operational activities rose from €27.8 million to €48.7 million.
The net interest-bearing debt for 2008 increased from €230.4 million to €331.1 million, mainly as a result of acquisitions. Net financing expenditure amounted to €13.7 million. This includes a gain of €3.7 million from changes in the value of financial instruments and from foreign exchange differences.
The tax rate amounted to 27.3%, compared to 20.5% in the previous year. In 2007 there was a non-recurring tax credit. The higher tax rate is linked to an increasing profit share of the American activities, where a relatively high tax rate applies (approximately 35%).
Outlook for 2009
TenCate operates in sustainable growth markets. The basis for the company’s growth is formed by global trends in the field of water management and the environment, the growing demand for light-weight materials in transport and haulage (reduction in fuel costs) and an increasing focus on safety and protection. The current economic and financial situation may temporarily restrain market trends.
Protective materials for defence markets represent a major part of the sales within the Advanced Textiles & Composites sector. In the field of personal protection and armour (vehicles), the policy of governments is not expected to differ greatly from the past. A number of future projects have already been announced.
The outlook for the European market for work wear for industrial end-users is cautious. The outlook for high-grade protective fabrics for the professional wear market remains positive.
The space and aerospace markets are guided by long-term developments, although the present shortage on the finance market may give rise to temporary delays.
In the United States the picture for the geosynthetics market remains cautious. Outside the United States the markets for geosynthetics continue to enjoy a distinctive profile. The intentions of governments to stimulate the economy by means of infrastructure projects will have a positive effect on the geosynthetics market worldwide.
Synthetic turf continues to gain ground worldwide. The sports market is usually related to government budgets.
The proposed holding in TigerTurf announced recently will further strengthen TenCate’s market position. This is a continuation of the end-user marketing strategy in the synthetic turf market.
Thanks to the company’s good global strategic positioning, growth prospects are occurring in this market in particular. TenCate will continue to study possible ways to exploit these growth prospects, in view of the growth in profits achieved in this way in the past.
TenCate continues to pursue its cautious investment policy and strives to achieve sustained cost control, as introduced early in 2008 .
Unlike the year under review, no profit forecast will be issued for the current financial year, in view of the present market situation.
Performance by sector
Advanced Textiles & Composites Sector
Of the total sales for 2008 of €481 million generated by the Advanced Textiles & Composites sector, 58% came from the Advanced Textiles group and 42% from the Advanced Composites group.
The sales of the Advanced Textiles & Composites sector increased to €122.2 million (in autonomous terms +3%) in the fourth quarter. The currency effect on sales amounted to +6% for the fourth quarter.
EBITA increased to €15.8 million in the fourth quarter. This increase was due entirely to acquisitions and to the currency effect of +6%. The EBITA margin amounted to 12.9% in the fourth quarter. The margin declined slightly as a result of a change in the product mix, in part due to lower European sales in the aerospace market.
Over the year as a whole strong autonomous growth was achieved in the American market for protective fabrics, with a substantial growth in sales for military applications (TenCate Defender™M-portfolio). Whilst there was growth in protective fabrics in the US, there was a decline in demand in the European market in the fourth quarter. This was mainly related to the market for work wear for industrial end-users. Unlike the European market, TenCate sales in the American industrial market grew in the fourth quarter. TenCate launched new products here a relatively short time ago, such as TenCate Tecasafe™Plus.
The Asian market is an emerging market for protective fabrics. TenCate recently entered into a partnership here with a Thai manufacturer through the establishment of TenCate Union - Protective Fabrics Asia Ltd (50.65% holding). This company was still at the start-up stage in the fourth quarter.
The contribution by the American Composix was substantial. Since its acquisition at the end of January 2008, TenCate has been involved in major projects in the field of vehicle armour, such as the MRAP and Stryker programme. These sales are project-specific. There were no large deliveries in this field in the fourth quarter.
In Europe TenCate has built up a stable position in the armour market and sales developed favourably in 2008.
