Panariagroup Industrie Ceramiche S.p.A. INTERIM REPORT AT 31 MARCH 2012

Transcription

1 Panariagroup Industrie Ceramiche S.p.A. INTERIM REPORT AT 31 MARCH 2012 Panariagroup Industrie Ceramiche S.p.A. Via Panaria Bassa 22/a Finale Emilia (Modena) Tax code, VAT TABLE OF CONTENTS

2 1. STRUCTURE OF THE GROUP 2. DIRECTORS AND OFFICIALS Board of Directors Board of Statutory Auditors Independent Auditors 3. BALANCE SHEET 3.1 Income statement comparison between 31/3/2012 and 31/3/ Reclassified balance sheet 3.3 Net financial position 4. COMMENTS ON THE FINANCIAL STATEMENTS 4.1 Accounting principles adopted 4.2 Scope of consolidation 4.3 Report on operations 5. OUTLOOK 6. SUBSEQUENT EVENTS Panariagroup Interim report at 31 March 2012 Page 2 of 17

3 1. STRUCTURE OF THE GROUP The structure of the Group at 31 March 2012 is as follows: The Parent Company is Panariagroup Industrie Ceramiche S.p.A., based in Finale Emilia, Modena (Italy), with share capital of Euro 22,677, Panariagroup produces and sells ceramic tiles for floors and walls under five distinctive brand names: Panaria, Lea, Cotto d Este, Fiordo and Blustyle. All of these brands focus on the high-end and deluxe market segment and mainly sell porcelain gres product lines, both in Italy and abroad. Gres Panaria Portugal S.A., based in Chouse Nova, Ilhavo (Portugal), share capital of Euro 16,500,000, subscribed and paid in, wholly owned by Panariagroup Industrie Ceramiche S.p.A. Gres Panaria Portugal produces ceramic tiles for floors and walls under two separate brand names, Margres and Love Tiles, both aimed at the main European markets. Panariagroup USA Inc., based in Delaware, USA, share capital of USD 65,500,000, wholly owned by Panariagroup Industrie Ceramiche S.p.A. It owns 100% interests in Florida Tile Inc. and Lea North America LLC. This company markets Panaria branded products on the North American market. Panariagroup Interim report at 31 March 2012 Page 3 of 17

4 Florida Tile Inc., based in Delaware, USA, share capital of USD 25,000,000, wholly owned by Panariagroup USA Inc., produces and sells ceramic tiles in the USA through its own distribution network located mainly on the east coast. Lea North America LLC., based in Delaware, USA, share capital of USD 20,000, wholly owned by Panariagroup USA Inc. This company markets Lea branded products on the North American market. Montanari S.r.l., based in Crespellano, Bologna (Italy), share capital of Euro 48,000, 100% owned by Panariagroup Industrie Ceramiche S.p.A. This company runs a retail outlet for ceramic tiles. Panariagroup Immobiliare srl, with head office in Finale Emilia, Modena (Italy), share capital of Euro 10,000, 100% owned by Panariagroup Industrie Ceramiche S.p.A. This is a property management company. As of the date of these notes, it has not yet commenced operations. Panariagroup Interim report at 31 March 2012 Page 4 of 17

5 2. DIRECTORS AND OFFICIALS Board of Directors Name Office Place and date of birth Emilio Mussini Chairman of the Board and Managing Director Sassuolo (MO), 20/4/1961 Giuliano Mussini Deputy Chairman of the Board of Directors Modena, 10/9/1930 Giovanna Mussini Deputy Chairman of the Board of Directors Sassuolo (MO), 12/4/1959 Andrea Mussini Managing Director Sassuolo (MO), 15/5/1958 Giuseppe Mussini Managing Director Sassuolo (MO), 23/11/1962 Paolo Mussini Managing Director Sassuolo (MO), 11/2/1958 Giuliano Pini Managing Director Modena, 21/5/1952 Marco Mussini Director Sassuolo (MO), 21/7/1971 Alessandro Iori (*) Director Reggio Emilia, 15/6/1943 Paolo Onofri (*) Director Bologna, 11/11/1946 Enrico Palandri (*) Director Milan, 2/10/1962 (*) Independent non-executive director Board of Statutory Auditors Name Office Place and date of birth Giovanni Ascari Chairman of the Board of Statutory Auditors Modena, 13/10/1935 Vittorio Pincelli Standing Auditor Frassinoro (MO), 3/8/1943 Stefano Premoli Trovati Standing Auditor Milan, 01/12/1971 Corrado Cavallini Alternate Auditor Sassuolo (MO), 4/1/1971 Massimiliano Stradi Alternate Auditor Sassuolo (MO), 16/3/1973 Independent Auditors Deloitte & Touche S.p.A. Panariagroup Interim report at 31 March 2012 Page 5 of 17

