TenCate net profit increases by 13% to ¤ 30.5 million up to and
including third quarter
TenCate net profit increases by 13% to ¤ 30.5 million up to and
including third quarter
-Expected profit growth 2007 remains at least 25% excl. results on
divestments
* Corporate sales up to and including September ¤ 660
million (+10%)
* Operating result (EBIT) ¤ 48.3 million (+20%)
* Growth of net profit 13% to ¤ 30.5 million, adjusted for
result on divestments
* Increase in net profit adjusted for amortization (cash
earnings) 21%
* Strong growth in sales of Defender(TM) M in the US
(American army)
* Sales in antiballistics up to and including third quarter
are lagging behind; higher deliveries in fourth quarter are secured
* Deliveries to Airbus (CETEX®) will get under way again in
fourth quarter
* Continuing restraint in American market for geosynthetics
* Expansion of production capacity for synthetic turf has
led to temporarily higher production and quality costs
(Netherlands)
Developments in the third quarter 2007
Sales in the third quarter increased by more than 15% to ¤ 233
million (autonomous +13.3%). The currency effect amounted to - 4.6%.
There was above-average growth in fire-resistant fabrics (including
TenCate Defender(TM) M and TenCate TecaSafe®).
Sales of personal and vehicle protection (antiballistics) fell behind
in the third quarter too. In the fourth quarter there will be a
strong catch-up effect, as a result of which the year in this segment
will end well.
In a cautious market, sales of geotextiles (geosynthetics) in the
United States remained stable. Ongoing sales growth was generated in
Asia and Europe.
In the Netherlands there was a considerable expansion and
reconstruction operation in synthetic turf production this year. This
involved some start-up problems and it has not produced the required
output.
In the third quarter the operating result increased by 9% to ¤ 18.4
million (autonomous - 1%). The autonomous decline can mainly be
attributed to the Geosynthetics & Grass sector. The reticent American
economy resulted in lower profit margins at TenCate Geosynthetics.
The machine fleet at the Grass group in the Netherlands, which is not
functioning to its maximum, exercised a considerably negative effect
on the result. The production of synthetic turf yarns in Dubai
(TenCate Thiolon Middle East) was in line with expectations.
The continuing weakening of the dollar resulted in a currency effect
on EBIT level of - 6.7%.
The net profit (excl. result on divestments) in the third quarter
amounted to ¤ 11.2 million (+ 3.6%).
Developments in the first nine months
Sales for the first nine months rose by 10% to ¤ 660 million
(autonomous +10.2%, currency effect - 4.2%). The operating result
(EBIT) increased by 19.6 % to ¤ 48.3 million (autonomous + 11.2%).
The EBIT margin improved from 6.7% to 7.3%.
An amount of ¤ 2.5 million (2006: ¤ 0.4 million) was included in the
operating result up to and including the third quarter for the
amortization of intangible assets. Excluding this item, the operating
result (EBITDA) increased by 24.5%.
The net profit before amortization and before the result on
divestments (cash earnings) rose by 21%.
The reported net profit for the first nine months amounted to ¤ 30.6
million. Adjusted for the result on divestments, net profit rose by
13% (autonomous +12.9%; currency effect - 2.4%) to ¤ 30.5 million.
Earnings per share (adjusted for the result on divestments) increased
by 4% to
¤ 1.34.
Outlook
As regards the profit forecast for 2007 as a whole, a number of
positive factors play a role in this:
* the additional contribution of TenCate Thiolon Middle East
in the fourth quarter;
* the current orders for fire-resistant fabrics for the
American defence market, which will be delivered up to the
beginning of 2008;
* a strong catch-up effect in orders for antiballistics in the
fourth quarter.
* deliveries of CETEX® for Airbus will get under way again in
the fourth quarter.
Despite the sluggish growth in profit in the third quarter, TenCate
stands by its statement for 2007 made earlier that net profit
(adjusted for the result on divestments) is expected to increase by
at least 25%, barring unforeseen circumstances.
Developments per sector
Advanced Textiles & Composites
+-------------------------------------------------------------------+
| (x ¤ million) | Q3 2007 | Q3 2006 | to Sept 2007 | to Sept 2006 |
|-----------------+---------+---------+--------------+--------------|
| Net sales | 82.0 | 62.1 | 250.0 | 211.9 |
|-----------------+---------+---------+--------------+--------------|
| EBIT | 7.9 | 3.6 | 24.6 | 14.7 |
|-----------------+---------+---------+--------------+--------------|
| EBIT margin (%) | 9.6 | 5.8 | 9.8 | 6.9 |
+-------------------------------------------------------------------+
Strong autonomous sales growth continued in the third quarter
(+34.7%). The operating result more than doubled compared to the
third quarter of last year. In autonomous terms, growth was as high
as 133%. The order position offers good prospects until mid-2008.
In America and Europe TenCate has built up a leading position in
protective fabrics. In addition to the positive developments in the
US (fire brigade and army), there is growth in the industrial market
in Europe.
As regards production in the Netherlands, TenCate will gradually
streamline and modernize its production in order to further reduce
costs.
The remaining part of the production of interlinings (Permess) in
China will be closed, as it does not fit in our strategic portfolio.
The financial effect of this is extremely limited.
