Imerys Announces First Quarter 2010 Results

PARIS, April 29, 2010 - Results for the 1st quarter ending on March 31, 2010 will be commented on by Gerard Buffiere, Chief Executive Officer of Imerys, at the Ordinary and Extraordinary Shareholders' Meeting to be held at 11am today. It will be webcasted live at http://www.imerys.com.
Consolidated results 1st quarter 1st quarter % %
non-audited (EUR millions) 2010 2009 current comparable
change change(1)
Revenue 751.6 694.3 + 8.2% + 9.5%
Current operating income(2) 84.1 44.4 + 89.4% + 101.4%
Operating margin 11.2% 6.4% + 4.8
points
Net income from current
operations, Group share (3) 45.1 14.6 + 209.0%
Net income, Group share 45.0 - 6.6 n.s.
Net income from current
operations, Group share, per
share(3)(4) EUR0.60 EUR0.23 + 157.2%
(1) At comparable Group structure and exchange rates.
(2) Operating income before other operating revenue and expenses.
(3) Group's share of net income, before other operating revenue and expenses, net.
(4) The weighted average number of outstanding shares rose to 75,428,057 compared with 62,786,408 in the 1st quarter of 2009, as a result of the rights issue of June 2, 2009.
Gerard Buffiere stated, "Economic activity has been slowly improving since the second half of 2009. Imerys benefited from this. Thanks to the actions taken since late 2008, the Group achieved an operating margin of 11.2% for the first quarter of 2010. We are confident in Imerys' ability to resume growth in 2010."
ECONOMIC ENVIRONMENT
The improvement observed on the Group's main markets since the second half of 2009 continued into the first quarter of 2010. Business was firmer overall than in the historically low levels of the first quarter of 2009. Emerging countries show strong growth. Economic activity in Europe and North America was affected by poor weather conditions in January and February.
Industrial production-related sectors, which were the worst hit by the global economic crisis and inventory reduction trends, recorded a significant upturn in business, particularly due to inventory rebuilding in the value chain. Thus, in the first quarter of 2010, global steel production grew + 29% compared with the same period in 2009 and returned to its first quarter 2008 level. Output in North America and Europe is however still approximately - 20% lower than pre-recession levels, while growth continues in China.
Global production of printing and writing paper increased slowly.
In France, the construction sector was hit by adverse weather conditions early in the year. Moreover, single-family housing starts remain low, not taking yet full advantage of the upturn in sales of new individual housings observed since mid-2009. In North America, housing starts are stagnating at historically low levels.
Directly consumer-related sectors such as the filtration market held out well.
DOUBLE-DIGIT OPERATING MARGIN OBJECTIVE ACHIEVED
Thanks to the actions implemented from the end of 2008, the Group succeeded in restoring a double-digit operating margin (11.2%). Fixed costs and overheads remained stable over the quarter despite a + 7.6% increase in volumes.
OUTLOOK
In early 2010, most markets are positively orientated and growth is high in emerging countries. Business, however, remains far below pre-recession levels. The recent positive trend, therefore, needs to be borne out in the coming quarters.
In this context, the Group will maintain its efforts in tight operating management in order to improve its operating margin over time.
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At comparable Group structure and exchange rates, sales growth (+ 9.5% vs. 1st quarter 2009) reflects the overall upturn in sales volumes (+ 7.6%). This trend, however, varied from one business group to another.
The price/mix effect improved + 1.9% thanks to inventory rebuilding in specialty products, which had a positive effect on the mix.
It should be pointed out that business in the 1st quarter of 2009, which was especially impacted by the inventory reduction trend, forms a favorable basis of comparison for the 1st quarter of 2010.
In the 1st quarter of 2010, sales to emerging countries rose + 29% compared with the 1st quarter of 2009, thanks to the strong momentum of the Indian and Chinese economies. Western Europe was affected by the weakness of Building Materials. The sharp improvement recorded in North America marks the activity's gradual return to normal, together with the rebuilding of inventory in some industrial chains despite poor weather conditions.
