Imerys Sales Down 22% for First Nine Months (posted 11/9/09)
Imerys recently announced its consolidated results for the first three quarters of 2009. Sales were down 21.9% and current operating income decreased by 46.4%. The company saw relative improvement in some markets in the third quarter of 2009 compared with the previous quarter, and it has reduced fixed costs by €133 million (approximately $198 million) since the beginning of 2009.
“During the third quarter, our main markets benefited from a slowdown in inventory reduction that had intensified their slump in the first half of 2009,” said Gérard Buffière, CEO. “This is a positive change but it does not point to a clear trend for the coming quarters. We are, therefore, maintaining the strict management that has already allowed us to reduce our fixed costs and overheads by €133 million since the beginning of the year. Cost control and cash flow generation remain our priorities and we confirm our goal of an operating margin close to 10% from early 2010.”
The markets served by the group in Europe and North America are still affected by the harsh economic environment that has prevailed since the fourth quarter of 2008. The improvement recorded in the second quarter on some emerging markets did, however, continue into the third quarter. Industrial equipment-related markets are still the most affected by the global economic crisis. While a recent upturn reflects slower inventory reduction in Europe and North America, steel production is still down, with a 42% decrease over the first nine months of 2009 compared with the same period in 2008.
Imerys’ action plans continued to have a positive effect on current operating income, which improved from a decrease of 54.4% in the first half of 2009 (57.2% at comparable Group structure and exchange rates) to a 46.4% decline (50.1% at comparable Group structure and exchange rates) over the first nine months of the year, whereas sales volumes continued to show a substantial decrease of 27.7%.
Over the first nine months of 2009, sales totaled €2,077.7 million (~ $3,087 million), a 21.9% decrease from the same period in 2008. At comparable Group structure and exchange rates, the decrease in sales (23.6% compared with the same period in 2008) results from the fall in volumes.
The inventory reduction phenomenon in the downstream customer chain, which intensified the slump in volumes in the first half of 2009, seemed to ease in the third quarter. Volumes, however, remain down in all business groups, but to varying extents. In this difficult context, the price/mix effect improved by 4.1% and was positive in all four business groups.
The Minerals for Ceramics, Refractories, Abrasives & Foundry division accounted for 27% of consolidated sales. Markets for Minerals for Refractories, Fused Minerals and Graphite remained affected in all geographic zones by the sharp drop in industrial equipment and automobile production observed since the middle of the fourth quarter of 2008. This decrease was intensified by massive inventory reduction throughout the downstream customer chain, particularly during the first half of 2009. In Europe and North America, steel production is increasing very gradually, while the Chinese and Indian markets continued to grow. The Abrasives and Graphite segments are improving very slightly, while the Ceramics market continued to suffer from the construction sector crisis in developed countries.
At €579.0 million (~ $860.2 million), sales for the segment fell 35.0%. All of the business group’s activities reduced their output and continued to implement measures to adapt to the market conditions they are experiencing. In France, the UK and Switzerland, operations turned to part-time working and work-week reductions. Periodical or even definitive stoppages of several production lines or plants came with workforce reductions in the countries where the business group operates.
The Materials & Monolithics division accounted for 32% of consolidated sales. At €664.2 million (~ $986.7 million), the business group’s sales declined by 18.3% for the first nine months of 2009 vs. the same period in 2008. In Building Materials in France, single-family housing start-ups decreased 18% on a rolling 12-month basis, leading to a slump in clay product sales, still lessened by a lower drop in roofing renovation. Steel-related Monolithic Refractories markets, except for India, were still affected by a number of production stoppages.
The other segments (cement, glass, incineration, petrochemicals, etc.) are holding out better. Major original-fit projects are gradually being completed, and the decrease in the number of new projects in progress is weighing on volumes.
In Building Materials, the adjustment of roof tile and brick production capacities to demand continues. Modernization projects at the Wardrecques (Nord, France) tile plant and the La Boissière du Doré (Loire-Atlantique, France) brickworks were completed during the period. The concrete joist and beam manufacturing and marketing activity, Planchers Fabre, was divested in late May 2009. In Monolithic Refractories, production volumes were reduced in most countries where the Group operates, except for India where business is buoyant. Efforts also focused on structure costs.
For additional details, including an archived conference call discussing these results, visit www.imerys.com.