There was a temporary decline in the demand for aerospace composites (TenCate Cetex®) in the fourth quarter. The reason for this was the major cutbacks in inventories in the entire value chain. The core of these sales lies in the European aerospace market. The industry has given no indication of a downward adjustment to the number of modern passenger aircraft yet to be built.
In the US there was a considerable downturn among the builders of small business aircraft.
Geosynthetics & Grass Sector
Of the total sales for 2008 of €497.8 million generated by the Geosynthetics & Grass sector, 62% came from the Geosynthetics group and 38% from the Grass group.
The sales of the Geosynthetics & Grass sector increased slightly in the fourth quarter to €115.6 million (in autonomous terms -2%). The currency effect on sales amounted to +3% in the fourth quarter.
The sharp decline in the prices of raw materials in the last few months of the year and the situation on the financial markets caused customers to exercise some caution in building up inventories for the new season. Customers also phased projects for budgetary reasons. Insufficient advantages were gained from the sharp decrease in the price of raw materials in the fourth quarter of 2008.
EBITA amounted to €8.8 million in the fourth quarter. The EBITA margin increased substantially in this quarter. The currency effect amounted to +10%. The improvement in the margin for the year as a whole can be mainly attributed to the Grass group, where start-up costs were incurred in 2007 after sizeable investments in production capacity.
The Mattex organization which we acquired was fully integrated into the TenCate Grass group in 2008. This has led to gains in efficiency.
The American geosynthetics activities showed flexibility by bringing costs in line with the continuing weak local market conditions.
Although the margin for the entire sector is still under the formulated objective (minimum EBITA margin 10%), a considerable improvement has been achieved under difficult conditions
At the time of the publication of the 2008 annual accounts, a new sector was introduced, in which technological developments are carried out. Xennia Technology has been incorporated in this sector. This company integrates hardware, software and ink formulations, to provide solutions within the rapidly developing industrial inkjet printer market. Xennia also supplies a number of platforms (components for inkjet print systems).
TenCate has initiated the development of digital textile finishing processes, together with Xennia, including those for the production of smart textiles.
As the development partner of OEM’s, Xennia also supplies technology solutions and components for markets other than those in which TenCate is involved.
The figures from Xennia are included in the Advanced Textiles & Composites sector.
Xennia turned in a good performance, in which commercial successes were achieved. These show great promise for the future.
Technical Components / Holding & Services Sector
The decline in the EBITA of the Technical Components / Holding & Services sector is linked to the exceptional items of €4.1 million in 2007 referred to above and taking a provision in 2008 for a reorganization of TenCate Enbi..
The OEM players on the market mainly for desktop printers and copiers in which TenCate Enbi operates have announced measures worldwide, as a result of the current economic situation. TenCate Enbi also cannot avoid taking appropriate cost control measures. The market is not expected to recover in the short term.
TenCate Enbi’s strength lies in the fact that the group is a global player that has a diversified portfolio of products and strong development capacity. On the basis of this TenCate Enbi has a strong relationship with the major OEM’s in the American and European markets and growing sales in Asia. It is possible that smaller regional competitors of TenCate Enbi are less resilient and thus less able to withstand the current difficult market conditions.
Almelo, Wednesday, 4 March 2009
Royal Ten Cate
For further information::
F.R. Spaan, Director Investor Relations & Corporate Development
Tel. : +31 546 544 338
Mobile : + 31 6 12 96 17 24
E-mail : email@example.com
Internet : www.tencate.com
The Royal Ten Cate press conference relating to the annual accounts for 2008 will be held on Wednesday 4 March at 10.30 a.m. in the Hilton Hotel, Apollolaan 138, Amsterdam. Those wishing to register may do so via firstname.lastname@example.org.
Royal Ten Cate
TenCate is a multinational company which combines textile technology with related chemical processes and material technology in the development and production of functional materials with distinctive characteristics. Systems and materials from TenCate come under four areas of application: safety & protection, space & aerospace, infrastructure & the environment, and sport & recreation. TenCate occupies leading positions in protective fabrics, composites for space and aerospace, antiballistics, geosynthetics and synthetic turf. TenCate is listed on the NYSE Euronext.