Increase in TenCate's net profit (+36%) considerably exceeds
expectations
Increase in TenCate's net profit (+36%) considerably exceeds
expectations
* Sales increased to ¤ 886 million (autonomous +14%)
* Operating result (EBIT) increased by 39% to ¤ 69.4 million
* Operating result before amortization (EBITA) increased from ¤
51.1 million to ¤ 73.0 million (+43%). In autonomous terms, 29%
* Net profit excluding result on divested activities increased from
¤ 34.0 million to ¤ 46.1 million (+36%)
* Net profit after deduction of extraordinary gains increased to ¤
43.0 million (+26.5%)
* Advanced Textiles & Composites sector has provided a major
contribution to the increase in profit as a result of military
orders from the US; EBITA increased 86% in autonomous terms
* Autonomous EBITA decrease of 22% in the Geosynthetics & Grass
sector
* Autonomous sales at TenCate Enbi stable
* Dividend proposal of ¤ 0.80 per share (cash/stock dividend); 2006
¤ 0.70 per share
Fourth quarter 2007
TenCate enjoyed an excellent fourth quarter. Sales increased in the
fourth quarter from ¤ 171 million to ¤ 226 million. In autonomous
terms sales increased by 26%.
This substantial increase in sales is mainly the result of sizeable
deliveries of military orders for fire-resistant fabrics (TenCate
Defender(TM)M) in the US and the shipment of orders announced
earlier, relating to the armouring of military vehicles.
TenCate Thiolon Middle East, which was acquired in 2007, also made
major contributions to sales.
The operating result increased from ¤ 9.7 million to ¤ 21.1 million
in the fourth quarter.
Net profit in the fourth quarter excluding the result on divested
activities amounted to ¤ 15.6 million (2006: ¤ 7.1 million).
In the fourth quarter a transaction was effected relating to the sale
of property in Nijverdal (the Netherlands) as a part of the
centralization of the manufacture of protective fabrics. On balance
this produced a result after tax of ¤ 3.1 million (pre-tax ¤ 4.1
million).
Annual results for 2007
Sales
Corporate sales showed a sharp increase of 15% (autonomous +14%) in
2007. The currency effect (mainly the American dollar) amounted to
-5%. Corporate sales in strategic core markets (safety fabrics,
composites, geosynthetics and synthetic turf) increased by 21%, of
which 16% was autonomous.
This increase in sales is mainly attributable to the Advanced
Textiles & Composites sector, where the demand for fire-resistant
materials for military equipment once again increased significantly.
The Geosynthetics & Grass sector also recorded sales growth, with the
major part of this coming from the acquisition of TenCate Thiolon
Middle East in Dubai.
During the year as a whole the American market for geosynthetics was
cautious as a result of the deteriorating economic situation. There
was, however, growth in this market in the rest of the world.
The synthetic turf market displayed ongoing growth, to which TenCate
was able to respond well with the acquisition it had made. There was
a temporary increase in the cost base due to the production problems
mentioned during the year. This was related to the new machinery
coming on steam.
Operating result
The operating result (EBIT) increased by 39% to ¤ 69.4 million.
As a result of the acquisitions made in the year under review, the
item of amortization of intangible fixed assets increased from ¤ 1.0
million to ¤ 3.6 million. The operating result before amortization
(EBITA) increased by 43%, from ¤ 51.1 million to ¤ 73.0 million. In
autonomous terms this increase amounted to 29%. The EBITA margin rose
from 6.6% to 8.2%.
Net profit
Net profit amounted to ¤ 46.4 million in 2007. Adjusted for a book
profit of ¤ 0.3 million on the divestment of activities, a net profit
of ¤ 46.1 million remained. This is an increase of 36%, compared with
the amount of ¤ 34.0 million reported in 2006.
After the deduction of the net gain of ¤ 3.1 million relating to the
property transaction already mentioned, a net profit of ¤ 43.0
million remains for 2007, representing an increase of 26.5%, thus
realizing the expectation expressed earlier that the net growth in
profit would be at least 25%.
