Padua, November 7, 2011 – The Board of Directors of SAFILO GROUP S.P.A. today reviewed and approved the results of the third quarter and first nine months of 2011.
In the third quarter of 2011, Safilo registered a positive top line growth on the back of the significant progress of the fast-growing markets in all the Group’s main product categories as well as the good performance of the American market. The operating result (EBIT) of the quarter improved compared to the same period in 2010.
Following the quarterly results, in the first nine months of 2011 Safilo confirmed a solid performance both at the economic and financial level. Sales grew by 6.7% at constant perimeter1 and exchange rates, EBITDA and EBIT increased double-digit and the Group’s net result was positive at Euro 26.6 million.
At the end of September, the net debt remained in line with the level reached in the first half of the year, at Euro 239.4 million, confirming the financial leverage of net debt to EBITDA at 1.95x.
Roberto Vedovotto, Chief Executive Officer of the Safilo Group, commented:
“During the third quarter of the year the developing and emerging countries continued to perform well, confirming the strength of Safilo’s commercial proposition.
We were also reassured by the reaction of the US market in spite of the uncertain economic environment, while the performance in Europe was affected by a slowdown in the marketplace.
In a quarter that has been historically characterized by the seasonality of our predominant wholesale business, what has been achieved in terms of operating result and financial leverage clearly testifies the effectiveness of the different actions in place on the main Group activities.
We have also finally completed the top management team with the recent appointment of the Global Head of Safilo’s Brands Division, our key business area in which we are investing significant resources. We are now ready to face the new challenges and the new business opportunities ahead of us”.
In the third quarter of 2011, net sales were equal to Euro 230.2 million compared to Euro 237.9 million in the third quarter of 2010, still impacted by the devaluation of the main foreign currencies against the Euro. The comparison with the previous year is also influenced by the sale of the retail chain in Mexico occurred at the end of 2010. At constant perimeter1 and exchange rates, the Group delivered a sales growth of 4.1%.
In the first nine months of 2011, net sales totaled Euro 833.5 million, reporting an increase of 1.9% compared to the same period of 2010. The growth was equal to 6.7% at constant perimeter1 and exchange rates.
The core wholesale business reported revenues of Euro 211.6 million in the third quarter of 2011, progressing by 3.4% at constant exchange rates (-1.4% at current exchange rates compared to Euro 214.6 million in the third quarter of 2010).
In the first nine months of 2011, wholesale revenues reached Euro 778.4 million, up 6.2% at constant exchange rates (+3.6% at current exchange rates compared to Euro 751.1 million in the first nine months of 2010).
Total net sales continued to be impacted by the contraction of the retail business (-19.8% to Euro 18.6 million in the third quarter of 2011, -17.9% to Euro 55.1 million in the first nine months of 2011), due to the different perimeter. The like for like performance of the US retail stores Solstice was indeed positive, up 7.5% and 7.1% respectively in the third quarter and first nine months of 2011.
From a geographical standpoint, in the third quarter of 2011, revenues in the American market were again penalized by the USD devaluation against the Euro, totaling Euro 110.6 million compared to Euro 116.9 million in the third quarter of 2010.
At constant perimeter1 and exchange rates, the Group’s performance in the region remained satisfactory, improving by 7.4%, with positive trends in all main product categories.
Sunglass collections benefited from the overall good performance of Solstice stores as well as from the continuing expansion of the business in the Latin-American markets, Brazil and Mexico in particular. The latest also contributed to the growth of prescription frames, which kept posting positive trends also in the main independent opticians channel in North America.
Sales growth was experienced by the main licensed top brands and by Safilo’s house brands on which the Group is progressively increasing its focus, particularly Carrera and Safilo.
The quarterly performance reflected the strong trend of the American market in the first nine months of 2011, with sales totaling Euro 343.6 million, up 8.4% at constant perimeter1 and exchange rates (-2.2% at current exchange rates).
