Ceramic Industry News

Imerys Sees Increase in Nine-Month 2008 Sales Results (posted 11/5/08)

November 5, 2008
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Imerys recently announced its non-audited consolidated results for the first nine months of 2008. Sales totaled €2,660.3 million (~ $3,402.5 million) for the first nine months of 2008, up 4.2% from the same period in 2007. This trend takes into account a high negative exchange rates impact of €120.3 million (about $153.9 million); and the net positive effect of changes in Group structure of €114.5 million (about $146.4 million), corresponding to the substantial contribution of the acquisitions made since 2007 (+ €137.0 million, ~ $175.2 million), minus the impact of divestments.

At comparable Group structure and exchange rates, sales continued to grow at a steady pace (up 4.5%). This growth primarily results from the significant improvement in the price/mix component (+ 3.7%), which continued to increase in the third quarter in every sector of activity in response to the sharp rise in variable costs. Sales volumes increased slightly overall (0.7%), with growth in industrial equipment-related activities offsetting the decreases recorded in construction-related markets.

This trend also reflects the growing share of emerging economies among the Group’s outlets. Sales increased 24% in those zones, which now account for 23% of Imerys’ total sales, compared with 19% for the first nine months of 2007.

Since the beginning of 2008, Imerys’ environment has been marked by the gradual downtown in American and European economic conditions, which gathered pace during the third quarter. New housing-related markets (building materials, ceramics, performance minerals, etc.) remained difficult in the U.S. and sharply decreased in Europe.

The paper sector was affected by further restructuring in both regions. However, global markets connected to industrial equipment (refractories, abrasives, graphite, etc.) remained firm. Moreover, the high inflation in variable costs (energy, raw materials, freight, etc.) recorded in the first half worsened in the third quarter, as expected. Finally, the euro’s average rate against the dollar remained high over the period.

In that context, according to Imerys, its sales held out well thanks to the diversification of its markets in terms of both geography (better exposure to emerging economies) and sectors. Current operating income, however, dropped 9.3%, reflecting the combined impact of very high inflation in variable costs and lower volumes in construction-rated activities. Net income from current operations decreased by 4.8%.

A downturn in sales volumes occurred recently in some sectors of business. The continuation of this trend in the fourth quarter has led Imerys to forecast a decrease of approximately 15% in net income from current operations for 2008 as a whole, compared with 2007.

In the third quarter, markets related to industrial equipment (refractories, abrasive and foundry) remained healthy overall. Minerals for Ceramics markets, however, slowed down significantly in Europe because of the construction sector slump and remain affected by difficulties on the North American market. Sales to September 30, 2008, totaled €890.8 million (about $1,139.3 million), a 14.6% increase vs. the same period last year. This increase includes a negative exchange rates impact of €42.1 million (about $53.8 million), down 5.4%, and a net Group structure effect of €83.1 million (~ $106.3 million), up 10.7%. The sales contribution of the acquisitions made since the beginning of 2007 is €88.9 million (about $113.7 million).

At comparable Group structure and exchange rates, sales grew 9.4% over the period, mainly because of a significant improvement in the price/mix component. Volumes rose overall, with the decrease in Minerals for Ceramics more than offset by sales growth in other business segments.

In Building Materials, the deterioration of activity continued in the third quarter. Although the renovation sector (roof tile) held out well and market share was gained in wall brick, clay product volumes decreased over the first nine months of the year, a consequence of the downtime taken by construction firms in August.. Given the slowdown on the French construction market, the Group decided to close its Bessens site (Tarn-et-Garonne, France), which specializes in the production of clay products, and to reallocate production to other sites in the business group.

The Monolithic Refractories market continued to benefit, in the third quarter, from satisfactory levels of business driven by the firm steelmaking, glass, cement and aluminum markets. Sales totaled €813.1 million (~ $1,039.9 million) for the nine-month period, up 6.6% from the same period last year. This increase includes €30.0 million (about $ 38.4 million) for changes in Group structure, net of divestments (the acquisitions made since early 2007 contributed €43.9 million, about $56.1 million). During the period, the impact of exchange rates was - 1.3% (€9.7 million, about $12.4 million).

At comparable Group structure and exchange rates, sales grew 3.9% compared with the first nine months of 2007. This increase reflects improvement in the price/mix component across all the business group’s activities and stable overall volumes, with the rise posted in Monolithic Refractories offsetting the decrease in Building Materials.

For additional details, as well as an archived conference call discussing these results, visit www.imerys.com.

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