Tarkett SA · SWB:1T9
Tarkett SA — FY2014 Earnings Presentation
57 slides from Tarkett SA's earnings presentation, Feb 19, 2015
Slide 1: 2014 Financial Results
2014 Financial Results February 2015
Slide 2: FY 2014 Highlights vs. FY 2013
FY 2014 Highlights vs. FY 2013 Net Sales of €2,414m, -4.1% of which -2.3% organic growth(1) Adjusted EBITDA(2) of €275m and adjusted EBITDA margin of 11.4% of sales In Russia, selling price increases of 15% to 20% in January 2015 Net profit attributable to owners of the Company (non-adjusted) of €61
Slide 3: Balanced exposures providing resilience to industry cycles
Balanced exposures providing resilience to industry cycles One of the broadest Attractive end-markets exposure Balanced geographic product portfolios exposure in the flooring industry Balanced Resilience New Sports Vinyl & construction CIS, APAC & North America 12% Residential Linoleum ~40% ~20% LAT
Slide 4: Activity 2014
2014 Activity @ Tarkett THE ULTIMATE FLOORING EXPERIENCE
Slide 5: Action on prices in Russia to offset strong ruble devaluation
Action on prices in Russia to offset strong ruble devaluation EUR-RUB (inverted scale) Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Feb-15 35 40 45 50 55 EUR-RUB FX rate Jan 1st = 45.2 July 1st = 47.0 60 Oct. 1st = 50.1 -33% 65 70 75 80 Selling prices +5% +5% +5% +15%/+20% 85 Sourc
Slide 6: Sharp devaluation of the ruble in the fourth quarter strongly penalized the full-year performance
Sharp devaluation of the ruble in the fourth quarter strongly penalized the full-year performance Currency variation impacts (Y-o-Y) €m Q4 2014 FY 2014 In the CIS countries (net of selling price increases) Comments Impact on Net Sales (24.0) (41.5) Impact on Adjusted EBITDA(1) (15.6) (15.5) In the
Slide 7: Cost and cash management in the CIS countries
Cost and cash management in the CIS countries Cost Management Balance sheet Management SHORT-TERM MEASURES Shorter payment terms through Flex variable production costs according to Discounts for Cash On Delivery (COD) volume changes by payment Reducing temporary headcount Tarkett’s warehou
Slide 8: Net sales affected by unfavourable volumes and adverse currencies
Net sales affected by unfavourable volumes and adverse currencies Net Sales €m 2,516.4 (57.8) 12.9 2,414.4 5.9 Of which lag effect (63.0) of selling price increases in CIS -€41.5m Organic1 Growth -2.3% FY 2013 Currencies Volume/ Mix Sales pricing Perimeter FY 2014 Note: (1) Organic growth: At same p
Slide 9: Adjusted EBITDA 2014 vs. 2013
Adjusted EBITDA1 2014 vs. 2013 Adjusted EBITDA €m 310.0 (21.4) 2 1.2 275.0 24.9 0.6 Of which lag effect of selling price increases in CIS -€15.5m 5.9 1.1 (47.2) FY 2013 Currencies Volume/ Mix Sales Purchase Industrial SG&A, Wage Perimeter FY 2014 pricing pricing Performance increases & Other Note: (
Slide 10: EMEA FY 2014
EMEA FY 2014 Net sales evolution - €m Comments on 2014 Net sales organic growth1 +1.2% Solid performance in Scandinavia, excluding Finland Organic growth1 Germany and Central Europe performed well 681.3 Q4 2014 -0.8% 669.6 Consistent improvement in Spain and Italy Weak demand in France +70
Slide 11: North America FY 2014
North America FY 2014 Net sales evolution - €m Comments on 2014 Net sales organic growth1 -2.1% Continuing weak performance in residential Organic growth1 Slight growth in commercial activity with Q4 getting 673.6 Q4 2014 -3.6% back to positive territory, fuelled by good dynamics 658.0 in LVT FY
Slide 12: CIS, APAC & LATAM FY 2014
