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2019/04/24

2019 Q1 financial results

 

Robust organic growth
Selling prices increases fully offsetting purchasing cost inflation 
Focus on profitability supported by the optimization of North America industrial footprint

 

Paris, April 24, 2019

Highlights

  • Solid organic growth(1) in Q1 2019 (+3.7% vs. Q1 2018), driven by EMEA (+5.8%) and Sports (+19.4%)
  • Net revenues at €625 million, up 10.0% at current exchange rates versus Q1 2018, reflecting organic growth, the integration of Lexmark in the US and a positive forex impact (US$-driven)
  • Selling price increases fully offset persistent inflation of raw material and freight costs
  • Q1 2019 adjusted EBITDA(2) before IFRS 16 at €36 million or 5.7% of revenues, up 20% with 50bps margin improvement versus Q1 2018 (€30 million or 5.2% of revenues)
  • Manufacturing optimization plan in North America announced in April to extract synergies from Lexmark integration and reduce cost base in the region
  • Group’s 2019 focus on sustainable profitability improvement and deleveraging

(1) Organic growth is the revenue growth on a like-for-like basis, i.e. at constant scope of consolidation and exchange rates, and therefore only reflects changes in volumes, prices and the product mix (note that in the CIS segment, price increases implemented to offset currency fluctuations are not included in organic growth). See the definition of alternative performance indicators at the end of this press release.
(2) Adjusted EBITDA: adjustments include expenses such as those relating to restructuring, acquisitions and share-based payments. See the definition of alternative performance indicators at the end of this press release.

Commenting on these results, Fabrice Barthélemy, CEO, said:

“In the first quarter of 2019, Tarkett achieved sound organic growth driven by a good dynamic in EMEA and continuing momentum in Sports. In North America, the focus has been on improving operational efficiencies. In the CIS and Latin America, our proactive pricing policy enabled us to offset adverse currency movements. The business environment remained challenging with inflationary raw material and freight costs. We are very satisfied that pricing increases implemented in 2018 fully covered cost inflation in the first quarter. We will continue to manage the sales pricing with this aim and remain focused on our 2019 top priorities of sustainable profitability improvement and deleveraging.”

 

Q1 2019 Sales by segment

(1) Organic growth is on a like-for-like basis, i.e. at constant scope of consolidation and exchange rates, and therefore only reflects changes in volumes, prices and the product mix (note that in the CIS segment, price increases implemented to offset currency fluctuations are not included in organic growth). See the definition of alternative performance indicators at the end of this press release.

Group net revenues saw a sustained rate of growth (+10%) in the first quarter of 2019 with organic growth (+3.7%) adding €22 million of revenues compared to Q1 2018 and with the integration of Lexmark and other 2018 bolt-on acquisitions (+3.8%) contributing €22 million. It also comprised a positive forex impact (+2.4%) of €14 million, mainly related to the appreciation of the dollar versus the euro.

The EMEA segment benefitted from a favorable comparison to a soft first quarter in 2018 with revenues up 5.8% on a like-for-like basis. This performance mostly derived from volume increase during the quarter. Sales in the UK and Scandinavia were particularly strong; they were sustained in Central Europe and stable in France but slowing down in Turkey and Middle East. Reported revenues were up 4.7%, negatively impacted by currency accounting for 1.1%, penalized by adverse exchange-rate movements affecting the Swedish krona.

The North America segment was down 0.6% year-on-year on a like-for-like basis as selling prices were materially raised and almost fully offset volume decrease. Commercial carpet activity sales stabilized in the quarter and revenues in resilient flooring were slightly below last year’s levels after a buoyant 2018. The integration of Lexmark led to a positive perimeter impact of 12.4% representing most of the revenue growth during the quarter. Reported revenues were up 19.7%, including Lexmark contribution and a positive impact of 8.0% through the appreciation of the dollar versus the euro.

Sales across the CIS, APAC and Latin America segment declined by 2.2% on a like-for-like basis. Revenues in the CIS region declined on a like-for-like basis during the quarter reflecting a volume decrease; this was partially mitigated by a mix improvement. The level of activity in Brazil and Latin America continued to significantly grow on a like-for-like basis, driven by sustained volumes and prices increases. Revenues in APAC are down year-on-year mostly reflecting a lower activity in Australia. Reported revenues were down 3.2%, affected by a negative effect of currency movements for 1.0% due to the depreciation of the Russian ruble and the Brazilian real versus the euro.

Strong momentum in Sports continued in the first quarter, which is structurally low due to the segment’s seasonality. Revenues grew by 19.4% on a like-for-like basis. Reported revenues were up 29.1% thanks to the 2018 bolt-on acquisitions (Thermagreen, The Tennis & Track Company and Grassman) for 2.6%. The appreciation of the dollar versus the euro generated a positive effect of 7.0% during the quarter.

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