'We will continue to exploit growth opportunities' – TenCate CEO
Loek de Vries, Executive Board Chairman and CEO: 'TenCate is well positioned in long-term niche markets in which the trends that are important for our growth remain fully in place. The foundations of these core markets are still intact. We are continuing to pursue our "buy & build" strategy and will continue to exploit growth opportunities, just as we have done successfully in the past. We have a strong balance sheet position and have achieved substantial growth in our cash flow.
The situation currently prevailing among banks, resulting in tightness in the supply of finance, has led to reticence among customers, even though projects are still being implemented. Inventory reduction has taken place on a large scale. Even governments and local authorities - an important group of customers for TenCate - are postponing decisions, with delays in the provision of budget resources.
In view of this situation, from mid-April of this year we gave priority to the maintenance of a healthy financial position. This avoided considerable additional financing costs and/or profit dilution and the attendant undesirable long-term effects.
In view of the foundations underpinning our markets and the measures which have and are being taken in the cost area, TenCate has the potential to stage a strong recovery when the markets recover.'
Performance in the second quarter of 2009
Sales in the second quarter totalled €230.4 million (organic: -29%).
The same period of 2008 had included a substantial order for vehicle armour for the US Army, whereas no such order was recorded in the current period. The market for vehicle armour remains a growth market, but the volumes are liable to fluctuate.
The European market for workwear for industrial end-users was under heavy pressure.
The trends in the American market for geosynthetics were unfavourable as a result of the postponement of infrastructure projects due to the insufficient release of public-sector funding.
The synthetic turf market is a seasonal market in which inventories are accumulated on the basis of the projects scheduled to be implemented over the summer months. The usual inventory accumulation did not take place.
One of the consequences of the tight financial policy was a loss due to underutilisation of capacity, which put additional pressure on earnings.
Second-quarter EBITA (earnings before interest, tax and amortisation) decreased by 58% to €13.4 million (organic -63%; currency effect +5%). The EBITA margin amounted to 5.8% (Q2 2008: 10.5%).
Net financing expenses rose, mainly due to the write-down of a €4.9 million non-strategic interest held by the Geosynthetics group. The balance of the interest income/expenses in this item in the first half of 2009 was approximately €0.7 million lower than in the comparable period in the previous year. The interest rate on the external debt was lower. In contrastto the previous year, no currency options were purchased to hedge the translation risk, so no option premiums were paid.