CIS, APAC & LATAM FY 2014 Net sales evolution - €m Comments on 2014 Net sales organic growth1 -7.8% CIS countries Excluding price increases For the first 9 months of 2014, prices were in line with the Organic growth1 exchange rate and adjusted EBITDA margin had been protected thanks to the price i
Slide 13: Sports FY 2014
Sports FY 2014 Net sales evolution - €m Comments Net sales organic growth1 +6.2% Continued momentum of artificial turf in North America Organic growth1 304.0 Q4 2014 +5.8% Healthy trends in Europe albeit with contrasting 285.8 patterns from one country to the next Adjusted EBITDA margin reache
Slide 14: EBIT impacted by €26m of restructuring costs in 2014
EBIT impacted by €26m of restructuring costs in 2014 €m 2014 2013 Net sales 2,414.4 2,516.4 Adjusted EBITDA1 275.0 310.0 % of net sales 11.4% 12.3% Depreciation (99.5) (99.1) Adjusted EBIT 175.5 210.9 €m 2014 2013 % of net sales 7.3% 8.4% Restructuring/plant shut down (26.4) (5.3) Adjustments to EBI
Slide 15: Net Income evolution
Net Income evolution €m 2014 20131 EBIT 136.6 180.9 % of net sales 5.7% 7.2% 1 Other financial expenses 1 Net financial expenses (31.0) (31.4) Commissions, bank charges and other financial Net interest expenses (12.6) (15.0) expenses Interest costs on pension liabilities Other financial income &
Slide 16: Solid Free Cash Flow generation
Solid Free Cash Flow generation Net cash flow from Operations ROCE €m 2014 20131 €m 2014 2013 Operating cash flow before working Tangible Assets 436 415 239.7 296.4 capital changes Intangible Assets 588 537 Changes in working capital 10.3 (16.3) Operating Working capital 241 236 Cash generated from
Slide 17: Well invested and managed industrial assets
Well invested and managed industrial assets Sustained investment efforts Track record of productivity gains Ongoing capex (€m) Ongoing capex as % of net sales % of productivity as a % of COGS 88 3.0% 84 77 78 2.5% 3.7% 3.6% 3.5% 46 3.2% 2.0% 2.4% 1.5% 1.0% 2010 2011 2012 2013 2014 2010 2011 2012 201
Slide 18: Consistently solid return on capital employed
Consistently solid return on capital employed ROCE evolution1 17.7% 16.5% Target of 14.2% 15% 13.8% 9.9% 2010 2011 2012 2013 2014 Note: (1) ROCE calculated as EBIT before financial elements over capital employed (tangible assets, intangible assets, goodwill and current assets), excludes Desso data i
Slide 19: A solid balance sheet allowing Tarkett to self finance its expansion through external growth
A solid balance sheet allowing Tarkett to self finance its expansion through external growth Net financial debt and leverage ratio evolution €258m €154m Tandus acquisition Desso acquisition €103m €125m dividend dividend 595 Leverage Ratios 2014 Net debt / Adj. EBITDA = 2.0x Pro- 452 forma for Dess
Slide 20: Strong liquidity and debt maturity
Strong liquidity and debt maturity Key highlights Utilization Credit Lines Strong liquidity with €135m of cash and €421m of undrawn €m credit lines as of December 31, 2014 over total committed lines Dec 2014 Dec 2014 of €1,151m Syndicated Facility (RCF) 156 450 Acquisition of Desso paid by draw-
Slide 21: FY 2014 Key Initiatives
@ Tarkett THE ULTIMATE FLOORING EXPERIENCE
Slide 22: Key restructuration actions
Key restructuration actions Restructuring of wood manufacturing capabilities in EMEA Hanaskog, Sweden Transfer part of production facilities closer to raw materials sources (Poland and Western Ukraine) Reduction of transportation and manufacturing costs Orzechowo, Poland Finishing is kept at H