In line with the previous quarters of the year, the Asian markets continued to strongly outperform in the third quarter, posting a growth of 17.9% at constant currency (+10.7% at current exchange rates). Sales in Asia were equal to Euro 35.2 million in the period, with the strongest trends in the travel retail business, in China and in the mature emerging countries of Hong Kong and Korea, where the Group is strengthening its presence with the top licensed brands as well as through the introduction of Carrera and the brands in the diffusion segment. In the first nine months of 2011, Asia proved to be a fundamental growth engine for Safilo.
Sales totaled Euro 135.1 million in the period, delivering a growth of 15.4% at constant currencies (+11.7% atcurrent exchange rates). The weight of the area on the total business thus increased to 16.2% in the first nine months of 2011 compared to 14.8% in the same period of 2010.
After a positive first half, the Group’s European business was instead subdued in the third quarter, also in comparison with the marked improvement registered by the area in the third quarter of 2010. The performance of the region was characterized by different trends per product category, with sales, which in the period were concentrated on sunglasses due to the diverse timing in the presentation of the collections.
In the third quarter of 2011, sales in Europe were equal to Euro 81.4 million, contracting by 4.8% compared to the same quarter of 2010. The performance of the region was positive in the first nine months, up 2.7% to Euro 343.2 million.
Gross profit amounted to Euro 133.3 million in the third quarter of 2011 (-2.2% compared to Euro 136.2 million in the third quarter of 2010), equal to 57.9% of sales or an improvement of 60 basis points compared to the margin of 57.3% registered in the same quarter of 2010.
In the first nine months of 2011, gross profit reached Euro 497.6 million, increasing by 3.1% over the same period of 2010, with the margin at 59.7% of sales compared to 59.0% in the same period of 2010.
Operating profit (EBIT) was equal to Euro 8.2 million in the third quarter of 2011, increasing by 5.8% compared to Euro 7.7 million registered in the third quarter of 2010. Operating profitability was equal to 3.5% of sales compared to 3.2% in the same period of 2010. In a quarter characterized by a seasonally lower operating leverage, the progress experienced at the industrial level was partially absorbed by the higher incidence on revenues of the wholesale costs structure. As occurred in the previous quarters of the year, the Group continues to invest in the strengthening of its business processes and activities, in particular in the areas
of sales and marketing.
The operating performance of the US retail chain Solstice continued to improve also in the third quarter of 2011, thanks to the positive trend of sales as well as the more efficient presence in the market.
In the first nine months of 2011, the operating profit (EBIT) totaled Euro 70.0 million, growing by 33.7% compared to Euro 52.4 million registered in the first nine months of 2010. The operating profitability increased to 8.4% of sales compared to 6.4% of sales registered in the same period of 2010.
EBITDA was Euro 17.4 million in the third quarter of 2011, equal to a margin of 7.6%, substantially stable over the same quarter of 2010. Profitability stood at 11.7% of sales in the first nine months of 2011, reaching Euro 97.6 million, up 18.4% compared to Euro 82.5 million in the first nine months of 2010.
The third quarter of 2011 closed for the Group with a negative net result of Euro 4.7 million compared to the Group net loss of Euro 0.4 million in the third quarter of 2010. The result of the period was also influenced by the impact of exchange rate differences, not yet realized as at September 30, related to balance sheet items. This accounting adjustment was negative in the third quarter following the relevant devaluation of the Euro spot rate against the USD at the end of September.
In the first nine months of 2011, the Group’s net profit stood at Euro 26.6 million compared to the net loss of Euro 3.6 million in the first nine months of 2010.
Free Cash Flow was positive for Euro 20.3 million at the end of the first nine months of 2011, compared to thecash generation of Euro 64.5 million in the first nine months of 2010. In the third quarter of 2011, the free cash flow was slightly negative for Euro 2.3 million compared to the cash generation of Euro 12.6 million in the third quarter of 2010.