The sales and results of TenCate Aerospace & Armour Composites will
reach their peak in the fourth quarter. This has budgetary causes at
customers in the field of defence. TenCate Armour Composites is a
supplier of antiballistic materials on the European and Asian market
for personal and vehicle protection and operates commercially as an
integrated group. On the American market for antiballistics, TenCate
currently still plays a relatively modest role. However, in view of
the programmes communicated by the American government, there is
strong market growth.
The deliveries for Airbus will get under way again in the fourth
quarter. In 2008 sales for the A-380 will increase substantially; for
the A-350 XWB too, TenCate will be involved as supplier of CETEX®.
Geosynthetics & Grass
+-------------------------------------------------------------------+
| (x ¤ million) | Q3 2007 | Q3 2006 | to Sept 2007 | to Sept 2006 |
|-----------------+---------+---------+--------------+--------------|
| Net sales | 135.9 | 121.1 | 357.2 | 312.7 |
|-----------------+---------+---------+--------------+--------------|
| EBIT | 11.2 | 12.8 | 24.4 | 24.7 |
|-----------------+---------+---------+--------------+--------------|
| EBIT margin (%) | 8.2 | 10.6 | 6.8 | 7.9 |
+-------------------------------------------------------------------+
In the Geosynthetics & Grass sector there was autonomous sales growth
of 4.3% in the third quarter. The operating result was under strong
pressure, with an autonomous decline of 32.1%. The geosynthetics
activities outside the US and the synthetic turf activities of
TenCate Thiolon Middle East provided some compensation.
Although the volume in the American market for geosynthetics is at
approximately last year's level, margins have declined. Moreover,
there is a continual increase in the price of raw materials as a
result of shortage and the effect of oil prices, which is putting
margins further under pressure.
Outside the US, good progress is being made, although the market for
large projects relating to geotextile solutions is at a lower level.
For some large projects traditional solutions were selected, although
our products are extremely environment-friendly and cost-saving. Now
that governments are placing a greater focus on environmental aspects
and sustainability, our products offer additional advantages in this
field.
The synthetic turf market is showing considerable growth worldwide
(+15%), although large regional differences do exist. In America,
growth in volume remained limited to 10% and projects were
transferred to 2008 because of inadequate production capacity in 2007
for certain types of synthetic turf fibres.
The Grass group implemented a major changeover at the end of 2006 /
beginning of 2007, in view of the (future) growth of the synthetic
turf market as a whole and the strong increase in demand for
monofilament (MF) fibres in particular. The consequences of this
process were felt most strongly in the production facility in the
Netherlands. The production output has not reached the desired level
as regards volume and costs.
The new product portfolio for this year, consisting of a larger share
of MF fibres and combined fibre products (multifilaments), which
integrate different functional characteristics, made adjustments
necessary within the production processes.
The acquisition of TenCate Thiolon Middle East resulted in TenCate
being able to secure a large part of the increased demand for MF
products in 2007. In the year 2008 the product portfolio and the
prices policy will globally be harmonized.
Furthermore, for 2008 a plan will be drawn up for the Grass group as
a whole so as to be able to serve the global market to maximum effect
from three production locations. In this connection, an investment
plan has been approved for a substantial capacity expansion in the US
and Dubai. In 2008 TenCate Thiolon Middle East will be the largest
production facility within the Grass group. This plan is intended to
result in considerably higher results in 2008.
Technical Components / Holding & Services
+-----------------------------------------------------------------+
| (x ¤ million) | Q3 2007 | Q3 2006 | to Sept 2007 | to Sept 2006 |
|---------------+---------+---------+--------------+--------------|
| Net sales | 15.4 | 18.9 | 52.4 | 75.1 |
|---------------+---------+---------+--------------+--------------|
| EBIT | -0.7 | 0.5 | -0.7 | 1.1 |
+-----------------------------------------------------------------+
The developments in respect of TenCate Enbi's sales and result are
positive, although the picture in the different geographical areas is
varied. TenCate Enbi is the only company in the sector that operates
on three continents in the printer and copier market. The core of
this market is shifting more and more to Asia. TenCate Enbi is active
here from Singapore and Zhuhai (China), where growth is being
generated.
The decline in the sales of the Technical Components / Holding sector
has mainly been caused by the divestment of Plasticum in 2006. Apart
from currency effects, TenCate Enbi's sales remained virtually
unchanged.
Other financial information
The tax rate for the first nine months decreased from 30.4% to 23.5%.
This was in part caused by the one-off tax gain and the zero rate
that applies to TenCate Thiolon Middle East, as mentioned in the
previous publication.
The investment level for the year as a whole will amount to approx. ¤
60 million. This amount is related to the investments the production
of synthetic turf and composites and building a second geosynthetics
factory in Asia (Zhuhai, China).
The increased working capital is linked in particular to the orders
to be delivered in antiballistic materials and fire-resistant fabrics
(American army).
The net interest-bearing debt amounts to ¤ 235.3 million (end of the
second quarter:
¤ 245.8 million). The debt position is still expected to improve
somewhat in the fourth quarter, as a result of seasonal influences.
Almelo, 1 November 2007
Royal Ten Cate nv
For further information:
F. R. Spaan
Head Investor Relations & Corporate Communication
Tel. + 31 546 544 338
M. + 31 6 12 96 17 24
e-mail f.spaan@tencate.com
www.tencate.com