Slide 23: Desso: Strategic acquisition of a well-established brand in commercial carpets
Desso: Strategic acquisition of a well-established brand in commercial carpets Net Sales (2014): €208m Strategic acquisition 820 employees 2 production sites in the Netherlands, Complementary solutions and end-markets in Europe, 1 in Belgium addressing the added-value and growing commercial c
Slide 24: Desso: Strong innovation and design capabilities
Desso: Strong innovation and design capabilities Indoor Air Quality Acoustic Comfort Visual Comfort AirMaster® SoundMaster® Light Reflection Master® capturing fine dust particles sound absorption room brightness Interactive Flooring Hybrid Turf for Sports Luminous Carpets™ GrassMaster®, LED lighting
Slide 25: Eco-innovation: a competitive differentiation lever
Eco-innovation: a competitive differentiation lever Eco-innovation for Indoor Air Quality Raw Materials and Recycling Two major eco-innovations to improve indoor air quality, ReStart - Tarkett global recycling program widely applied to all product categories and acknowledged providing recycled raw
Slide 26: FloorInMotion: added-value service to address the growing silver economy
FloorInMotion: added-value service to address the growing silver economy Breakthrough innovation Successful pilot and expected development A unique connected floor Successful pilot phase in France since April 2014 Detect falls and alert on mobile devices 4 pilot institutions (Hospital) Provid
Slide 27: Modularity and customization: 2 major market trends
Modularity and customization: 2 major market trends Carpet Wood Vinyl Modular Carpet New Carpet Tiles in Unique Wood digital Modular LVT with System Freeform Eastern Europe printing loose-lay backing Tandus Centiva Multi and on-demand size Modular textile product on Launched in January Easy,
Slide 28: Capturing the value of the growing modular LVT segment
Capturing the value of the growing modular LVT segment MARKET CONTEXT TARKETT STRATEGY Total LVT demand in 2014: ~70M sqm in EMEA Accelerate growth and gain market shares and ~40M sqm in US • Focus on commercial applications for Hospitality, Shops Fastest growing flooring category both on & St
Slide 29: Conclusion
Conclusion @ Tarkett THE ULTIMATE FLOORING EXPERIENCE
Slide 30: Financial objectives – Mid-term guidance
Financial objectives – Mid-term guidance Net sales from 2012-2016 organic sales CAGR continues to outperform CHALLENGING organic growth aggregate GDP growth in the regions where we are present Additional sales Objective of c. €300m additional sales by 2016 coming from 3/4 completed from acquisit
Slide 31: Take Aways
Take Aways Resilient performance in 2014 Worsening conditions in Russia in Q4 being addressed through selling 2014 Results price increases of 15% to 20% in January 2015 Solid free cash flow generation of €101m Focused value-accretive M&A strategy with four acquisitions in 2014 M&A Strength
Slide 32: 2014 Financial Results Q&A session
2014 Financial Results Q&A session February 2015
Slide 33: Appendices
@ Tarkett THE ULTIMATE FLOORING EXPERIENCE
Slide 34: New GDP growth forecast downgrades except in the United States
New GDP growth forecast downgrades except in the United States IMF’s GDP latest growth forecasts - January 2015 Forecast evolutions since October 2014 Country 2014 2015 2016 Revision of forecasts (pts) since October 2014 for: United States 2.4% 3.6% 3.3% Country 2014 2015 2016 Euro Area 0.8% 1.2% 1.
