financial report and registration document 2011 - Groupe SEB

4 Commentary
Commentary on the fi nancial year
on the consolidated results
4.3. COMMENTARY ON THE CONSOLIDATED
RESULTS
Income statement
At €453 million, Groupe SEB’s 2011 operating result from activity (formerly
referred to as operating margin) was up 3.5% compared with 2010, a year
that had set the bar high at €438 million, up 23% over 2009. This fi gure
represents 11.4% of sales (12% in 2010 and 11.2% on 2009). This drop,
which was largely anticipated, is mainly due to the geographical mix of sales;
operating margin from activity, as a percentage of sales, is lower in emerging
markets than in mature markets. Thus, the fact that the emerging markets
represent an increasingly greater share of the consolidated sales dilutes the
operating margin across the Group.
However, operating result from activity is increasing in terms of value. This
positive change is linked to a set of factors, whose mixed effects were
ultimately positive:
� sustained consumer spending levels, in general, despite the crisis
confi rmed in certain countries and the slowdown observed in certain
regions from the summer, as well as gains in market share, resulted in
an increase in volumes sold, supported by strong industrial production
levels and satisfactory absorption of costs. The trend was not, however,
as marked as in 2010 (effect of over €150 million), which benefi ted from a
very sharp upswing in industrial activity after 2009’s worldwide economic
crisis. The impact of volume on the 2011 operating result from activity
amounts to +€76 million;
� the impact of the price mix amounts to a negative -€32 million, with a
certain stabilisation apparent after the negative impact of -€27 million
during the fi rst half of the year. The causes of this decrease include a
proliferation of promotional operations and price adjustments in certain
markets, which also cancelled out the effect of the targeted price increases
applied. It also refl ects the dilutive effect that the strong sales dynamic in
emerging economies had on the mix;
� a €59 million increase in purchasing costs in relation to 2010, due to higher
costs of raw materials (metals and plastics) and sourced products. This
anticipated increase could not be offset by a positive currency effect of
€26 million, which includes the positive impact that the 2011 dollar/euro
exchange rate – on average below that of 2010 – had on procurement;
� the slight increase in intervention costs was due mainly to greater
investments in innovation (€130 million, including strategic marketing
and R&D) and commercial resources (including the development of
the Group’s own retail brand outlets). Such investments are crucial to
supporting its product dynamic and continuously improving product
exposure on store shelves and marketing within stores. Overheads were
contained and benefi ted from continuous progress in after-sales service
and further reductions in warehousing costs (on a like-for-like basis). After
2010, which was marked by massive spending on advertising (€143 million
versus €95 million in 2009) in a buoyant and receptive market situation, the
more complicated economic climate of 2011 led the Group to reduce its
commitments in this area. Thus, although advertising spending remained
high during the fi rst half of the year in order to support the relaunch of
Moulinex, it fell, especially in the fourth quarter. Moreover, this quarter is
compared against the fourth quarter of 2010, an extremely active period
in terms of advertising. In the end, the Group allocated €128 million to its
advertising budget in 2011, representing 3.2% of sales.
In addition, operating result from activity benefi ted from a change in scope
and from a €5 million contribution from the newly acquired companies,
Imusa, consolidated since 1 March, and Asia Fan, consolidated since 1 June.
Operating profi t climbed from €349 million in 2010 (9.6% of sales) to
€400 million in 2011 (10.1% of sales). This increase – almost 15% – greatly
exceeds the growth seen in operating result from activity. This was due, in
part, to lower bonus and profi t-sharing payments than in 2010 (€44 million in
2011 versus €50 million in 2010), resulting from the fact that the exceptional
performance witnessed in France in 2010 did not repeat itself. It is also
related to a much lower liability for “other income and expenses” than in
2010, i.e. -€9 million versus -€38.5 million. This amount includes:
� provisions for restructuring costs limited to €6 million (€15 million in 2010)
and comprising several small-scale transactions;
� impairment losses that were also lower (€13 million in 2011 vs. €18 million
in 2010), representing restatements concerning plants and, given the
uncertainties in 2012, additional impairment of All-Clad’s goodwill (in the
amount of €7 million), as All-Clad’s recovery may prove precarious in such
a challenging economic climate;
� other items including a capital gain on the sale of land in Brazil representing
€14 million. This sale had been in the pipeline for a long time, but was
fi nalised at the beginning of the year, under favourable conditions including
real estate appreciation and the strengthening of the Brazilian real.
Net fi nancial expense amounted to -€27 million, compared with -€16 million
in 2010. This increase, essentially the result of greater interest expenses, is
based on two factors. The fi rst of these factors is the increase in average debt
– although this fi gure remains at moderate levels (going from €195 million
68 GROUPE SEB Financial Report and Registration Document 2011