Financial Report and Registration Document 2010 - Groupe Seb

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1 MANAGEMENT GROUPE SEB IN 2010 REPORT ON 2010 Home care confirmed its vibrancy in 2010 with renewed robust growth thanks to the redesign of the range 3 years ago which helped to strengthen its positions in European markets (Spain, France and Italy for example) and the continued international expansion of the Air Force upright vacuum cleaner and bagless models; Electric cooking reported vibrant growth compared to 2009 with nevertheless very uneven trading activity in the various product families. The growth of Actifry sales continued, driven by the successful international expansion, with special mention for Canada, Netherlands, Turkey and Central Europe. Barbecues and planchas, sandwich and waffle-makers as well as rice cookers all had a positive impact on sales, while sales declined for ovens, toasters and bread makers; Food preparation which, after a lacklustre 2009 affected by the decline of the Russian market in particular, reported excellent performance on virtually all products. While Fresh Express continues to leave its mark, mincers, meat mincers, blenders, mixers, large food processers benefited from the recovery of markets in all countries. The successful relaunch of yoghurt makers should also be noted, in a currently buoyant niche of healthy homemade desserts; Beverage preparation rallied sharply in 2010, with growth mainly driven by single-portion coffee thanks to the confirmed success stories of Nespresso and Dolce Gusto, which renews its brilliant performances in European markets through the launch of new models (Piccolo and Fontana) and continues its international expansion (Brazil, Argentina, Russia, etc.). Kettle sales were also boosted by the rally of the Russian market and a still robust trading activity in Japan, but were affected by fiercer and more aggressive competition in other markets; Linen care was driven by steam generators, which in 2010 served as growth vectors for trading activity in Western Europe while the growth of iron sales, although still positive, was strongly mixed depending on the country. It was on the right track in Russia, Mexico and Brazil but it shrank in some European countries (to the advantage of steam generators) and in Turkey; Cookware reported solid growth for mid-range products and recovered signifi cantly for premium range products such as All-Clad in the US, boosted again after a difficult 2009 by the success of the new D5 range. However, activity was not uniform overall and it remained low in Central Europe in particular. Furthermore, it is sensitive to whether or not loyalty programmes with certain distributors are renewed; The resilience of the Personal care trading activity in 2010 was due to a significant recovery in hairstyling appliances (hair dryers, hair straighteners, etc.) for which the progress and advances made in certain countries more than offset the downturns experienced in others, especially in Europe. Meanwhile, weighing, depilation and baby-care equipment declined. GEOGRAPHICAL PERFORMANCE Breakdown of 2010 trading activity by geographical zone In France, the Small Household Equipment market continued performing well and remained at the cutting edge of innovation. The sector remains driven by affordable prices (average price of €50 to €55 for small electrical appliances), basic trends such as “home-made” or refocusing on the home, the impact of televised cooking shows, renewal of the offering and marketing and advertising support. Nearly all product families contributed to the market’s progress. In a very active competitive environment, especially in small electrical appliances, the sector benefited from a sustained product performance to which once again Groupe SEB contributed signifi cantly through the launch of multiple new products. After a robust start to the year, quarterly growth stabilized at around 3%, including growth in the fourth quarter, even though the 2009 basis for comparison was demanding. The most significant contributors to the increase are still cookware, steam generators, single-portion coffee (Nespresso and Dolce Gusto machines), Fresh Express small food preparation equipment, Silence Force and Air Force vacuum cleaners, barbecues and planchas together with Délice yoghurt makers. Advertising investments deployed before Christmas certainly helped to boost trading activity over the last weeks of 2010. In the other Western European countries, the fi rm demand and good performance of the Small Household Equipment market generated solid growth in sales, heightened in the second half. Business grew in all countries except for Greece, but remained mixed depending on the market. In a degraded economic climate, which further deteriorated at the end of the year, the Group reported excellent performance in Spain, where it reinforced its leadership in electrical products and in cookware. However, it stagnated in the fourth quarter, which was much tighter. In Portugal, in a sluggish market, sales fi rmed up quarter on quarter with the gain of new market shares in particular. In Germany and