H1 2018 Results
Acceleration in organic growth in Q2
Paris, July 25, 2018.
- Q2 2018 organic growth(1) is strong at +5.3% with excellent performance in Sports (+18.6%)(1) and expansion in all segments
- Solid +3.0% organic growth(1) in H1 2018, net sales reaching €1,317m
- Good progress of selling price increases in Q2 2018, beginning to offset the anticipated raw material prices increase
- Q2 2018 Adjusted EBITDA(2) at €86m and EBITDA margin at 11.5%
- H1 2018 Adjusted EBITDA(2) at €116m and EBITDA margin at 8.8%, still affected by raw material prices and currency effects
(1) Organic growth: at constant scope of consolidation and exchange rates (note that in the CIS segment, price increases implemented to offset currency fluctuations are not included in organic growth, which only reflects changes in volumes and the product mix). See the definition of alternative performance indicators at the end of this press release.
(2) Adjusted EBITDA: adjustments include expenses such as restructuring, acquisitions and share-based payment expenses. See the definition of alternative performance indicators at the end of this press release.
The acceleration in organic growth in Q2 2018 (+5.3%) led to an increase in net sales of +3.0% in H1 2018 at constant scope of consolidation and exchange rates. All segments have grown in the second quarter. The improvement has been driven by excellent growth in Sports (+18.6%) mainly thanks to vigorous sales of artificial turf, and good development in the segment North America (+3.7%), owing to dynamic resilient activities; in addition, commercial carpet improved progressively. EMEA also showed a better performance compared with the previous quarter and reached an organic growth of 1.7% in Q2 vs Q2 2017. The CIS, APAC & Latin America segment posted a 1.4% like-for-like gain in Q2 2018.
Reported sales were down -0.4% in Q2 2018 versus Q2 2017 (-3.4% in H1 2018). Currency movements had a significant negative impact of -6.7% in the first half primarily due to the US dollar, the Russian ruble and the Swedish krona. The perimeter impact accounted for +0.3% thanks to the acquisition of the assets of Grassman, a leading Australian synthetic turf manufacturer that reported approx. €10m of sales in 2017.
The Group adjusted EBITDA amounted to €86m in Q2 2018. While Q1 EBITDA margin has been significantly below last year (-320 basis points), the gap with last year narrowed in Q2 and margin reached 11.5% compared to 14.5% in Q2 2017 or compared to 13.1% excluding the impact of a favorable settlement recorded in the Sports segment in June 2017 (US$12m). The effect of selling price increases in EMEA and North America accelerated in Q2 (+€6m, half of it generated in June) and started countering the raw material prices impact (-€13m). In addition, cost containment and targeted restructuring measures taken generated €2m of savings in SG&A in Q2. Productivity improvements across the business contributed by +€5m. Adverse currency effects also weighted in the quarter (-€5m), mainly owing to the Russian ruble, the US Dollar and the British pound. The net impact of CIS currencies and selling prices evolutions (lag effect) is -€1m.
In H1 2018, the Group adjusted EBITDA amounted to €116m (vs. €160m in H1 2017) and the adjusted EBITDA margin came in at 8.8% compared to 11.8% in H1 2017. Excluding the impact of the favorable settlement in Sports, H1 2017 adjusted EBITDA margin would have been 11.0%. Selling price increases in EMEA and North America benefited the Group by +€7m in H1 2018 and started offsetting the raw material prices impact (-€23m in H1). We also implemented productivity improvements across the business (+€14m) over the period.
We continued to face adverse currency effects totaling -€10m in H1, mainly owing to the Russian ruble, the US dollar and the British pound. The “lag effect” had an impact of -€3m.
Net profit attributable to owners of the Company amounted to €29m vs. -€98m H1 2017 (that included a €150m provision in relation to the French Competition Authority penalty).
Commenting on these results, Glen Morrison, CEO, stated:
“Tarkett has delivered solid organic performance in the first half, accelerating in Q2. We are seeing the positive effects of both the pricing and cost containment actions we have been taking. We will intensify our focus on both these measures to proactively mitigate the anticipated increase in raw materials and freight cost. We will continue to invest in new products and services that will further drive growth. We are pleased to be receiving very positive feedback from customers on recent product launches.”