6 3. BALANCE SHEET 3.1 Income statement : comparison between 31 March 2012 and 31 March 2011 (in thousands of euro) I Quarter 2012 % I Quarter 2011 % var. Revenues from sales and services 71, % 72, % (726) Change in inventories of finished products 3, % 1, % 1,255 Other revenues 1, % 1, % 412 Value of Production 76, % 75, % 941 Raw, ancillary and consumable materials (20,685) % (20,936) % 251 Services, leases and rentals (30,214) % (29,183) % (1,031) Personnel costs (18,476) % (18,367) % (109) Change in inventories of raw materials % % 302 Other operating expenses (653) -0.85% (692) -0.92% 39 Cost of production (69,653) % (69,105) % (548) Gross operating profit 6, % 6, % 393 Amortisation and depreciation (4,263) -5.58% (4,091) -5.42% (172) Provisions and impairments (279) -0.37% (692) -0.92% 413 Net operating profit 2, % 1, % 634 Financial income and expense (1,308) -1.71% (1,424) -1.89% 116 Pre-tax profit % % 750 Income taxes estimated (564) -0.74% (533) -0.71% (31) Net profit for the period % (351) -0.47% 719 Cash Flow 4, % 4, % 478 Panariagroup Interim report at 31 March 2012 Page 6 of 17

7 3.2 Reclassified balance sheet (in thousands of euro) March 31, 2012 December 31, 2011 March 31, 2011 Inventories 145, , ,440 Accounts Receivable 87,477 82,997 90,319 Other current assets 7,722 6,436 8,846 CURRENT ASSETS 240, , ,605 Accounts Payables (61,814) (62,306) (60,098) Other current liabilities (27,004) (26,506) (27,807) CURRENT LIABILITIES (88,818) (88,812) (87,905) NET WORKING CAPITAL 151, , ,700 Goodwill 12,789 12,789 12,789 Intangible assets 2,587 2,697 2,926 Tangible assets 91,389 92,221 86,923 Equity Investments and other financial fixed assets FIXED ASSETS 106, , ,642 Receivables due after the following year Provisions for termination benefits (6,048) (6,175) (6,423) Provisions for risks and charge and deferred taxes (1,520) (2,381) (9,609) Other payables due after the year (4,033) (4,045) (536) ASSETS AND LIABILITIES DUE AFTER THE YEAR (11,346) (12,340) (16,298) NET CAPITAL EMPLOYED 246, , ,044 Short term financial assets (2,347) (3,101) (3,571) Short term financial debt 53,508 49,316 49,900 NET SHORT TERM FINANCIAL DEBT 51,161 46,215 46,329 Mid-long term financial debt 43,391 38,659 38,894 NET FINANCIAL POSITION 94,552 84,874 85,223 Group Shareholders' Equity 152, , ,821 SHAREHOLDERS' EQUITY 152, , ,821 TOTAL SOURCES OF FUNDS 246, , ,044 Panariagroup Interim report at 31 March 2012 Page 7 of 17

8 3.3 Consolidated Net Financial Position (in thousands of euro) March 31, 2012 December 31, 2011 March 31, 2011 Securities Cash and cash equivalents (2,347) (3,101) (3,571) Short term financial assets (2,347) (3,101) (3,571) Due to banks 53,508 49,311 49,887 Financial payables to holding companies Short term leasings Short term financial debt 53,508 49,315 49,900 Due to banks 43,391 38,660 38,894 Mid-long term leasings Due to bondholders Mid-long term financial debt 43,391 38,660 38,894 Net Financial Position 94,552 84,874 85,223 Panariagroup Interim report at 31 March 2012 Page 8 of 17

