P +41 58 787 25 41
Please find below all Forbo media releases listed by year.
· Adhesives activities becoming a global business
· Flooring and belting maintain their position in difficult markets
· Group's return to growth
· Operating profit at previous year's level
· Lower Group profit of CHF 43 million, record free cash flow of CHF 109 million
· Solid balance sheet with attractive long-term financing
· Cash distribution of CHF 22 per share on the level of the previous year's dividend
Eglisau, March 25, 2003
The business year 2002 was characterized by continued difficult economic conditions and the acquisition of the Swift activities. The targeted expansion of the Adhesives Business had positive effects in all respects. The Forbo Group's international market position was essentially strengthened with the Swift acquisition, which made a substantial contribution to the Group's result. Thus, a company development could be brought about that was better than that of the overall industry. Sales in the business year 2002 reached CHF 1,531 million, an increase by 13 % excluding the Carpet Business sold in October 2001 (previous year: CHF 1,354 million). Thus, the Group is back on its growth course following a phase of focusing. The operating profit (EBIT) of CHF 88 million is nearly unchanged (previous year: CHF 89 million), despite additional amortization of CHF 6 million and unfavorable currency effects of about CHF 4 million. As a result of clearly higher expenses for financing and an increased tax rate, Group profit is at CHF 43 million after CHF 52 million in the previous year. As opposed to this trend, the free cash flow could be increased to a remarkable level of CHF 109 million (previous year: CHF 74 million).
Sales growth through Adhesives
In the year under review, the Forbo Group recorded sales of CHF 1,531 million, a 13 % rise excluding the Carpet Business sold in October 2001. This increase is the result of the Swift acquisition. In parallel, the share of North America in total Group sales rose from 14 % to 22 %. Excluding this acquisition, sales declined by 2 % in local currencies and 5 % in Swiss Francs to CHF 1,284 million on a comparable basis.
Operating profit on the previous year's level
With CHF 180 million, Forbo succeeded in maintaining the operating profit before depreciation and amortization (EBITDA) on the previous year's level despite global negative influences. This corresponds with an attractive margin of 11.8 % on sales. The operating profit after depreciation and amortization (EBIT) is CHF 88 million, nearly unchanged from the previous year, although CHF 6 million Swift goodwill were amortized and CHF 4 million resulted from negative currency movements.
Negative impacts came from the unfavorable currency development, strong price pressure and rising raw material, energy and labor costs. This trend was countered with moves to enhance productivity and restructuring programs. This is also reflected in the number of employees which decreased by about 160 excluding acquisitions. Especially as a result of the higher financial expenses related to acquisitions and a higher tax rate, the Group result of CHF 43 million is 18 % below the previous year.
Unchanged cash distribution thanks to high free cash flow
The cautious investment activity - in line with the business development and good management of working capital - led to an attractive, high level of free cash flow. This value, before dividends and excluding the purchase as well as the sale of activities exceeded the 100 million threshold for the first time, reaching CHF 109 million, compared with CHF 74 million in the previous year.
In view of the profitable business activity and especially the high free cash flow, the Board of Directors proposes to the Annual General Meeting a cash distribution in the same amount of the previous year's dividend of CHF 22 per registered share, by way of a reduction of the nominal value. On the one hand, this is to underline the cash distribution continuity. On the other hand, this is a special recognition in view of the company's 75th anniversary because the shareholders will additionally benefit from a tax favorable form of payment.
Solid balance sheet and attractive financing
Debt rose to some CHF 590 million in May 2002 as a result of the acquisition of the Swift activities. By the end of 2002, net debt had already been reduced to CHF 485 million as a result of the high free cash flow and the seasonal business development. The equity ratio is 37 % - an acceptable level in connection with high liquidity. We expect the balance sheet ratios to show further improvements.
A US private placement was successfully concluded with attractive conditions in November 2002 for refinancing the acquisition of the Swift Adhesives Business and for general Group financing purposes. The investors are US insurance companies. In total, the volume was USD 275 million and the term of the placement is graduated over a period of five to ten years. Thus, the Group's long-term debt financing rests on three pillars, i.e. US private placement, Swiss capital market, and to a smaller extent bank facilities.