Per share of ¤ 2.50 par value, net profit, excluding the result on
divested activities and exceptional items, increased from ¤ 1.64 to ¤
1.89 (+15%). It is proposed to pay a dividend of ¤ 0.80 per share,
either in cash or in shares (2006: ¤ 0.70 per share).
Developments by sector
Advanced Textiles & Composites
* Net sales: ¤ 350 million (+25%; autonomous +26%)
* EBITA: ¤ 40.2 million (+88%, autonomous +86%)
* EBITA margin: 11.5% (2006: 7.6%)
The Advanced Textiles & Composites sector turned in an excellent
performance:
* Substantial growth in the demand for fire-resistant materials for
army equipment in the United States. Prospects in this market
have remained favourable as a result of TenCate's lead, which is
based on innovative products that are customized to meet the
specific requirements of the American army. TenCate recently
announced that it had once again been granted an exemption under
the Berry Amendment, for the TenCate Defender(TM)M product.
* The growth of the European market in high-grade, multi-risk
products (TenCate Tecasafe®, TenCate Tecashield® etc.) and an
increasing exchange of product knowledge between the TenCate
companies involved have resulted in short launch times for new
products in local markets.
* The successful buy & build strategy in the field of aerospace &
armour composites has considerably strengthened TenCate's
strategic position. (The takeovers of Roshield and Phoenixx TPC,
as well as those of Composix and YLA/CCS at the beginning of
2008).
* Measures to reduce costs and centralize the production of
protective fabrics in the Netherlands have got off to a good
start.
Sales growth amounted to well over 25%, with the autonomous increase
amounting to 26% (currency effect -6%). This strong autonomous growth
can be mainly ascribed to TenCate Protective Fabrics USA.
Within TenCate Aerospace & Armour Composites there was some pressure
on sales resulting on the one hand from delays at Airbus (A380) and
on the other from the incomplete shipment of armour orders. A part of
the orders on hand for 2007 will be carried forward into the first
quarter of 2008.
Following the acquisition of Roshield at the beginning of 2007,
integration of the European commercial organization in the field of
antiballistics was completed. This joint approach has proved
successful in acquiring a large order relating to vehicle armouring
in the United Kingdom.
The operating result before amortization (EBITA) increased by 88%
(+86% autonomous) from ¤ 21.3 million to ¤ 40.2 million. The EBITA
margin increased to 11.5% (2006: 7.6%).
Geosynthetics & Grass
* Net sales: ¤ 468 million (+18%; autonomous +8%)
* EBITA: ¤ 30.4 million (+19%, autonomous -22%)
* EBITA margin: 6.5% (2006: 6.4%)
The American market for geosynthetics came under pressure during the
year as a whole. The increased sales within the Geosynthetics & Grass
sector were mainly the result of the increasing demand for
geosynthetics from Asia and Europe.
The synthetic turf market continues to show strong growth. There has
been a considerable increase in the demand for products that have a
natural appearance.
During the year the Grass group was confronted with problems when new
machinery became operational (Dutch and American production). As a
result, it was not possible to supply the market to the extent
required. Consequently, the introduction of new products was subject
to delay, resulting in a temporary increase in the cost base.
TenCate Thiolon Middle East was able to absorb part of the demand at
the other two production locations.
There was also a sharp increase in the costs of raw materials
(PE/PP), which exerted additional pressure on margins. In view of the
seasonal nature of the synthetic turf market, which is mainly
project-related, price increases can only be implemented with a time
lag. Price increases have now been implemented for the year 2008 in
order to cover further increases in the price of raw materials.
The operating result before amortization (EBITA) of the Geosynthetics
& Grass sector came under considerable pressure. There was an
autonomous decrease of 22%. TenCate Thiolon Middle East, on the other
hand, provided a strong and positive contribution.