Minerals for Ceramics, Refractories, Abrasives & Foundry (32% of consolidated sales)
Minerals for Refractories, Fused Minerals (particularly Abrasives) and Graphite markets benefited from the turnaround in the steel, industrial equipment and automotive sectors and from a progressive inventory rebuilding trend in the segments that were worst hit by the economic crisis. Over the period, the Minerals for Ceramics markets improved slightly, construction in developed countries showed no significant signs of improvement.
Sales, at EUR244.6 million for the 1st quarter of 2010, rose + 26.6% compared with the 1st quarter of 2009 (which was down - 33.0% from 1st quarter 2008). An analysis of this change shows:
- A limited structure effect of - EUR0.3 million;
- Foreign exchange impact of - EUR3.8 million.
The sharp upturn in demand in Fused Minerals, Minerals for Refractories, Graphite & Carbon and, to a lesser extent, in Minerals for Ceramics, explains the increase in revenue, which also benefited from sales of high value-added products.
Several production facilities that were temporarily idled in 2008 and 2009 were restarted during the quarter.
Materials & Monolithics (28% of consolidated sales)
In January and February, particularly adverse weather conditions temporarily affected all construction activities in France, and notably roofing renovation. As of end of March 2010, on a twelve-month rolling basis, the number of single-family housing starts remained low, down approximately - 13%[3] from the previous period (April 2008 to March 2009). In that difficult environment, decreases of approximately - 19 %[4] and - 6%[4] were recorded for clay roofing products and clay bricks, respectively.
Monolithic Refractories markets benefited from the sharp upturn in steelmaking and, more generally, all activities involving liquid metal production. Other segments (cement, glass, incineration, petrochemicals, etc.) that had been less affected by the economic crisis improved slightly, whereas the number of orders with respect to new furnace building projects remains limited.
At EUR212.1 million, the business group's sales (- 7.4% in 1st quarter 2010 vs. 1st quarter 2009) take into account:
- a - EUR3.6 million structure impact[5],
- a + EUR5.9 million foreign exchange effect.
At comparable Group structure and exchange rates, the decrease in turnover reflects the significant fall in Building Materials sales volumes.
CURRENT OPERATING INCOME
- Current operating income up + 89%
- Upturn in volumes
- Further reduction in variable costs
Current operating income totaled EUR84.1 million for the 1st quarter of 2010. It factors in a negative foreign exchange effect (- EUR5.3 million), mainly due to the US dollar's depreciation against the euro over the period. Changes in structure had negligible effect.
At comparable Group structure and exchange rates, current operating income increased twofold from the 1st quarter of 2009. This performance is due to:
- higher sales volumes contributing for + EUR12.7 million,
- an improvement in product prices and mix, at + EUR5.9 million,
- a decrease in variable costs for - EUR15.0 million,
- the reduction in fixed costs and overheads (- EUR5.0 million).
The Group's operating margin was 11.2% (6.4% in the 1st quarter of 2009).
NET INCOME FROM CURRENT OPERATIONS
Net income from current operations amounted to EUR45.1 million (vs. EUR14.6 million in 1st quarter 2009). This sharp rise is due to growth in current operating income and takes the following items into account:
- a financial expense of - EUR19.9 million (vs. - EUR24.0 million in 1st quarter 2009), including an unfavorable foreign exchange effect (-EUR1.9 million),
- a tax charge of - EUR18.0 million (- EUR5.7 million in 1st quarter 2009), which represents a stable effective tax rate of 28.0%.
NET INCOME
After taking into account other operating revenue and expenses, net of tax (- EUR0.1 million over the period, vs. - EUR21.2 million for the same period the previous year), the Group's share of net income for the 1st quarter of 2010 totaled + EUR45.0 million (vs. a net loss of - EUR6.6 million in 1st quarter 2009).
FINANCIAL SITUATION
The Group's financial situation remained sound at the end of the 1st quarter of 2010, with no significant change in net debt since December 31, 2009, despite adverse currency fluctuations.
[1] Deconsolidation of Xinlong (China, late January 2009), divestment of Planchers Fabre (France, May 2009).
[2] Deconsolidation of Xinlong (China, late January 2009).
[3] Source: French Ministry of Ecology, Energy, Sustainable development and Sea.
[4] Source: FFTB, French Federation for Roof tiles and bricks.
[5] Divestment of Planchers Fabre (France, May 2009).