Slide 35: Sales and Adjusted EBITDA performance by quarter (Q1/Q2)
Sales and Adjusted EBITDA2 performance by quarter (Q1/Q2) Q1 Q2 Organic Organic €m 2014 2013 % growth 2014 2013 % growth Growth1 Growth1 EMEA 169.4 166.4 +1.8% +3.6% 177.6 175.6 +1.1% +0.8% North 178.0 185.3 140.8 149.0 -5.5% -0.7% -3.9% +1.1% America Net sales CIS, APAC & 187.1 219.4 157.9 179.9 -1
Slide 36: Sales and Adjusted EBITDA performance by quarter (Q3/Q4)
Sales and Adjusted EBITDA2 performance by quarter (Q3/Q4) Q3 Q4 Organic Organic €m 2014 2013 % growth 2014 2013 % growth Growth1 Growth1 EMEA 174.2 169.7 +2.7% +0.4% 160.1 157.9 +1.4% -0.8% North 178.1 186.3 161.1 153.0 -4.4% -5.0% +5.3% -3.6% America Net sales CIS, APAC & 234.6 263.4 191.5 224.7 -1
Slide 37: Sales performance by semester
Sales performance by semester H1 H2 Organic Organic €m 2014 2013 % growth 2014 2013 % growth Growth1 Growth1 EMEA 347.0 342.0 +1.5% +2.2% 334.4 327.6 +2.1% +0.2% North 318.8 334.3 -4.6% +0.3% 339.2 339.3 0.0% -4.4% America CIS, APAC & 345.0 399.4 -13.6% -7.6% 426.1 488.1 -12.7% -7.9% LATAM Sports 96
Slide 38: Adjusted EBITDA performance by semester
Adjusted EBITDA1 performance by semester H1 H2 % of % of % of % of €m 2014 H1’14 net 2013 H1’13 net 2014 H2’14 net 2013 H2’13 net sales sales sales sales EMEA 41.3 11.9% 38.5 11.3% 35.8 10.7% 32.8 10.0% North 34.1 29.7 8.8% 37.3 10.7% 36.6 11.0% 11.0% America CIS, APAC 61.8 84.2 19.8% 113.7 17.9% 76
Slide 39: Material Consumption in 2014
Material Consumption in 2014 COGS 2014A breakdown Material Consumption in 2014A Others 14% Traded Goods 20% Transport and Material Logistics Consumption 10% 60% Raw Materials - Oil derivatives Payroll Other Raw 56% 16% Materials 24% Total 2014A COGS: €1,843m Note: Excluding Desso. 2014 Financial Res
Slide 40: Net pension liabilities increase on the back of the decrease of discount rates
Net pension liabilities increase on the back of the decrease of discount rates in m€ (34.7) (3.3) 5.0 (155.4) 11.6 (5.5) (6.3) (122.2) 12/31/2013 Current service Interest Actuarial gains Return FX Changes Benefit 12/31/2014 cost expenses and losses on assets/ payments Remeasurement 2014 Financial Re
Slide 41: True “GLO-CAL” competitive advantage
True “GLO-CAL” competitive advantage “GLO-CAL” COMPETITIVE ADVANTAGE INNOVATION PRICE COMPETITIVENESS WELL-ADAPTED DESIGN Global scale leverage Local strengths HIGH LEVEL OF CUSTOMER SERVICE Regional design centers Purchasing negotiation power anticipating local trends Research & innovation gl
Slide 42: The “GLO-CAL” competitive advantage applies particularly well in the CIS countries and Russia
The “GLO-CAL” competitive advantage applies everywhere in Tarkett’s business, and particularly well in the CIS countries and Russia The sustainability of Tarkett’s position in the CIS region is supported by… Local presence for more than 10 years with strong local team Best brand awareness and cust
Slide 43: The most balanced geographic exposure in the industry
The most balanced geographic exposure in the industry Balanced geographic 70%+ 85%+ exposure North America exposure European Union exposure 5% 6% 10% 5% 30% 15% 15% 15% CIS, 13% APAC & 20% LATAM 30% pro-forma for Desso % 2014 net sales Other 36% EMEA Europe 90% 95% 85% 81% 85% North America 70% 55%
Slide 44: A global leader with one of the broadest product offerings
A global leader with one of the broadest product offerings Vinyl & Wood & Turf & Product Ranking based on latest sales data (in m€) Ceramics Linoleum Carpet Laminate Rubber Tracks categories (1) 5 4 5 2 3 1 2 1 5 1 Source: Company information
Slide 45: A market with very specific regional segmentations
A market with very specific regional segmentations Total flooring market: 12.2bn sqm Breakdown of volume demand by product (2013A) Ceramics Commercial Residential Carpet ¹ Residential Carpet Carpet 7% 21% Vinyl, Commercial Carpet Linoleum & Rubber ADDRESSED Vinyl, Linoleum & Rubber 9% SEGMENTS Wood
Slide 46: Shareholder composition - As at December 31, 2014