9 4. COMMENTS ON THE FINANCIAL STATEMENTS 4.1 Accounting principles adopted This interim report is prepared pursuant to art. 154-ter of Legislative Decree no. 58/1998 (TUF) and Consob's Issuers Regulations. In connection with regulations on the listing of parent companies incorporated or regulated under the laws of countries not belonging to the European Union, and which have a significant impact on the consolidated financial statements, it should be noted that: - as of 31 March 2012 three companies controlled by Panariagroup come under these regulations: Panariagroup USA Inc., Florida Tile Inc and Lea North America LLC; - adequate procedures have been adopted to ensure thorough compliance with the new rules (art. 36 of the Market Regulations issued by Consob). Panariagroup has adopted the IFRS issued by the International Accounting Standards Board. The accounting policies used in preparing this interim report do not differ from those applied since the date of adoption of IFRS; moreover, the accounting figures given in this interim report do not include any estimates other than those normally used to prepare the annual consolidated financial statements. In relation to the Group's U.S. companies, note that there were no significant differences between local accounting principles (U.S. GAAP) and the accounting standards adopted in the consolidated financial statements (IFRS). This interim report has not been audited The amounts reported and commented on are in thousands of euro, unless otherwise indicated. Panariagroup Interim report at 31 March 2012 Page 9 of 17

10 4.2 Scope of consolidation The scope of consolidation includes: - Panariagroup Industrie Ceramiche S.p.A. Parent Company - Gres Panaria Portugal S.A. 100% owned - Panariagroup USA Inc. 100% owned - Florida Tile Inc. 100% owned - Lea North America LLC. 100% owned - Montanari Srl, 100% owned - Panariagroup Immobiliare S.r.l., 100% owned 100% All of the companies included in the scope of consolidation have been consolidated on a line-by-line basis. In February 2012 "Panariagroup Immobiliare S.r.l." was set up to buy, sell and manage property. Panariagroup Interim report at 31 March 2012 Page 10 of 17

11 4.3 Report on operations Income statement key figures at 31 March 2011 (in thousands of euro) March 31, 2012 % March 31, 2011 % var. Revenues from sales and services 71, % 72, % (726) Value of Production 76, % 75, % 941 Gross operating profit 6, % 6, % 393 Net operating profit 2, % 1, % 634 Pre-tax profit % % 750 Net profit for the period % (351) -0.47% 719 Briefly, the results for the period are the following: Consolidated revenues from sales amounted to Euro 71.7 million, a decrease of Euro 0.7 million on 31 March 2011 (-1%). Gross operating profit comes to Euro 6.8 million (Euro 6.4 million at 31/3/2011), with an improvement of Euro 0.4 million, Net operating profit amounted to Euro 2.2 million (Euro 1.6 million at 31/3/2011), with a rise of around Euro 0.6 million. Pre-tax profit (loss) came to Euro 0.9 million (Euro 0.2 million at 31/3/2011), with a growth of 0.7 million euro. Consolidated net profit amounted to Euro 0.4 million, an increase of 0.7 million on the first quarter Sales in the first quarter of 2012 are broadly in line with the same period of the previous year, despite the ongoing economic downturn, particularly acute on the Italian and European front, which are the markets where our Group operates the most. In terms of profitability, the Group achieved an improvement, particularly welcome in view of the fact that there was another significant increase in energy prices in the first quarter of 2012 (+21% on first quarter 2011). The main factors that have contributed to this improvement are the rising level of appreciation for porcelain gres laminate products, which have a higher value added, and the further progress made in the results of American business unit, which is reaping the full benefits of the reorganisation carried out in previous years in a market context that is showing more substantial signs of recovery. Panariagroup Interim report at 31 March 2012 Page 11 of 17

