Tarkett Activity Report 2012

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vision & ambition / ceo interview Accelerating Sustainable Growth ‘‘ Our growth strategy is inspired by our vision of sustainability, combining the three dimensions of People, Planet, and Profit. Michel Giannuzzi Chief Executive Officer What were the highlights of Tarkett’s performance in 2012? In a word, it was a record year. In a world of differences – with markets ranging from mature to high-growth – our market-focused strategies were successful in generating overall 11% sales growth, of which 4.6% was organic growth at constant exchange rates. Tandus, a leading carpet designer and manufacturer acquired in September 2012, added 3.6% to total revenue growth compared with 2011. Another 2.8% of sales growth comes from exchange rates. With the inclusion of Tandus, we now generate one third of our sales in each of the three regions (Emerging Economies, North America, Europe). Thanks to our good geographic balance, Tarkett is able to deliver continuous growth in a volatile environment and despite variable regional economic conditions. Innovation enables us to gain market share in stable or slow-growth, mature markets, while our unique service offer drives our success in emerging markets. In fastgrowing markets, we achieved double-digit organic growth. What are the key financial highlights for 2012? Despite overall weak economic conditions in Europe, we generated record revenues of more than € 2.3 billion and EBITDA (before unusual items) of €260 million. Thus we returned to a healthy 11.2% EBITDA margin. After a difficult 2011 year when profitability was under pressure because of fast-rising raw material costs, we managed to regain 2 points of margin, through a strong focus both on product pricing and our own productivity – particularly in our factories through the continued rollout of our World Class Manufacturing (WCM) program. How does Tandus fit into the strategic picture? The Tandus acquisition was not only our largest acquisition of the past decade; it also significantly extended our product range with the addition of textile flooring for commercial applications, enabling us to provide a wider range of coordinated flooring solutions. Carpet is one of the leading flooring choices in North America, particularly for our professional customers in schools, universities, health care facilities and the office sector. A second major strategic reason for the Tandus acquisition is its complementarity to current Tarkett distribution channels in North America. Like Centiva, our brand specialized in Luxury Vinyl Tile (LVT) modular solutions acquired two years ago, Tandus directly serves specifiers, such as architects and project owners through installers. Our Johnsonite and Tarkett brands are more focused on distributors and on retailers for the residential market. We also further strengthen our footprint in the fast growing Asian markets, since Tandus already operates in China. This acquisition perfectly fits into our strategy to be a global and integrated solutions provider. Tarkett 2012 Activity Report 09
vision & ambition / ceo interview How do you intend to maintain this strong performance going forward? We intend to continue to grow faster than the industry. Profitable organic growth will continue to come from a combination based on gaining market share through innovation in mature and highlycompetitive markets and our creative service offers in fast-developing emerging markets. Our innovation leadership will come from two areas: innovation in our business model and innovation in the eco-design of our product offerings. We will continue to lead as “change agents” in both areas. An example of business model innovation is our “iSelect” marketing concept, which helped us win the trust and confidence of a major American distributor last year. Through “iSelect” services, we help consumers make their own choice with attractive themed panels of samples integrated into different universes of design, ambiance and lookand-feel, each in harmony with selected colors. We are also the leader in eco-innovation, integrating the Cradle to Cradle and the Circular Economy principles throughout product’s life. First, we eco-design our products by selecting “good materials” for health and the environment. We then look at the environmental impact of production and distribution. Next, we seek to increase wellbeing and comfort from the use of our flooring, for example, by improving indoor air quality through our low-VOC products. Finally, we aim for total recycling of the product at the end of its primary usage. This emphasis on sustainability is also a management tool driving not only our innovation strategy, but also boosting operational excellence, improving productivity and saving resources. Today, our sustainable development approach is fully embedded in our strategy, inspiring the way we operate, do business and innovate. How can Tarkett continue to be a “change agent” for the flooring industry? Our vision is what motivates our whole approach to serving clients: “To be the global leader in innovative solutions that generate value for our customers in a sustainable way.” This vision is inspired by our commitment for sustainability through a holistic approach that brings together the three dimensions of People, Planet and Profit. We are extremely passionate about this vision shared with our employees, our customers, our suppliers and our shareholders. We strongly believe that our industry will also move in that direction. What is your strategy for profitable growth as the flooring industry develops worldwide in 2013 and beyond? In 2013, we will continue the integration of Tandus and bring together all teams to create new growth opportunities. Fully combined, the whole really will be greater than the sum of the parts. We will also be attentive to economic pressures on clients in economicallychallenging markets and we will continue to innovate to gain market share. We see growth coming from modularity of more easy-to-handle LVT-type products, which also allows for a greater choice of styles, colors and patterns. Our innovative service offerings will range from new on-line room designers to simulate home decoration to service centers in countries where unique customer support will make the difference. Our external growth strategy will be based on three criteria. One is expanding our product portfolio through acquisitions. A second is geographic expansion via new distributors or partners in emerging markets. A third is acquisition of other flooring companies in a very fragmented market where there are clear opportunities for consolidation and cost reduction. Overall, our sustainable growth will be fueled by our talent development and operational excellence. In other words, identifying and developing our people to grow their contribution to Tarkett and increasing their satisfaction in being part of our team. I am convinced that it is people who make the difference and that our teams are the source of our sustainable growth. ‘‘ tarkett objective We want to grow sustainably, profitably, and faster than the industry, and to be the leader of innovative and integrated solutions, delivering a unique customer experience. Tarkett 2012 Activity Report 10
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