Shareholder composition - As at December 31, 2014 Treasury Shares 0.3% Free Float 28.0% Société d’Investissement Deconinck 50.2% KKR international Flooring 21.5% 2014 Financial Results 45 Feb 19, 2015
Slide 47: Governance
Governance Supervisory Board Shareholder agreement President: Didier Deconinck Shareholder agreement between KKR and the Deconinck family to remain in place post-IPO for a term of 4 years Vice President: Jacques Garaїalde (KKR) (or until one party holds less than 5% of the share capital) 9 B
Slide 48: Consolidated income statement
Consolidated income statement Income statement €m 2014 20131 Net sales 2,414.4 2,516.4 Cost of sales (1,842.8) (1,892.8) Gross profit 571.6 623.7 Other operating income 7.2 8.9 Selling and distribution expenses (249.4) (248.8) Research and development expenses (26.0) (25.8) General and administrativ
Slide 49: Consolidated cash flow statement
Consolidated cash flow statement Cash flow statement €m 2014 2013 Net profit before tax 103.9 148.2 Adjustments 135.8 148.2 Operating profit before working capital 239.7 296.4 changes Effects of changes in assets and liabilities 10.3 (16.3) Cash generated from operations 250.0 280.2 A Other operatin
Slide 50: Consolidated balance sheet
Consolidated balance sheet Balance sheet €m 31 December 2014 31 December 20131 Assets Goodwill 532.6 425.6 Intangible assets 115.8 110.9 Property, plant and equipment 502.1 415.4 Financial assets 28.8 27.5 Deferred tax assets 109.3 82.6 Other non-current assets 0.5 0.2 Non-current assets 1,289.1 1,0
Slide 51: Detailed overview of Tarkett’s product offering
Detailed overview of Tarkett’s product offering Vinyl & Linoleum Carpet Wood & Laminate Rubber & Others Sports 54% 19% 9% 6% 12% Heterogeneous Vinyl Broadloom Multilayer wood floor Rubber Tiles/Sheets Track Homogenous Vinyl Modular Laminate Stair nosing Artificial Turf Linoleum Drain Natural reinfor
Slide 52: Characteristics: Vinyl and Linoleum
Vinyl and Linoleum Linoleum Homogeneous Vinyl Homogeneous Vinyl VCT (modular homogeneous Vinyl) Urethane polymer based surface Surface treatment Solid treatment Pur: Polyurethane Surface treatment Colour pigments Colour pigments Pur: Polyurethane Linoleum Product Jute backing Plain and decorative
Slide 53: Characteristics: Vinyl and Linoleum (cont’d)
Vinyl and Linoleum (cont’d) Heterogeneous Vinyl Heterogeneous commercial Vinyl Heterogeneous residential Vinyl LVT (modular heterogeneous Vinyl) PUR reinforcement Compact Printed Transparent PVC Fibreglass Design (printed PVC for easy PVC design wear-layer non woven reinforcement Compact PVC film or
Slide 54: Characteristics: Wood and Laminate
Wood and Laminate Wood Laminate Lacquer or hardwax oil Core board Overlay surface treatment made of high Middle layer made of density floor board pine or spruce or HDF Decor layer = Product impregnated Wear layer of paper hard wood Bottom layer of Balancing layer spruce veneer Engineered wood comb
Slide 55: Characteristics: Rubber, Accessories and Carpet
Rubber, Accessories and Carpet Rubber Sheets, Tiles and Accessories Carpet Modular Broadloom Rubber Tufted Fibre Sheets/Tiles Stair nosing Drain (nylon) PP woven backing with latex coating Product Primary backing Structured with latex pre- backing coat Loop pile top cloth Rubber sheets and tiles c
Slide 56: Characteristics: Sports
Sports Turf Natural reinforced grass Tracks Coating of Polyethylene the backing fibres tufted in rows Finished into backing Carpet ready Natural to be installed on the pitch grass Product 40 cm Patented long infilling: washed artificial Patented infilling: silica sand turf Final layers of cryogenic
Slide 57: Disclaimer
Disclaimer The Supervisory Board of Tarkett held on February 18, 2015, reviewed the consolidated financial statements of the Group as of December 31, 2014. Audit procedures have been carried out and auditors’ report on financial statements is being issued. This document may contain estimates and