Imerys Announces 1st Half 2010 Results

Aug. 2, 2010 - On July 29, 2010, Imerys' Board of Directors, meeting under the chairmanship of Aimery Langlois-Meurinne, examined the Group's financial statements for the 1st half of 2010, as presented by Chief Executive Officer Gerard Buffiere.
Gerard Buffiere stated, "Our sales volumes grew in the first half, especially the second quarter, leading to a substantial improvement in operating performance. Inventory rebuilding in the value chain, made a significant contribution to that upturn. We do not feel that this trend can be extrapolated to the coming quarters as the global macro-economic environment remains uncertain. We continue to develop and to optimize our businesses, as reflected in our investment in a new carbonate for paper and packaging plant in China and a kaolin activity in Brazil. In this context, unless the economic environment deteriorates heavily, the Group should achieve an operating margin of more than 12% for fiscal year 2010."
The 1st half of 2010 was marked by further growth in emerging countries - which now represent 26% of the Group's sales. Global economic activity improved, driven by significant inventory rebuilding, which picked up speed in the 2nd quarter, particularly in industrial related sectors.
In the 1st half of 2010, global steel production was very slightly higher than the pre-crisis levels recorded in the 1st half of 2008, driven by China. In North America, Europe and Japan, however, it remained approximately - 18% below 2008 levels.
Global printing and writing paper production rose + 7% compared with the 1st half of 2009, with an upturn in mature countries and healthy emerging markets. Currency trends contributed to higher performance by European papermakers, whose export sales increased. American producers benefited from positive trends on their local market.
The flexibility of its industrial assets enabled Imerys to draw full benefit from the upswing in sales volumes, which rose 14.1% in the first half. Thanks to the control of overheads and fixed production costs, every business group regained an operating margin of more than 10%.
On June 9, it was announced that Gilles Michel would join Imerys in the fall of 2010. After approval of the project by the Company's relevant corporate bodies, his nomination as Chairman & CEO of Imerys will be proposed at the Shareholders' General Meeting that rules on the 2010 financial statements. Imerys announces the signing of an agreement with the Brazilian group Vale to acquire its 86.2% stake in the Brazilian company Para Pigmentos S.A . (PPSA), as well as mining rights in Para State for a total price of approximately USD 70 million.
Through this operation, Imerys is enhancing its Brazilian resources with a kaolin for paper deposit, a processing plant and logistic capacities - a pipeline and harbor terminal - located near its Rio Capim Caulim Pigments for Paper industrial activities. This operation will enable the business group to secure its supply of white pigment for global paper and packaging markets and to control its long-term mining costs more effectively.
The acquisition, financed by available resources, was settled on July 26, 2010. It will be consolidated in the Group's accounts as from August 1, 2010.
Economic stimulus plans and the inventory rebuilding movement contributed to the improvement observed in the 1st half. The incentive measures and demand stimulus plans set up in some countries are drawing to an end and visibility remains low for the next quarters, with a macro-economic outlook that varies from one market to another.
In that context, given the actions implemented over the past 18 months, the Group estimates that its operating margin should be greater than 12% in 2010. The priority remains the continuation of internal and external growth , together with very tight management.
First half 2010 sales totaled EUR1,623.0 million (+ 18.1% from 1st half 2009).
At comparable Group structure and exchange rates, the rise in turnover (+ 16.0% vs. 1st half 2009) marks the overall recovery of sales volumes. Trends, however, were more contrasted between business groups. The price/mix component improved + 1.9%.
It should be remembered that activity in the 1st half of 2009, which was particularly affected by the economic crisis combined with the inventory reduction movement, forms a favorable basis of comparison for the 1st half of the current year.
In the 1st half of 2010, the Group's sales in emerging countries grew + 35% compared with the 1st half of 2009 thanks to sound development in China , Eastern Europe, Brazil and India. In North America, where the recovery was significant, sales benefited from the US dollar's further appreciation against the euro.
Current operating income totaled EUR207.3 million in the 1st half of 2010 (+ 88.4%). This growth takes into account an exchange rate impact of - EUR6.8 million (due in particular to the Brazilian real's appreciation against the euro and the US dollar). The net effect of changes in Group structure is not significant.
At comparable Group structure and exchange rates, current operating income increased by EUR104.1 million compared with the 1st half of 2009, thanks to the high contribution of sales volumes (+ EUR81.6 million). The product price and mix component was favorable (+ EUR14.7 million) and the Group recorded an overall decrease in variable costs (- EUR18.1 million) with lower energy bills in all four business groups. Overheads and fixed production costs remained under control, with the + EUR40.4 million increase from the 1st half of 2009 strictly due to the rise in production volumes and the related costs (personnel, maintenance).
At 12.8%, the Group's operating margin gained 4.8 points compared with the 1st half of 2009.