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[August 2006]
Imerys Estimated 1st Half 2006 Consolidated Results
On 25 July 2006, the Board of Directors of Imerys examined the estimated consolidated results for the first half of 2006, as presented by CEO Gérard Buffière. Definitive results will be drawn up and published on 6 September 2006.In the second quarter of 2006, Imerys’ markets remained contrasting. Furthermore, the macroeconomic environment for the first half of the year was marked by high inflation in external costs, particularly energy.
In that context, the group said it again showed its adaptability, strict financial management and the responsiveness of its personnel. Imerys kept up a steady growth rate during the first half. Sales rose by 12.1% compared with H1/2005 (up 13.4% in the second quarter). At comparable group structure and exchange rates, growth was +4.6% (+2.9% in Q2). Current operating income increased by 4.3% during the period (+3.7% in Q2). Finally, net income from current operations increased by 6.9% (up 2.5% in Q2), given the improvement in financial result during the period.
In response to the durable high levels of energy prices in the UK, which weigh on the Pigments for Paper and Specialty Minerals business groups’ performances, Imerys announced the reorganisation of its UK kaolin production base. The impact on the first half of 2006 accounts is a net accounted charge of - €73 million.
Gérard Buffière commented: "In the 1st half, our markets showed contrasting trends. Our growth remained firm, thanks to the contribution of our recent acquisitions, integration of which continues satisfactorily, and to the efforts of all our teams, who succeeded in offsetting the impact of rising energy costs.
"Enduring rises in those costs, particularly in the United Kingdom, led us to decide the reorganization of our kaolin platform. Following this redeployment, we will have an efficient cost base. For the full year, if macroeconomic and market conditions remain unchanged, growth in our net income from current operations should be similar to the growth rate achieved for the 1st half."
Imerys' consolidated sales totalled €1.665.8 billion for H1/2006, up by 12.1% from the same period in 2005 (up 10.8% in Q1 and by 13.4% in Q2).
Current operating income amounted to €228.4 million for H1/2006, a 4.5% rise from the same period in 2005 (+5% in Q1 and 3.7% in Q2).
Net income (operating income before other income and expense, net) from current operations was up 6.9%.
The group’s share of net income from current operations totalled €149 million for H1/2006, a 6.9% rise compared with €139.4 million for the same period in 2005.Specialty Minerals accounted for 27% of consolidated H1 sales. The business group’s markets showed contrasting trends in the first half of the year: Performance minerals markets (paint, plastics, adhesives, etc) were healthy in both North America and Europe; Fine ceramics markets (sanitaryware and tableware) continued to decline in Europe, while the traditional markets for floor tiles (Italy and France) were affected by weak demand. The American market is facing sanitaryware production transfers to Mexico and Asia; Graphite markets grew slightly but kiln furniture markets deteriorated in the second quarter with higher competition in particular.
In a context marked by a downturn in some markets and high inflation in energy costs, restructuring efforts were stepped up throughout the business group, including: the implementation in February of an administrative costs reduction plan as part of the integration of Denain-Anzin Minéraux (DAM), acquired in late October 2005; the announcement in May of a project to group together kiln furniture production on the business group’s Spanish, Thai and Hungarian sites and to stop the production of Lamotte-Beuvron plant (Loir-et-Cher, France), where facilities are less efficient; The announcement in early July of a project to shut down kaolin mining and refining activities in Devon in late 2007 to concentrate British production of kaolins for ceramics and performance minerals in Cornwall.
Furthermore, the business group continued to strengthen its positions in GCC for performance minerals with the acquisition in early July of a 70% stake in Mikro Minerals (Turkey), which achieves annual sales of €3.5 million, mainly in the paint market.
Materials & Monolithics also accounted for 27% of consolidated first half sales. The business group benefited from firm overall markets in H1/2006. The French building materials market remains healthy. The roofing segment grew by 4%, driven by growth in new single-family house start-ups (up 5%). In structural bricks, clay products continued to grow (up by over 10%). The monolithic refractories market benefited from sound business, particularly in the European steel industry.
In Building Materials, the new clay roof tile production line at Sainte-Foy L'Argentière (Rhône, France) is now running at full capacity and supplying market demand. In bricks, the new wall brick manufacturing line at Mably (Loire, France), which was commissioned at the end of 2005, is being gradually ramped up. The Marcel Rivereau plant (Loire Atlantique, France) acquired in late December 2004 is developing satisfactorily, particularly thanks to the production and marketing of structural bricks. Ongoing industrial modernisation includes the set-up of higher performance equipment at the Saint Geours d'Auribat tile plant (Landes, France), with start-up scheduled for September.
In Monolithic Refractories, industrial and commercial optimisation continues. In that framework, the decision was made to shut down the Scheuerfeld plant in the second half of 2006 and concentrate production on the division’s other two plants in Germany. In China, construction of the new plant (near Shanghai) is going as expected. This unit should come on stream at the end of 2006 and will mainly supply the steel and casting markets.
Refractories, Abrasives & Filtration accounted for 23% of consolidated first half sales. During the period, the business group’s market environment was favourable overall. Refractory minerals markets were sound, benefiting from good business in the steel industry in both Europe and the USA and from the launch of new projects in aluminium. Minerals for abrasives markets declined. In minerals for filtration, markets were stable compared with the first half of 2005.
A highlight of the first half was the acquisition of the French group AGS in late February. Specialising in chamottes (calcined clays) and metakaolins, mainly for the refractory and sanitaryware markets, AGS achieved sales of approximately €50 million in 2005. In minerals for abrasives, the new ultrafine abrasive powders plant under construction in Villach (Austria) should come on stream as planned at the end of 2006. Furthermore, new product developments continue. In minerals for filtration, integration of World Minerals is in progress with the implementation of the actions needed to improve the division’s operating performance. In particular, a capacity extension project is in progress at the Guadalajara (Mexico) plant.
Imerys' capital expenditure totalled €23.8 million, i.e. 124.7% of depreciation expense, compared with €11.2 million in the first half of 2005.
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ENDS