Brussels - The weak European economic environment is one reason behind a 2.8% reduction in foam group Recticel's first half sales to Euro 680.2 million ($853 million). But earnings (REBITDA) improved to Euro 48.5 million (+2.0 percent) and REBIT to Euro 28.8 million (+9.5percent) "as a result of structural improvements," the group said in a 30 Aug statement. (REBITDA = EBITDA before non-recurring elements).
Changes in the scope of consolidation in the half year included Recticel's buy out of the 50 percent joint venture partners in the holding company Enipur bv (the Netherlands), which controls operations in Greece (Teknofoam Hellas) and Turkey (Teknofoam Turkey).
Also, from 01 January 2012, Recticel has also consolidated Recticel India Pte Ltd, a unit which started up in the course of 2011.
By segment, Recticel's sales of flexible foams rose 0.4 percent to Euro 303.5 million, while in bedding they dropped 5.6 percent to Euro 133.6 million. Sales of insulation rose 0.8 percent to Euro 109.5 million, while in its automotive division sales fell 7.9 percent to Euro 161.3 million.
The company commented that the weakening sales trend seen in Q1 2012 (-2.4 percent) was confirmed in Q2 when sales fell 3.2 percent, and was caused by overall softer demand in most end-use markets.
Automotive and bedding were affected the most, while flexible foam sales remained stable. Sales in insulation grew 1 percent versus H1 2011, which had been an extremely strong half year, Recticel noted.
Sales growth has fallen, as a result of a decrease of 2 to 7 percent in the residential construction markets, and a 4 to 6 percent fall in the renovation markets in which the group operates. Weather conditions in some countries during the semester, cold in February and rain in Q2 have moved business into the second half of the year.
Despite lower sales and a currently "very challenging economic environment," Recticel said it has improved its overall profitability.
The foam group commented that during H1 2012, raw material market prices again increased, reaching new record highs, slightly above those of the first half-year of 2011. A combination of the pass-through of raw material costs into sales prices, restructuring and efficiency improvements and of purchasing performance contributed to the improved profitability.
The group commented that its EBITDA was cut by a non-recurring Euro 4.4 million for restructuring in flexible foam (Eurofoam Germany and UK), bedding (Austria and Germany) and automotive interiors (Germany and Belgium) as well as legal fees with respect to the ongoing EU Commission inspection.
Recticel noted that, as part of plans to reduce complexity and adjust its industrial footprint in flexible foams, it has closed its production site in Bladel, the Netherlands. Its joint venture company Eurofoam is also closing its production site in Bexbach (Germany).
Also, Recticel has declared its intention to close the Gwalia comfort foam converting plant in Gwent Vale, UK, before the end of 2012. This will make 42 employees redundant out of the 474 people employed in the UK in flexible foam, and will cost an estimated Euro 0.5 million (accounted for in H2 2012).
In insulation, Recticel said it expects demand for high performing polyurethane building insulation products to continue to grow long term, as a result of stricter insulation standards and regulations, higher energy prices and ever growing awareness of the need for more and better insulation.
Recticel expects its new factory for thermal insulation boards in Bourges, France, to operate as from October 2012.
In its automotive business, sales in interiors decreased by 11.8 percent to Euro 80.0 million as a result of the anticipated phase-out of some contracts, mainly in the US. But Recticel said this business resisted better than the market, because "it mainly supplies the premium car segment, which remained very strong thanks to good German and Asian demand."
Sales in seating (Proseat, the 51/49 joint venture between Recticel and Woodbridge) decreased by 3.7 percent to Euro 75.2 million. This business was also stronger than the European market thanks to its high exposure to German OEMs, Recticel said.
During H1 2012, Recticel completed the shutdown of its German interiors factory in Unterriexingen, as well as implementing further staff reductions.
Recticel concludes that, given the challenging and uncertain economic environment in which Recticel operates, it is not in a position to assess the growth potential for the remainder of 2012.
The group has over the last two years streamlined operations and cut complexity, and says these actions are contributing as anticipated to the results.