Net debt at the end of September 2011 amounted to Euro 239.4 million, in line with Euro 240.3 million registered at the end of June 2011 and lower than Euro 262.7 million at the end of September 2010. The financial leverage (Net debt / EBITDA LTM) was equal to 1.95x, remaining stable at the level reached at the end of June 2011.
1 Excluding the sold retail chain in Mexico, which had recorded sales of Euro 5.3 million in the third quarter of 2010 and Euro 15.6
million in the first nine months of 2010.
Statement by the manager responsible for the preparation of the company’s financial documents
The manager responsible for the preparation of the company’s financial documents, Mr. Francesco Tagliapietra, hereby declares, in accordance with paragraph 2 article 154 bis of the “Testo Unico della Finanza”, that the accounting information contained in this press release corresponds to the accounting results, registers and records.
This document contains forward-looking statements, relating to future events and operating, economic and financial results for Safilo Group. Such forecasts, due to their nature, imply a component of risk and uncertainty due to the fact that they depend on the occurrence of certain future events and developments. The actual results may therefore vary even significantly to those announced in relation to a multitude of factors
Alternative Performance Indicators
The definitions of the “Alternative Performance Indicators”, not foreseen by the IFRS-EU accounting principles and used in this press release to allow for an improved evaluation of the trend of economic-financial management of the Group, are provided below:
- Ebitda (gross operating profit) is calculated by Safilo by adding to the Operating profit, depreciation and amortization;
- Net debt is for Safilo the sum of bank borrowings and short, medium and long-term loans, net of cash in hand and at bank;
- Net capital employed for Safilo is the sum of current assets and non-current assets net of current liabilities and non current liabilities, with the exception of the items previously considered in the Net Financial Position;
- Free Cash Flow for Safilo is the sum of the cash flow from/(for) operating activities and the cash flow from /(for) investing activities.
Today, at 6.00 pm CET (5.00 pm GMT; 12.00 am EST) a conference call will be held with the financial community during which the results of the third quarter and first nine months of 2011 will be discussed.
It is possible to participate to the call by dialing the following number: +39 02 36269650 or +44 203 4509987 (for journalists: +39 02 30410450) and quoting the following confirmation code: 8374900. The playback of the conference call will be available from November 7 to November 9, 2011 by dialing the number +39 02 30413127 o +44 207 1111244 (access code: 8374900#). The conference call can also be followed via webcast on the site www.safilo.com/en/investors.html. The presentation is available and downloaded from the company website.
Intermediate report at 30th September 2011
Please note that before the end of the day, the intermediate report at 30th September 2011 will be made available to the public at the company’s registered offices and the offices of Borsa Italiana S.p.a.; furthermore, the report will be published on the company’s internet website at the address www.safilo.com/en/investors.html.
The Safilo Group is worldwide leader in the premium eyewear sector and maintains a leadership position in the prescription, sunglasses, fashion and sports eyewear sectors. Present in the international market through exclusive distributors and 30 subsidiaries in primary markets (U.S.A., Europe and Far East). The main proprietary branded collections distributed are: Safilo, Carrera, Smith Optics, Oxydo, Blue Bay, and the licensed branded collections are: Alexander McQueen, A/X Armani Exchange, Balenciaga, Banana Republic, Bottega Veneta, BOSS Black, BOSS Orange, Dior, Emporio Armani, Fossil, Giorgio Armani, Gucci, HUGO, J.Lo by Jennifer Lopez, Jimmy Choo, Juicy Couture, Kate Spade, Liz Claiborne, Marc Jacobs, Marc by Marc Jacobs, Max Mara, Max&Co., Nine West, Pierre Cardin, Saks Fifth Avenue, Tommy Hilfiger, Valentino, Yves Saint Laurent.
This press release is also available on the website www.safilo.com.
For further information:
Safilo Group Investor Relations
ph. +39 049 6985766