Austria, it confirmed the good results of the previous months in a rather buoyant consumption context which was also increasingly price-oriented. Sales growth was driven by the success of single-portion coffee (Nespresso and Dolce Gusto), steam generators and cookware. In Italy, the market benefited from strong vitality, with strengthening of all product categories except breadmakers. Thanks to the introduction of new products and robust advertising support, the Group strengthened its positions in this market. In the UK, after losing ground for several years, the small electrical appliance market has taken off with value growth and the Group leveraged this turnaround with several flagship products (Actifry, Dolce Gusto, Nespresso, cookware, etc.). The Netherlands and Scandinavia reported brisk business, a big change from the downturn in difficult 2009. In North America, just like 2009, 2010 was mixed depending on the quarters, countries and brands. Around the end of the year, sluggish and highly promotional markets reflected the limited confidence of households and lacklustre consumption. After a strong third quarter, the Group’s sales stagnated in the last 3 months. In the United States, the Group displayed sustained growth in cookware, thanks in particular to the confirmed success of T-fal, the successful relaunch of Emeril – which has been bolstered by a restructured offering – and the recovery initiated by All-Clad in the premium segment thanks in particular to the resounding success of its new D5 range. Although the situation is significantly better compared to the very difficult 2009, it remains contrasted depending on the distributor. In electrical appliances, after a slow start up, business relating to Rowenta picked up in the second half with product listings reinitiated with certain clients and loyalty operations entered into with others. The result is stable turnover for the year. Krups, on the other hand, has stayed in a negative spiral with significantly shrinking sales and little or no favourable outlook in the short term. In Canada, the second half was able to make up for the bad start to the year, thanks to the excellent performance of Actifry and Dolce Gusto. Sales of cookware have fallen significantly, penalized by the lack of promotions. In Mexico, the strong progression, driven by cookware and, to a lesser extent, by irons, is compounded by a loyalty operation with a distributor. In South America, 2010 was marked by the return to a more buoyant economic context, which resulted in a consumption pattern more in line 14 FINANCIAL REPORT AND REGISTRATION DOCUMENT 2010 GROUPE SEB
1 GROUPE SEB IN 2010 MANAGEMENT REPORT ON 2010 with the pre-crisis level. The Group’s situation eased in all the countries of the zone except in Venezuela, which is in full recession. In Brazil, beyond the favourable economic climate, the enormous growth of the middle class, known as “C”, reinforced by access to the consumption of about 40 million people primarily located in the Nordeste, generated a very positive dynamic on demand. Taking advantage of aggressive product plans and a reorganized sales force, Groupe SEB reported a very good year in Brazil: solid business recovery and the recapture of cookware market shares; reinforcement of leadership in small electrical appliances thanks in particular to the success of fans, the renewal of the entire range of blenders, the upgrading of Dolce-Gusto or the Respect hair straightener, marketed among others through the booming “beauty shops” outlets; the massive expansion of the Group’s own retail outlets, which, at the end of 2010, amounted to 22 in the country, versus 4 at the end of 2009. In Colombia, the Group’s second largest market in South America, business was very positive for the majority of the product families and was further boosted by the opening of 10 new shops in 2010. In the other countries, and especially in Argentina and Chile, the Group reported excellent performance on the basis of an extended product offer and the development of its own retail outlets (3 openings in Argentina and 6 in Chile). In Asia and Pacific, the strong business growth throughout the year was sharply driven by the vibrant Chinese market, which represents the Group’s second largest market in size. Supor actively contributed to this dynamic performance with a 30% increase in domestic sales in 2010 despite a more modest increase in the fourth quarter due to the difficulties in 2009. In the field of cookware, which made up a third of its sales in China, Supor strengthened its leadership, despite fierce competition, thanks to the success of its latest models of woks, frying pans, saucepans and steam cookers, Thermospot and the Ingenio concept (removable handles), but also thanks to significant progress in several key accounts. In small electrical appliances (two thirds of its sales), Supor reported strong growth in all its product families and created development drivers through its entry into new segments (kettles, blenders, etc.). At the same time, Supor continued to develop its “Supor Lifestores” on the Chinese territory and, at the end of the year, had 804 of its