SIMONA 2013: Weakness in core European market – Progress with strategic reengineering
Financial Press Releases
Kirn. The SIMONA Group recorded a downturn in both revenue and earnings in the 2013 financial year.
Operating in an economic climate impacted by sluggish investment spending, the Group saw its sales revenue decline by 2.4 per cent to €286.2 million (prev. year: €293.2 million). Although this figure was within the range projected by SIMONA, it fell well short of the budgeted target of more than €300 million. Having been adversely affected by product mix, pricing factors and increased energy costs, EBIT plunged to €8.2 million (prev. year: €14.1 million). The EBIT margin fell from 4.8 per cent in 2012 to 2.9 per cent. The company's financial base, however, remains solid. Following strategic realignment and acquisitions in the US market, the global plastics-processing company will be looking to expand revenue and earnings in 2014.
Sales performance in the 2013 financial year was dominated by a lacklustre first half. "Despite a stable second half with an encouraging final quarter, we were unable to compensate for this downturn," said Wolfgang Moyses, CEO/Chairman of the Management Board of SIMONA AG. "We lost ground in our core market, Europe, where anaemic capital expenditure clearly took its toll. We are satisfied with the significant momentum generated in Eastern Europe, particularly by our fledgling subsidiary in Russia. Business development was stable in Asia, although we did fall short of our own expectations. Our sales performance in the United States was poor", said Moyses.
In Germany, revenue fell by 4.2 per cent to €89.2 million (prev. year: €93.1 million). In the region encompassing the "Rest of Europe and Africa" buoyant business in Eastern Europe was sufficient to more than offset the decline recorded in Western Europe. Sales revenue rose by 1.6 per cent to €148.4 million in this region. In total, the region comprising "Asia, the Americas and Australia" saw revenue decline by 10.1 per cent to €48.6 million (prev. year: €54.0 million) due to the marked downturn in the United States.
Both product groups were affected by the contraction in sales revenue. Semi-finished and finished parts generated revenue of €210.0 million worldwide, a year-on-year decline of 2.3 per cent. This reflects the company's sluggish performance in the field of chemical tank construction, which saw a downturn in revenue from sheets made of polypropylene and fluoropolymer. By contrast, SIMONA managed to increase its revenue from the sale of PVC foam sheets used in the structural engineering sector.
Sales revenue attributable to the product category of pipes and fittings amounted to €76.2 million (prev. year: €78.2 million), a year-on-year decline of 2.5 per cent.
Revenue from pipes used in civil engineering and industrial applications was down in the reporting period. By contrast, fluoropolymer-based fittings for safety-specific applications produced growth for the company.
The Group's earnings performance was unsatisfactory. Earnings before interest and taxes (EBIT) amounted to €8.2 million (prev. year: €14.1 million). At 2.9 per cent, the EBIT margin fell well short of the 5 per cent target and was slightly lower than the projected figure. This was attributable to product mix and price factors as well as the associated downturn in sales revenue and margins, together with the effects of intense competition. Earnings were also impacted by the continued rise in energy costs.
As part of the Group's restructuring efforts in Europe, its overall headcount fell by 65 to 1,172 as at the end of 2013. Staff downsizing mainly affected the company's sites in Germany.
In 2013, SIMONA launched a programme of strategic reengineering. Greater innovatory thrust, faster processes and more pronounced growth in the emerging markets are the key objectives defined by the company. At the same time, it is committed to remaining independent and shaping its own growth.
"We are satisfied with the overall development and execution of our strategy and the progress made with regard to structural realignment. By contrast, our business performance was less encouraging," said Wolfgang Moyses in summarising the financial year 2013. "The year just ended was immensely important in terms of securing a sustainable future for the company. In developing new products for new markets, we took another step forward when it comes to reducing our dependence on the European market for chemical tank engineering. A new Technology Centre at our headquarters in Kirn, which is scheduled for completion in the third quarter of 2014, will provide additional capacity for innovation projects. We have also strengthened our technical consulting services in the emerging markets, with the express purpose of expanding in the high-end market of industrial applications. The acquisition of Laminations and Boltaron at the beginning of the year has seen the newly formed SIMONA AMERICA Group emerge as a significant player within the US market, with US$80-90 million in revenue, more than 250 employees and access to the global growth market for aircraft interiors," said Moyses.
SIMONA has presented a cautiously optimistic outlook for 2014. Economic conditions have become more favourable and the investment climate is brighter. The company has set itself ambitious growth targets and will be looking to achieve revenue in excess of €300 million and an EBIT of more than €10 million. In the first quarter of 2014, Group sales revenue increased by 11.6 per cent year on year to €77.1 million. First-quarter EBIT amounted to €1.7 million (Q1 2013: €2.0 million). "Earnings were adversely affected by one-off costs for the acquisition of Laminations and forex items in the first quarter. We have improved at an operating level. We will continue to consolidate our business in Europe, while also pursuing growth through high-margin products. Beyond Europe, we are committed to investing in the future. Our primary focus is on the United States and China," said Wolfgang Moyses.