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2016/04/21

2016 Q1 results: strong start to the year

Strong start to the year:
+4.2% organic growth and Adjusted EBITDA up by +41.5%

 

Highlights

Net sales
Organically, sales grew by 4.2% vs. Q1 2015.  EMEA and Sports continued on the good pace observed in 2015. North America posted a very good performance (+11.4%), confirming that the segment has fully recovered. On the opposite, the economic conditions in the CIS remained adverse, leading to a negative organic growth for the reporting segment CIS, APAC and LATAM.
Reported sales reached €576m vs. €561m in Q1 2015. There was no change in the scope of consolidation but exchange rates had a negative impact (- €8m), primarily the ruble which remained weak throughout the quarter.
 
Adjusted EBITDA
The Group delivered an adjusted EBITDA of €45.0m vs. €31.8m in Q1 2015, up by +41.5%. The adjusted EBITDA margin increased from 5.7% to 7.8%. The main contributor was North America that confirmed the profitability improvement seen in H2 2015, thanks to better volumes and efficiencies. Meanwhile, EMEA and Sports also reported higher margins than in Q1 2015.  Margins in the CIS suffered from the slowdown in sales volumes and from the weakness of the ruble. All geographies benefited from favorable raw material prices.

Commenting on the financial results, Michel Giannuzzi, CEO of Tarkett, declared:
“We are pleased with this very strong start to the year in three of our four segments. It was particularly true in North America where we are now clearly in a growth mode, with most product lines gaining steam. The increased EBITDA margin is driven by the sales growth and by the improvements made in our operations. These results demonstrate the very balanced profitability profile of the Group and the strength of our diversified portfolio of flooring and sports surfaces solutions.”

Net sales

Adjusted EBITDA(2)

Comments by segment

Europe, Middle East, Africa (EMEA)
In EMEA, Tarkett delivered a strong organic growth of 5.5%. Most countries contributed to this performance, in particular the Nordic countries, the UK and Germany. Spain slowed down compared to last year, in the midst of political uncertainties. France posted a slightly positive organic growth, a noticeable change from the past three years.
The reported sales grew by only 2.6% due to a reclassification of some Desso sales to other segments and a marginal negative impact of currencies.
The LVT category (luxury vinyl tiles) continued to be the main driver of growth across the region. The new production line in Poland, designed to meet this growing demand, is on track to be operational by the end of the year.

North America
Sales in North America increased organically by 11.4% in Q1 2016. Most product lines benefited from the growth, both in the residential and in the commercial sectors. The VCT product category, which had been negatively impacted in H1 2015 by production transfer issues (resolved in H2 2015), is recovering.
On a reported basis, sales grew by 15.0%, thanks to an exchange rate of the US dollar that was in average slightly higher against the Euro than in Q1 2015 and by the reclassification of some sales from Desso Europe.

CIS, APAC & LATAM
Net sales declined by -11.0% organically (excluding price increases in the CIS). The market conditions in Russia remained unfavorable, with consumer purchasing power still very much constrained. The ‘’lag effect’’ between the ruble fluctuations and the price increases had a negative impact of €9m on net sales. The latest price increase was implemented in March 2016 by up to 10% depending on the products.

In APAC the year started fairly slowly, both in Australia and in China. In Latin America we posted another quarter of positive organic growth, despite a still depressed economic environment in Brazil.

Sports
The Sports activities started the year on a very good pace with organic growth of 14.1%. Sales of artificial turf and of running tracks both performed well.  Our hybrid-turf technology GrassMaster ® has been selected by the Stade de France, notably for the Euro 2016 football competition, including the Opening and Final games.

Outlook  
North America and EMEA regions now represent more than 80% of Group sales and EBITDA and should continue on a growth mode, while we expect the year to be challenging in the CIS countries.
The recovery in North America initiated last year is being confirmed quarter after quarter. EMEA and Sports also achieved a very good start to the year, benefiting from the rise of modular products both in carpet and vinyl, as well as from a solid demand in sports surfaces.
With a very solid balance sheet, Tarkett will continue to play an active role in the consolidation of the industry.

An audio-conference will be held for the analysts on Friday April 22nd at 11:00 am CET and an audio webcast (live and replay) will also be available at www.tarkett.com.

 

Financial Calendar - Publications to be released after Paris market closing

  • April 26, 2016: Annual General Meeting
  • July 27, 2016: Half-year Financial Results
  • October 26, 2016: Third quarter Financial Results