Technical Components / Holding & Services
* Net sales ¤ 67 million (-28%; autonomous 0%)
* EBITA ¤ 2.4 million, including an exceptional item of ¤ 4.1
million
The sales in the Technical Components / Holding & Services sector
decreased as a result of the divestment of activities in 2006 and
2007. In autonomous terms, sales remained stable. TenCate Enbi, a
manufacturer of technical components (rollers) mainly for desktop
inkjet and laser printers in Europe, the US and Asia, showed a stable
sales trend.
The markets in which TenCate Enbi operates exhibited healthy growth
of 10% on average. The market for colour laser printers in particular
grew sharply. There are, however, considerable geographical
differences, with the European market displaying a continuing
decline, because the manufacturers (OEMs) are to be found mainly in
Asia. TenCate Enbi's decision, which was made in 2005, to start up
production in China has led to new sales.
Financial
Investments were high, at a level of ¤ 63 million (2006: ¤ 43
million), with an amount in depreciation and amortization of ¤ 33
million. The largest investment project relates to the building of
the geosynthetics factory in Zhuhai (China). These investments will
facilitate the group's future growth.
The net interest-bearing debts at the year's end amounted to ¤ 230
million (year-end 2006: ¤ 87 million).
TenCate's strong growth as a result of its acquisitions and
investments and the increase in its working capital has led to an
increase in its capital requirement of approximately ¤ 200 million. ¤
50 million of this was covered by the small (10%) issue of shares at
the beginning of 2007 and a renewed and enlarged syndicated credit
facility of ¤ 250 million. In corporate financing, the financial
objective should be for the relationship between net interest-bearing
debt and EBITDA (operating result before depreciation and
amortization) to amount structurally to less than 2.5. As a result of
the sharp increase in results, there is a solid balance sheet
position and TenCate, as it finds itself at the end of 2007, remains
well within this objective.
The effective tax pressure decreased from 27.2% in 2006 to 20.5% in
2007. Of this decrease, 3.5 percentage point can be attributed
TenCate Thiolon Middle East. In addition, TenCate benefited from a
one-off tax gain relating to previous years and the exploitation of
losses available for set-off against tax.
Outlook
TenCate has undergone strong strategic development, which has further
strengthened its position in the relevant value chains. Its
technological base has been strengthened, thanks to technologies that
we have either developed in-house or have acquired, including those
in the field of digital finishing technology (Digitex). Technology
positions form the basis for our future growth.
On the basis of global trends in the field of safety and protection,
known as army modernization programmes, aerospace (lightweight
structures), water management and the environment, we expect, as a
supplier of innovative materials, to be able to play an important
role here. Sports and recreation are growth markets par excellence.
Continuing growth is expected for the synthetic turf market.
Our strong position in the US in the field of fire-resistant
materials for army equipment will be further expanded geographically.
There is now genuine interest in these materials in Europe. The new
exemption relating to the Berry Amendment (import exemption in the
United States) is beneficial to our leading position in the American
market.
The takeover of Composix, which was completed at the end of January
2008, provides TenCate with a good springboard position on the
growing American market for vehicle armouring.
Thanks to the measures implemented within Geosynthetics & Grass, an
autonomous improvement in margins is expected in this sector. The new
facility in China for the production of geosynthetics will become
productive in the first half of 2008.
The recently announced takeovers of Edel Grass, YLA/CCS and Xennia
are expected to be completed shortly.
In order to finance acquisitions, the existing syndicated loan
facility will be expanded in the short term
TenCate expects to achieve a growth in profits also in 2008. Economic
developments in the United States, which may also have an effect on
the rest of the global economy, as well as the trend in the rate of
the dollar are uncertain factors. TenCate does not expect to
experience any major negative consequences resulting from a possible
decline in consumer spending.
The complete press release including financial appendices, can be
found in the attached pdf file, or on our website, www.tencate.com
Almelo, 27 February 2008
Royal Ten Cate n.v.
For futher information:
F.R. Spaan, director corporate development & investor relations
+ 31 546 544 338
+ 31 612 961 724
f.spaan@tencate.com
www.tencate.com
