Brussels -- Foam giant Recticel said 9 Nov that its third quarter sales fell 6.0 percent to Euro 316.4 million ($225, and for the first nine months of 2012 fell by 3.8 percent, to Euro 996.6 million ($1270 million).
Sales of insulation increased by 6.8 percent during Q3, the company added.
Recticel said the weakening sales seen in Q1 (-2.4%) and in Q2 (-3.2%) extended in Q3, with all business segments, except Insulation, reporting lower sales - "influenced by the weak European economic environment and the resulting overall softer demand in most end-use markets."
As in the first half-year, automotive and bedding were most impacted with respectively -15.4 percent and -11.2 percent sales drop in Q3/2012.
Insulation sales grew by +6.8 percent in Q3 thanks to the building insulation sub-segment (+8.4 percent).
In raw materials prices, a steep increase during the first half of 2012 was followed by a slight drop in Q3, said Recticel, noting that the impact of lower sales on profitability was "substantially compensated by the effect of cost reductions and efficiency improvements."
Breakdown of sales by segment (unaudited) mill Euro
Recticel's sales drop 6 % in Q3
Q3/2011 Q3/2012 change YTD 2011 YTD 2012 change
147.3 140.1 -4.9% Flexible Foams 449.5 443.7 -1.3%
76.8 68.2 -11.2% Bedding 218.4 201.8 -7.6%
54.8 58.5 6.8% Insulation 163.4 168.0 2.8%
74.3 62.8 -15.4% Automotive 249.4 224.2 -10.1%
336.6 316.4 -6.0% Total 1036.4 996.6 -3.8%
Flexible foams fell 5 % in Q3
In the first nine months, sales in flexible foams fell by 1.3 percent to Euro 443.7 million, and in Q3/2012, by -4.9 percent to Euro 140.1 million due to "the difficult European macro-economic situation in all sub-segments," said Recticel.
In comfort foams sales for Q3 fell-6.4 percent as a result of "deteriorating demand in Scandinavia, Spain and Benelux." In other countries sales stabilised in a very competitive market, but Recticel noted tangible "signs of slowdown" in Central & Eastern Europe.
According to the Belgian foamer, sales in technical foams (Q3 sales -2.3 percent down) continued to suffer from lower demand in industrial and automotive markets, especially in Spain, France and Italy, partially compensated for by strong growth in Turkey, the US and China.
Recticel intends to close the Gwalia comfort foam converting plant in Gwent Vale, UK, before the end of 2012, with 42 redundancies out of 474 people employed in flexible foams in the UK. The cost has been estimated at Euro 0.5 million andwill be accounted for in 2H/2012.
Sales in bedding dropped by 11.2 percent to Euro 68.2 million during the Q3, partly driven by "globally weakening consumer confidence," said Recticel. Recticel has appointed Philipp Burgtorf as group general manager of bedding, to focus on developing a new growth strategy.
For Q3/2012, insulation sales increased by 6.8 percent to Euro 58.5 million, mainly driven by an 8.5 percent rise in sales of building insulation. Recticel said "despite an increasingly difficult European construction market, structural demand for high performing polyurethane building insulation products is expected to continue to grow on the 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."
A new factory for insulation boards in Bourges, France, became operational at the end of October 2012.
Automotive sales drop 15.4 %
Over the first nine months, sales in automotive fell by 10.1 percent to Euro 224.2 million and in Q3 2012 by 15.4 percent, to Euro 62.8 million. Sales in interiors for Q3 fell 15.7 percent, but the group stressed that this fall "was largely expected as some programmes, mainly in the US, are phasing-out."
Generally, sales for interiors held up, because this business mainly supplies the premium car segment, and this was more resilient thanks to German and Asian demand, the group explained.
But now, even in these regions, Recticel has seen the first signs of weakening volumes in Q3.
Sales in seating (Proseat, the 51/49 joint venture between Recticel and Woodbridge) fell (9M/2012: -7.2 percent; Q3/2012: -15.4 percent) along with the general automotive market in Europe.
Recticel said an "increasingly challenging and uncertain environment" does not allow any assessment of growth for the rest of 2012. Hence the foam group continues to streamline operations and reduce complexity.