Q3 2014 results - Robust margin performance in a challenging macro environment
• Net Sales of €731.2m, -3.3% vs. Q3 2013, of which -3.8% organic growth
• Identical Adjusted EBITDA margin as in Q3 2013 at 15.4% (€112.3m vs. €116.6m in Q3 2013)
Net sales reached €731.2m, a reduction of -3.3% vs. Q3 2013 (-3.8% organically). The main driver was a slowdown of demand in the CIS countries similar to the second quarter (organic growth at -11.0% vs. Q3 2013, representing strictly the effect of volume and mix). The activity in North America was soft, especially in August. EMEA as a whole remained positively oriented (+0.4% vs. Q3 2013 organically). The Sports division confirmed the solid growth reported in the first half of this year.
The integration of Gamrat Flooring since May 1st contributed positively for +0.7% in the quarter; currencies had a slightly negative impact of -0.2%.
The Group continued to show resilience in matching Q3 2013 adjusted EBITDA margin at 15.4% (€112.3m vs. €116.6m in Q3 2013). Tarkett managed to protect margins in the CIS region thanks to selling price increases (to offset currency weakness) and cost reductions (to cope with lower volumes). Combined with continuing improvement in EMEA and Sports, this achievement allows the Group to report a very solid adjusted EBITDA margin.
Commenting on the financial results, Michel Giannuzzi, CEO of Tarkett, declared:
“In the third quarter, we have confirmed once again our ability to protect margins through continued pricing and cost management. This performance demonstrates the resilience of our business model, even in a challenging macro environment.”
Sales by segment
In EMEA, Tarkett posted a positive organic growth in Scandinavia, Central Europe and Middle East as well as in Spain and Italy which continued to rebound. France was again negatively affected by the contraction in public spending and the overall weakness of its economy. In addition, Tarkett suffered from the decrease in the French wood flooring market that shrank by circa 20% between 2010 and 2013. The Group thus announced the contemplated closure of its Marty wood flooring plant in France, which experienced severe financial difficulties despite industrial, sales and marketing investments made.
Sales in North America retreated in the third quarter as the recovery in the market has not yet materialized. The residential activity remained on the same negative trend as in the first half of the year and commercial was penalized by a particularly weak demand in August. As planned, the Houston plant (Texas) was closed on July 31st and the new production line of vinyl tiles (VCT) has started in our facility in Florence (Alabama).
The CIS & Others segment posted a -11.0% decrease in organic growth, strictly reflecting volume and mix. Market conditions in both Russia and Ukraine have stabilized. The Group has been able to contain volume erosion thanks to adapting its entry-level product range. Following the selling price increases implemented in the first-half, the current level of prices is in line with the present exchange rates. Moreover the cost structure has been quickly adjusted to the new level of activity. In Latin America, the slowdown of the Brazilian economy has negatively affected the performance in spite of a positive development of LVT (high-end vinyl tiles).
The Sports division pursued its vigorous start of the year with a solid top line growth (posting a +6.4% increase in sales) combined with margin improvement, confirming the progress of this business.
Tarkett confirms its ambition to protect margins in a challenging economic environment. The Group will continue to proactively manage costs and cash-flow.
Thanks to its strong balance sheet and cash generation, Tarkett will also pursue its value-creative strategy of acquisitions.
An audio-conference will be held for the analysts on Monday October 20th at 10:30 am CET and an audio webcast service (live and replay) will also be available at www.tarkett.com.
Financial Calendar - Publications to be released after market closing
• February 18, 2015: Full year 2014 Financial Results
• April 21, 2015: First quarter Financial Results
• April 24, 2015: Annual General Meeting
For more information, visit the Financial Results page.