Reorganization of the Flooring Business
With floor coverings sales of CHF 736 million, or 48 % of Group sales, were recorded. Weak demand in key European markets, and notably Germany, Scandinavia and Benelux, resulted in a decrease of 3.6 % in local currencies. Especially in the fourth quarter, the core product linoleum suffered from reluctant public spending in key European countries. The North American market for this attractive and environmentally friendly product continued on a positive trend. Vinyl partly compensated weak business in Northern and Western Europe with a further sales growth in Eastern Europe and Asia. The Flooring Business continues to be the most profitable business with CHF 64 million operating profit (EBIT) or 9 % of sales.
The linoleum and vinyl activities, which have so far been represented separately in the Executive Board, were consolidated into a single business at the beginning of the new fiscal year. This business will in the future be represented in the market by a global sales organization, under the name of Forbo Flooring. As in the past, a segmented marked coverage will be ensured on a national level with the core products linoleum and vinyl. The streamlined organization will further enhance the appearance in the individual national markets and ensure a sharper customer focus with products and product development as well as cost savings in the administrative area.
Global position in the Adhesives Business
Adhesives are on a clear growth course with sales of CHF 487 million, CHF 268 million more than in the previous year. The Swift activities acquired in April 2002, whose integration in the existing Adhesives Business has nearly been concluded, contributed CHF 247 million. Even excluding acquisitions, the Adhesives Business reached a sales plus of 8.2 % in local currencies. The operating profit (EBIT) reached 8 % of sales and amounted to CHF 38 million. To this result Swift contributes CHF 17 million. But also the traditional Forbo Adhesives Business made an essentially higher profit contribution than in the previous year. The integration of the acquired Swift activities has led to a clear new positioning of Forbo in the international Adhesives Business. The extraordinary significance of this acquisition is the geographical expansion into North America. There, Forbo had not been present in the adhesives industry. Furthermore, the Swift activities in Europe are a perfect fit with the company's previous business, both geographically and by application segments. The Swift acquisition makes adhesives an important pillar of the Group, introducing a completely new order of magnitude and strategic significance. Today, Forbo is among the world's leading producers of adhesives.
European presence with Belting expanded*3
The global Belting Business recorded sales of CHF 308 million, minus 5.5 % in local currencies compared with the previous year. Especially the decreasing demand for capital investment weakened the OEM business that could not be offset by replacement business. The business conditions were slightly more favorable in North America and Asia than in Europe. The profitability of the Belting Business was not satisfactory with CHF 11 million EBIT or 4 % of sales. The additional measures for business optimization could partly make up for the negative effects of declining sales. Effective October 1, 2002, Forbo acquired the former agent for Siegling belts in Great Britain and Ireland. This company reached annual sales of CHF 17 million with about 80 employees and is one of the leading suppliers of belts for conveying and power transmission in its market segment. With the take-over, Forbo is now represented with its own companies in all the key European markets.
**Board of Directors
The terms of office of Dr. Paul Tanos and Prof. Dr. iur. Rolf Watter as Directors of the Board will expire on the day of the 2003 Annual General Meeting. The two gentlemen will stand for re-election. Dr. Gerd Hofmeister, for personal reasons, will resign at the forthcoming Annual General Meeting.
75th anniversary of the Forbo Group
In 2003, the Forbo Group can celebrate its 75th anniversary. What started in 1928 under the name of Continental Linoleum Union as a group that had an international presence already at that time, is in existence still today. Apart from the core product linoleum which, in a rejuvenated form, is still successful in today's markets and continues to be one of our key profit contributors, the company's product portfolio underwent numerous changes in the 75 years of its existence. Today, Forbo has good preconditions for further entrepreneurial success with its three global Businesses, i.e. Flooring, Adhesives, and Belting.
For the next few months, Forbo is not expecting a significant change of the current market conditions. As a result of these difficult circumstances, the company will continue its strict cost management and focus on cash generation aimed at posting a clearly positive free cash flow in 2003. This will further strengthen our balance sheet. We are expecting continued sales growth in local currencies following the first full-year contribution of Swift in 2003.
Forbo is a global producer of floor coverings, adhesives and belts. The company employs some 5,700 people worldwide and has an international network of 32 production companies and 80 marketing organizations in 30 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