12 Consolidated revenues Revenues from sales have decreased by 1.0%, from Euro 72.4 million at 31 March 2011 to Euro 71.7 million at 31 March 2012 (-0.7 million euro). Principal markets During the quarter, our major markets have been showing very different trends: on the one hand, Italy and Europe continue to show signs of sufferance, quite severe in certain cases; on the other, the American and Asian markets are seeing encouraging signs of growth, helped by the commercial policies introduced by our Group in recent years to focus on areas with the most growth potential. The European market has contracted by around 10%; this decrease has been brought about by particularly penalising results in the Portuguese market, followed by the French and Dutch markets, only partially offset by growth in the German market and certain Eastern European countries. The European market's share of total sales comes to around 37%. The Italian market, as confirmed by recent surveys carried out by Confindustria Ceramica, is experiencing a moment of severe contraction that has affected all operators in the property sector. The climate of economic uncertainty affecting our country has been further burdened by the austerity measures introduced by the government, with particular reference to the taxes that are due to hit real estate, contributing to a further slowdown in that sector. In this situation, our Group has experienced a 10% decline in sales. The Italian market's share of total revenues comes to around 26%. The U.S. market confirms the important growth trend that characterised the previous two years: sales have gone up by more than 18%. This improvement is largely due to the American subsidiary, Florida Tile, which thanks to investments in previous years, has achieved a competitive position that ranks us one of the most important players in America. The US market's share of total turnover comes to around 25%. There have also been excellent performances on other Overseas markets (Asia, Oceania and Africa), where the improvement compared with the first quarter of 2011 comes close to 30%. Also in this case, the commercial reorganisation carried out by the Group to take advantage of the obvious development opportunities that we had identified there, is bearing fruit. One of the measures taken in the Far East that stands out is the recent joint venture agreement signed in India with one of the main local players (Asian Granito), which has also involved creating a brand for the Indian market called "Bellissimo- Stile Italiano". The Overseas market's share of total turnover is 12%. Panariagroup Interim report at 31 March 2012 Page 12 of 17

13 The following table provides a breakdown of sales in the Group's principal markets. Revenues by geographical area (gross of customer incentives) (amounts in thousand euros) rk Nation March 31, 2012 March 31, 2011 var. % 1 ITALY 19,245 21,356 (2,111) -9.9% 2 USA 18,250 15,409 2, % 3 FRANCE 7,229 7,992 (763) -9.5% 4 PORTUGAL 4,505 6,199 (1,694) -27.3% 5 GERMANY 4,068 3, % 6 BELGIUM 3,477 3,621 (144) -4.0% 7 HOLLAND 1,375 2,075 (700) -33.7% 8 SPAIN 1,294 1, % 9 AZERBAIJAN 1, % 10 AUSTRALIA 1, % OTHERS 11,105 10, % TOTAL 72,833 73,830 (997) -1.4% The table shows the trends in the main countries, as already reported. In terms of individual brand sales, results are very positive for Florida Tile and Panariagroup Trade, which are seizing the opportunity to develop their markets, whereas they are slow for the Italian and Portuguese brands, which operate mainly on European markets. The Portuguese business unit has been affected by the difficult situation on the domestic market, which is still quite serious; the aim is to strengthen our development strategy in foreign markets and to compensate, in the medium term, the negative dynamics of the domestic market. Panariagroup Interim report at 31 March 2012 Page 13 of 17

14 Operating results Gross operating profit came to Euro 6.8 million, representing 8.9% of the value of production (Euro 6.4 million at 31 March 2011) with an improvement of 0.4 million euro. The higher operating profitability is the result of the following: - an improvement in the results of the American business unit, which achieved a considerable increase in EBITDA; - the higher production efficiencies made possible by doubling of the production line dedicated to porcelain gres laminate in the last quarter of However, these improvements have been offset by a further increase in energy costs at the Italian and Portuguese plants and the decline in profitability of the Portuguese business unit. The net operating profit comes to Euro 2.2 million (Euro 1.6 million at 31 March 2011) with a rise of 0.6 million euro. The result of financial operations is slightly improving, thanks to the euro-u.s. dollar exchange rate, less penalised compared with the first quarter of The pre-tax result is positive for Euro 0.9 million (Euro 0.2 million at 31 March 2011). The estimated tax burden should come to Euro 0.5 million, in line the previous year. The consolidated net profit amounts to Euro 0.4 million, an improvement of 0.7 million on the first quarter of 2011, which closed with a loss. Panariagroup Interim report at 31 March 2012 Page 14 of 17

