Financial Report and Registration Document 2010 - Groupe Seb

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GROUPE SEB IN 2010
MANAGEMENT REPORT ON 2010
MANAGEMENT REPORT ON 2010
Information on risk management, social performance and the environment is presented in the following sections.
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2010 HIGHLIGHTS
GENERAL ENVIRONMENT
After 2009, with its host of negative factors, Groupe SEB enjoyed a
much more favourable environment for its business in 2010, with a good
consumption level maintained throughout Western European countries and
recovering demand in the number of emerging markets severely affected
by the 2009 crisis. Nevertheless, the situation is highly uncertain in some
countries – especially in Europe – where economies have become very
fragile and are currently going through austerity measures that are potentially
bad for consumption. In this buoyant context, despite a few glitches, the
Small Household Equipment sector confirmed its strength, driven by good
consumer demand in the majority of mature markets and by the significant
recovery of most developing markets. However, the crisis has left traces in
the buying behaviour of consumers in these countries which was manifested
through a greater tendency towards low-cost products and special offers.
Meanwhile, the monetary environment has remained volatile, but compared
to the atypical 2009, where virtually all currencies collapsed against the euro,
ultimately, the general trend for the financial year was the appreciation of
those very currencies against the euro. However, there was a great deal of
tension on commodities and on the price of oil, which increased significantly.
With respect to retail distribution, the financial difficulties encountered in
2009 by many retail banners due to the downturn in consumption and the
credit crunch abated over the year. This gradual normalisation of the situation
has helped to restore credit insurance levels more in tune with the “pre-crisis”
levels, depending on the country. The 2010 financial year unfolded without
any accidents and without customer defaults, but in a context of cautious
re-stocking rather than real reconstitution of inventories.
CURRENCIES
After two financial years marked by a negative currency effect on
sales (-€69 million in 2008 and -€63 million in 2009), 2010 marks a genuine
break with an impact of exchange rates of +€171 million on turnover, primarily
recorded in the second half. In fact, practically all the Group’s operating
currencies contributed to this positive effect, but four of them were decisive:
the real, yuan, dollar and rouble. These four alone account for nearly 65% of
the total impact. The remaining 35% comprise 20 or more currencies which
had a more modest impact.
All our major operating currencies, based on average exchange rates,
appreciated against the euro in 2010:
dollar: +5.1% over the year due to a weakening early in the year, followed
by a second half where it firmed up;
yuan: +6.1% over the year, down in the first quarter and up later, as for
the dollar;
real: +18.8% over the year, with a slowdown in appreciation in the
fourth quarter;
rouble: +9.6% over the year, with a more modest fourth quarter;
the yen, won, Turkish lira, zloty, Mexican peso all appreciated significantly
against the euro, between 8 and 16%.
The persistent volatility is likely to disrupt the Group’s very international
trading activity whose priority remains the preservation of local profitability.
RAW MATERIALS
The Group’s business is exposed to fluctuations in the price of certain raw
materials, including metals such as aluminium, nickel (used in stainless steel)
and copper. The latter peaked in 2007 and early 2008, before turning around
sharply with a trough in late 2008, early 2009. Since then, we have seen a
gradual, then more significant but steady increase in the price of metals.
Rallying markets, especially Chinese domestic demand, caused strong
tensions on commodities, aggravated by the systematic failure to reopen
production capacities which had been temporarily shut down during the
crisis. The combination of these two phenomena resulted in tense markets,
frequent inventory shortages and increasing prices.
For 2010 as a whole, aluminium prices shot up by 30% with an average
price of USD 2,173 per tonne. In practice, the Group mostly buys aluminium
for which all the price components – metal LME price, access bonus and
value added – increased considerably in 2010. Nickel prices jumped by
43% reaching an average price of USD 21,000 per tonne in 2010, versus
USD 14,700 per tonne in 2009. Copper continued to be characterized by
major volatility but, despite temporary contraction in Spring 2010, remained
generally in a signifi cant infl ationary spiral with, fi nally, an average 2010
price of USD 7,500 a tonne, up by 47% compared to 2009. This very sharp,
upward trend on metals (which continued in 2010 with copper, reaching
record highs early in the year) in the end had limited impact on business and
on our performance in 2010, a fact particularly due to the Group’s hedging
policy for part of its metal requirements.
GROUPE SEB
FINANCIAL REPORT AND REGISTRATION DOCUMENT 2010
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