Zumtobel Announces Increasing Profits

Thanks to the dynamic growth of its professional lighting components business, the Austrian lighting company Zumtobel Group was able to post an 8.0% increase in revenues for the first six months of the current financial year (May - October) to € 615.4m (PY: € 570.1m). This was supported by positive foreign exchange effects in the amount of € 31.0m. Adjusted for these effects, revenue growth totalled 2.5%.

The Zumtobel Group also reported positive developments in terms of first-half earnings: At € 48.5m, the adjusted operating result (adjusted EBIT) was slightly up on the comparable prior-year period (€ 47.8m). This represents an adjusted EBIT margin of 7.9% (PY: 8.4%). Any comparison with the previous year should, however, take account of a substantial non-recurring licence payment received in the first quarter of 2009/10. The development of earnings in the second quarter reveals a marked improvement of 28.2%, with adjusted EBIT rising to € 31.4m. The increase in gross margin resulting from the rise in revenues was offset primarily by ongoing pressure on prices and by increased expenditures for development. First-half net profit rose from € 24.9m in 2009/10 to € 39.6m (+59.2%).

“The decisive factor in the positive development of the Zumtobel Group in the first half-year was the dynamic growth of our components business. But the late-cyclical lighting business too has been stabilised by a buoyant renovation sector. Effectively we have been able to de-couple our business from the marked general downward trend in the construction sector in 2010,” said Zumtobel Group CEO Harald Sommerer, commenting on developments in the first half-year.

A breakdown by segment reveals that the two segments continue to develop at different speeds: Revenues in the components Segment (Tridonic and Ledon brands) reached € 214.7 m in the first half-year (+18.9%, FX-adjusted: +13.7%). The main reasons for this development are the switchover from magnetic to more sophisticated electronic ballasts and an increase in Tridonic’s share of the electronic ballasts market. Supply bottlenecks for electronic components and a shortage of production capacity prevented even higher growth. In the Lighting Segment (Thorn and Zumtobel brands) first-half revenues totalled € 440.3m, 3.6% up on the prior-year period (PY: € 424.9m). Adjusted for foreign exchange effects this equates to a slight 1.4% decline in revenues. First-half developments in the Zumtobel Group’s future-oriented LED business showed further growth, as revenues from the sale of LED-based products rose 21.4% to reach € 41.8m.

Broken down by region, revenue trends in Europe, which accounts for 76.4% of the consolidated total, point to increasing market stability: In the key German-speaking region (Germany, Austria, Switzerland) revenue growth reached 4.3%. In Northern and Western Europe the pace of market development remained slow, while the positive trend in Eastern and Southern Europe continued. The Asian market showed dynamic growth, with revenues increasing 14.4% to € 55.3m. Despite the ongoing weakness of the construction sector, America posted 12.8% growth. And the Australia / New Zealand region too reported strong growth of 30.0%. It must be said, however, that the Zumtobel Group benefited from positive foreign exchange effects across all regions.

Compared to the prior-year headcount on 31 October 2009, the size of the workforce (full-time equivalent including contract workers) increased by 287 to a total of 7,616 employees. This is largely explained by the expansion of production capacities in the Components Segment. Compared to the size of the workforce at the end of Q1 (7,613 FTE on 31 July 2010) the headcount remained virtually unchanged.

With respect to its balance sheet structure and liquidity, the Zumtobel Group remains on solid foundations. Compared to the balance sheet date (30 April 2010) the equity ratio rose from 35.8% to 37.7%. At 1.98 the debt coverage ratio (net liabilities divided by EBITDA) remained relatively low. The higher volume of business led to an increase in receivables and inventories and thus to a negative free cashflow of minus € 19.6m.

Although forward visibility remains restricted, the positive impetus of the first six months has led to an increasingly confident outlook on the part of the Zumtobel Group Management Board. The decisive factor here is the growth of the components business, where the dynamic pace of expansion is, however, expected to slow down over the next few months. In the lighting sector, management is anticipating a further stabilisation of the Group’s business, with individual regions generating increasingly positive growth. Against this backdrop and taking into account the seasonality of the business, the Management Board expects to see full-year revenues for 2010/11 rise up to € 1.2bn, with an adjusted EBIT margin of between five and six percent. The Zumtobel Group is well positioned for the medium- to long-term to continue the profitable growth course of the past few months in a stable economic environment.