Please find below all Forbo media releases listed by year.
Eglisau, November 6, 2001
The Forbo Group is affected by the general economic situation. Both the sales and income development weakened in the third quarter, notably in September. In the first three quarters of 2001, the company recorded sales of CHF 1 169.8 million, a slight decrease of 0.5% in currency-adjusted terms on a comparable basis. Due to cost and margin pressure but also due to currency movements, the operating profit of CHF 74.3 million after depreciation is 23% below the previous year's result. The return on sales before depreciation still amounts to 12.3 % (previous year 13.1 %). Partly as a result of lower financial income, consolidated profit after tax is CHF 43.6 million, 34% less than in the record year 2000. The free cash flow for the first nine months of the current year is CHF 36 million (previous year CHF 59 million) before the impact of acquisitions, dividend payments and share buy-back program. The company still has a very solid financial basis with an equity capital ratio of about 45%.
The decrease of the operative result is due to lower exchange rates, which alone account for a decline of CHF 3.3 million, and the operative business where essentially three key factors are relevant. First, the capacity utilization of the Linoleum core business that was lower than planned resulted in higher production costs. Second, the Vinyl business reported sales losses with specialty flooring product for the high-tech industry. And third, the Belting business suffered from weak demand for investment goods. In addition, the operating profit was impacted by price concessions and cost associated with the new production plant in Hanover.
The financial result was significantly weaker than in the previous year. Whereas capital gains from securities were realized in the first nine months of 2000, this year's share price development resulted in realized valuation losses. Besides, the
financial result reflects the interest cost resulting from the share buy-back program. At CHF 43.6 million, Group profit showed a stronger decrease – by 34.4% - than the operating result.
Sales of the linoleum business amounted to CHF 305.2 million, which is a 1,6 % increase in currency-adjusted terms. Linoleum sales were generally better than the total floor covering market. Moderate growth was recorded in Switzerland, Benelux, UK, France, and in the USA. However, sales declined somewhat in Germany and Scandinavia. Sales in the Vinyls business declined by 1.3% to CHF 252.9 million. Here, part of the market shifted from Western to Eastern Europe. The decline in this business sector is particularly due to sales losses with floor coverings for the high-tech industry. Sales in the Belting business decreased by 3.5% to CHF 267.7 million, especially in America (-4.6) and Asia (-3.4%). The Adhesives business showed a more dynamic development, increasing sales by 7.4% in currency-adjusted terms to CHF 166.8 million. This applies to both the floor/wall segment and industrial applications.
At the level of total sales, there were decreases in Germany, Scandinavia and Great Britain, whereas increases could be achieved in France and Eastern Europe. Business is stagnating in America and declining in Asia, compared with the corresponding period of the previous year.
Forbo has taken early measures in response to the general business situation. All business units were subject to a general cost-cutting program. In addition, many parts of the organization were streamlined, and some branch offices were closed. Short time work and temporary production stops in some plants are further cost-cutting measures. Forbo is expecting to have about 5, 600 employees at the end of the year compared with 5,832 at the beginning of 2001, on a comparable basis.
"There will be no compromises, neither in the development of products and markets nor as regards the introduction of new information technologies based on SAP/R3 ", explained
Werner Kummer, CEO. Here, the original plans will be implemented.
With the planned divestment of the carpets business, the Forbo Group consistently strengthens its focus on its four strategic core businesses. The Group has reached an agreement with the management of the carpets business. It is foreseen to have the transaction concluded by the end of the year.
Forbo continues to pursue its growth strategy. In addition to internal growth, it aims to acquire companies in line with the overall strategy. The acquisition of the Spanish adhesives manufacturer Carzuh per September1, 2001 is expected to open up the Spanish market for industrial adhesives in application and customer segments where Forbo already has a strong position in other countries. Forbo acquired sales with adhesives in the shoe industry from Sika Tivoli and now also from Salamander. Further acquisitions will follow. But the Group is not willing to purchase at any price. "The acquisition projects have to be in line with the overall strategy and meet Forbo's quality criteria", said CEO Kummer.
Because of the unstable economic situation and current results, the medium-term objectives have been adjusted, with the overall strategy being maintained. The operating result (EBITDA/net sales) is to be increased to 15% by 2004. The target for return on invested capital before goodwill amortization is at least 13%. Between 1999 and the end of 2001, Forbo will have divested businesses with sales of more than CHF 400 million, including the carpets business. On the current sales basis of some CHF 1.4 billion, the Group strives for sales clearly above CHF 2.0 billion until 2004, with a substantial share coming from acquisitions.
Given the current economic situation, an essential improvement of profits is hardly to be expected before the end of 2001. All measures serve to increase the company's performance. As markets recover, profitability should pick up fast. All in all, CEO Werner Kummer drew a positive conclusion despite the current drawbacks regarding the results. Forbo is a focused company with a clear strategy and clear objectives, he said. A committed management team continuously pursues business success. Besides, the Group has a positive free cashflow and a strong balance sheet, the CEO pointed out.
Forbo is a global producer of floor coverings and industrial specialties. It employs some 5 800 people worldwide and has an international network of 28 production companies in 12 countries and 67 marketing organizations in 25 countries.
Head of Corporate Communications
Tel: + 41 1 868 25 69
Fax: + 41 1 868 35 69
Chief Financial Officer
Tel: + 41 1 868 25 25
Fax: + 41 1 868 25 26