Financial results for the first half of 2005 • Solid performance compared with last year’s strong first half results • Higher average raw material prices than in 2004 not fully reflected in higher selling prices • Positive volume growth in North America, but margins under pressure from competition and currency movements • Mixed performance in Europe, with Germany remaining difficult • Turnover € 872 million, a like-for-like increase of 3.1% • Operating result €102 million, lower by 5.1% on a like-for-like basis
The unaudited consolidated accounts for the first half of the year 2005 were presented to the Board of Directors at its meeting held on 22 September 2005.
was € 75 million. The increase in net debt results principally from the seasonal increase in working capital and capital expenditure during the period, offset by cash generated from operations. A significant proportion of the Group’s debt is denominated in foreign currencies pursuant to the Group’s balance sheet hedging policy.
Prospects for the second half of 2005 No major changes in the European economic environment are expected in the second half of 2005, and although overall growth in the Group’s key markets should be maintained at a modest level, it will not be uniformly achieved. Construction demand in North America continues to be stimulated by low long-term interest rates which support the residential housing market. However, cost and margin pressures will continue to be significant factors in the second half of the year, with the future trend of raw material prices uncertain. In the light of these economic conditions, trading in the second half of the year is expected to remain broadly satisfactory, at a level slightly lower than the first half and in line with the Group’s normal pattern.
Summary consolidated accounts
Comments
Summary Profit and Loss Account (€ million)
Profit and loss account The Group’s turnover in the first half of 2005 was € 872 million, an increase of 3.1% on the same period of 2004. Minor changes in the consolidation scope had only a negligible impact on the consolidated turnover. The overall impact of exchange rate movements was also limited with a stronger Canadian dollar (+3.3%) and New Zealand dollar (+4.8%) offset by a weaker US dollar (-4.7%) and sterling (-1.9%). The operating result was € 102 million, a decrease of 4.4% compared with the first half of 2004. Minor changes in the consolidation scope had only a negligible impact on the operating result, and at constant exchange rates the decrease was 5.1%.
First half 2005
First half 2004
Turnover
872
Operating result
102 11.7%
12.6%
% of turnover Financial result: Interest charges
The financial result in the period was a charge of € 24 million (2004: € 18 million), including net interest charges of € 21 million (2004: € 24 million). The remaining financial charges of € 3 million (2004: income of € 6 million) largely represent realised and unrealised exchange gains and losses arising on assets and liabilities held in foreign currencies. The goodwill amortisation charge for the period was unchanged at € 18 million. The extraordinary result was a charge of € 1 million (2004: charge of € 2 million). Taxes amounted to a charge of € 26 million (2004: € 29 million), representing an effective tax rate of 33% (2004: 33%). The Group share of net profit for the period was € 33 million (2004: € 39 million). The Group share of net current profit and net current cash flow was € 52 million (2004: € 58 million), representing € 0.61 per share (2004: € 0.66 per share) and € 87 million (2004: € 92 million), representing € 1.01 per share (2004: € 1.04 per share) respectively.
Goodwill increased by a net € 9 million during the first half of 2005, with the amortisation charge of € 18 million more than offset by currency translation adjustments, arising in particular from the stronger Canadian dollar. Tangible fixed assets increased by € 4 million during the first half of 2005, as a result of € 25 million of capital expenditure during the period, a depreciation charge of € 35 million, and € 14 million arising from currency translation adjustments. Non-Cash Working Capital increased by € 154 million compared with the level at the end of 2004. Excluding the impact of exchange rate movements, the increase was € 134 million, and mainly reflects the normal seasonal pattern of trading which results in a higher level of trade receivables and inventories at the end of the second quarter of each year. The Group share of Capital and Reserves increased by € 70 million during the six-month period, representing the Group share of net profit for the period (€ 33 million) together with € 37 million of currency translation adjustments. Net debt at 30 June 2005 was € 759 million compared with € 659 million at 31 December 2004. Excluding the impact of exchange rate movements, the increase
26
1,680
107
(5)
199 11.8%
(18)
(6)
(44)
(24)
3
(48)
(3)
6
(9)
(18)
(18)
Extraordinary result
4 (36)
(1)
(2)
1
(5)
(26)
(29)
3
(52)
1
1
34
40
(6)
63
33
39
(6)
61
1
1
Net current profit, Group share*
52
58
(6)
100
Net current cash flow, Group share*
87
92
(5)
167
€ per share, Group share**
First half 2005
First half 2004
% Inc/ (Dec)
Full Year 2004
Net current profit
0.61
0.66
(7.6%)
1.17
Net current cash flow
1.01
1.04
(2.9%)
1.95
Taxes Profit from equity interests
1
attributable to: - Group - Minority interests
2
* Net current profit and Net current cash flow exclude goodwill amortisation and the extraordinary result. ** Calculated based on the total number of Aliaxis S.A. shares in issue, less those shares held by the Group as Treasury shares.
Summary Balance Sheet (€ million)
June 2005
Intangible Fixed Assets
December 2004
June 2004
12
12
12
Goodwill
493
484
506
Tangible Fixed Assets
510
506
504
Financial Fixed Assets
33
28
41
1,048
1,030
1,063
Total Fixed Assets Treasury Shares Non-Cash Working Capital TOTAL
19
19
1
479
325
428 1,492
1,546
1,374
Capital and Reserves
656
584
581
attributable to: - Group
644
574
570
- Minority Interests Provisions Net debt
Balance Sheet
846
(24)
Net profit Although trading activity in North America remained at a good level during the first half of 2005, margins were weaker than in the same period of 2004 due in part to more intense competition which limited the ability to recover higher raw material costs through higher selling prices. In addition, the Canadian / US dollar exchange rate once again deteriorated, by 8.3% compared to 2004, which both penalised exports from Canada to the USA and encouraged sales of US manufactured goods in Canada. Market conditions in Europe were again mixed, with growth achieved in France, the UK and especially in Spain. In Italy, growth was more modest reflecting the slow-down in the economy, and although sales in Germany once again deteriorated the Group’s results there remained stable. Activity in Eastern Europe was weak in comparison with the first half of 2004, mainly as a result of the distortion of the pattern of sales in Poland during 2004 in advance of the increase in VAT rates. Raw material prices in Europe showed some softening during the six-month period, but average prices remained higher than in the same period of 2004. Trading in Australasia, South America and South Africa continued to advance despite some evidence of a slowdown in some of those markets.
Full Year 2004
(21)
Other Financial Income/(Charges) Goodwill amortisation
Inc/ (Dec)
TOTAL
12
10
11
131
131
137
759
659
774
1,546
1,374
1,492
Aliaxis, an international group of businesses with a worldwide presence, is dedicated to the manufacture and sale of plastic pipe systems and related building and sanitary products used in residential and commercial construction and renovation, as well as in a wide range of industrial and public utility applications.
Contact: Yves Mertens (Group Finance Director) Don Bailey (Group Corporate Development Manager) Tel. +32-2-775 5050 – Fax. +32-2-775 5051 E-mail: aliaxis@aliaxis.com