own retail outlets (+272 outlets compared to end 2009). In Japan, in a dismal economic context, shrinking purchasing power led to a contraction in consumption; the Small Household Equipment market stayed on an uptrend, but with a more significant price orientation. Sales in 2010 remained steady but the slowdown in growth observed in the third quarter was confirmed and emphasized in the last months. In Korea, we rely on a sturdy business in cookware and the opening of new electrical product categories (food preparation, personal care, etc.) to continue moving forward. Lastly, in Australia, consumption remained slack and the Group suffered. The end of the year was slightly more positive and allowed a partial offsetting of the delay accumulated in the first half. In Central Europe, Russia and other countries (Turkey, and Middle-East countries, Africa, etc.), the return to growth in 2010 – confirmed from quarter to quarter – occurred in a context of more competitive and promotional markets than before. The zone is heterogeneous and situations remain mixed depending on the country. In Russia, demand recovered and the Group was able to redeploy its sales, although it has not returned to its “pre-crisis” levels. Retailers, more focused than previously, maintained a cautious stocks policy and gave preference to quick turnover products. The Group renewed its successes in ironing, kettles, meat mincers and personal care, supported by advertising and marketing investments which turned out to be very lucrative. In Ukraine, in a more favourable environment, the Group confirmed its leadership and left the No. 2 lagging far behind as it dominated the market with its small electrical appliances such as kettles, breadmakers, hair straighteners and the launch of Dolce Gusto. In Turkey, the Group accumulated some delay in the fi rst half compared to the fast take-off of the market, but it began to correct the situation in the second half of the year, regaining positions in small electrical appliances thanks to an enhanced mix, and in spite of strong and active local competition. Lastly, in Central Europe, the recovery is taking much longer and consumption is still weak. Against this background, our sales nevertheless improved at the end of the year, especially in Poland, offsetting the bad first half, with more vibrant trading activity in electric products (drawn by Actifry, vacuum cleaners, Dolce Gusto, steam generators, hair straighteners, etc.) but a clear contraction in cookware. 1 COMMENTS ON 2010 RESULTS INCOME STATEMENT At €438,000, Groupe SEB’s 2010 operating margin increased by 23.2% compared to 2009, accounting for 12% of sales (11.2% in 2009 and 10.6% in 2008). This positive change is linked to a set of factors, whose positive effects were ultimately mixed: the improvement in the economic situation as well as the proper performance or recovery of markets led to a sharp rise in sales volumes with a very positive impact on the trading activity of the Group’s plants and on the absorption of production costs. The phenomenon is all the more significant given that the production capacities of the sites had been under-utilized in 2009 and this led to sub-absorption of manufacturing costs. Taken together, the increase in sales and its impact on the utilisation of industrial capacities led to a volume effect on the operating margin of over €150 million; the slightly-shrinking price-mix effect due to price reductions and targeted promotional operations in certain countries where there had been substantial increases in 2009. These price reductions were intended to preserve the dynamism of the Group’s market. The product mix is still good thanks to the quality of the Group’s sales, despite a strong history and tighter markets; foreign currencies made a positive contribution of up to €32 million to the operating margin, while their impact was hugely negative in 2009 (-€87 million). This effect is due to the nearly widespread appreciation of the Group’s operating currencies (real, rouble, yuan, yen, pound sterling, Turkish lira, won, zloty, etc.) against the euro, for which the positive impact on the translation of the operating margin into euros significantly exceeded the negative impact of the dollar’s reinforcement on procurement and purchasing conditions; the unfavourable differences on purchases, linked in particular to the inflation of raw material costs, were generally limited since the additional cost amounted to €19 million, a significant portion of which was linked to the effect of aluminium price hikes on purchases of Supor, which has no hedging instruments. In 2010, the Group thus succeeded in containing increases on commodities as well as on components or finished products, but is anticipating a greater impact in 2011; GROUPE SEB FINANCIAL REPORT AND REGISTRATION DOCUMENT 2010 15
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ADDITIONAL INFORMATION 6 ADDITIONAL
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NOTES GROUPE SEB FINANCIAL REPORT A
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FINANCIAL AGENDA 2011 26 APRIL AFTE
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