15 Review of the balance sheet Reclassified balance sheet (in thousands of euro) 31/3/ /12/ /3/2011 Net Working Capital 151, , ,700 Fixed assets 106, , ,642 Assets / Liabilities due after year (11,346) (12,340) (16,298) NET CAPITAL EMPLOYED 246, , ,044 Net Financial Position 94,552 84,874 85,223 Shareholders' equity 152, , ,821 TOTAL SOURCES OF FUNDS 246, , ,044 Net working capital The rise in net working capital during the first quarter compared with the beginning of the year is due to seasonal trends affecting receivables and inventory. The increase in net working capital from 31 st March 2011 is due an increase in inventories, partially offset by a decrease in trade receivables. The rise in the level of inventories is mainly due to: - higher stocks of porcelain gres laminate products due to the start-up of the second production line, which serve to meet the increase in sales; - the increase in stocks at the American business unit in anticipation of higher sales, which is in fact taking place during the first quarter. Even though inventories have risen, the Group still maintains a constant focus on stock rationalisation, taking initiatives to optimise the product range and manage inventory turnover, article by article. As regards the level of receivables, we can confirm the positive trends that emerged last year, such as a slight reduction in average collection times. Panariagroup Interim report at 31 March 2012 Page 15 of 17

16 Non-current assets Fixed assets have decreased by Euro 0.9 million since the start of the year. This decrease was due to: - net capital expenditure of Euro 3.9 million, of which 2.5 million euro in Italy, 0.3 million euro in Portugal and 1.1 million euro in the United States; - the lower value of fixed assets of the US sub-consolidation expressed in euro because of the weakening of the dollar since the end of 2011, for Euro 0.5 million; - depreciation and amortisation for the period of Euro 4.3 million. Net financial position Financial cash flow (thousands euro) 31/3/ /12/ /3/2011 Net financial position (debt) - beginning (84,874) (78,602) (78,602) Net Result 368 1,551 (351) D & A 4,263 17,621 4,091 Net Variation Provisions (813) (1,953) (137) Internal operating Cash flow 3,818 17,219 3,603 Change in net working capital (8,865) (1,886) (7,688) Change in net working capital Net Investments (3,855) (18,804) (1,485) Net change in tax provision for "State Aid" 0 (3,999) 0 Other movements (776) 1,198 (1,051) Net financial position (debt) - final (94,552) (84,874) (85,223) The net financial position worsened by 9.7 million euro from the start of the year; the deterioration is attributable mainly to the change in net working capital, which is typical of the first quarter, as explained previously. 5. OUTLOOK. Given that the various areas of the world economic scenario are moving at different speeds, we have decided to adopt different strategies. On more mature and less dynamic markets, particularly Italy and Western Europe, our aim is to maintain market share and rationalise marketing investments. On the U.S. market, having completed the reorganisation, the present corporate structure allows us to be very competitive and responsive in taking advantage of the positive trend in the market. On emerging markets, which are still booming, there are major development initiatives currently underway that involve reorganising the business model and operations of an extraordinary nature, such as the recent Indian joint venture, which gives us an opportunity to create a larger, tangible presence in markets that would otherwise be difficult to penetrate. Panariagroup Interim report at 31 March 2012 Page 16 of 17

17 These three different commercial approaches have a common element in a particular strength of ours, namely our ability to innovate both the technology and the aesthetics of our products, an area where our constant efforts and investments have never ceased. 6. SUBSEQUENT EVENTS As already mentioned briefly, Panariagroup has signed a joint venture agreement with Asian Granito India Ltd by forming a new company owned 50/50 by the two partners. The products that the JV will sell consist of a select range of Panariagroup's best selling products in Italy and collections made at Asian Granito's Indian plants. The JV's sales organisation will exploit Asian Granito's knowledge of the Indian market and will operate under the "Bellissimo- Stile Italiano" brand. Panariagroup Interim report at 31 March 2012 Page 17 of 17