First Quarter 2021 Results Tarkett
Q1 2021 results: net revenues decrease in line with
Group’s expectations, purchasing cost inflation weighing
on profitability
First Quarter 2021 Results
- Net revenues down -8.5% with a like-for-like change of
-3.8% versus Q1 2020, reflecting a slow recovery in commercial
segments, partially offset by the continued rebound of
residential;
- Adjusted EBITDA of €34.0 million or a 6.1 % margin,
down versus last year as a result of lower revenues and higher
purchasing costs at the end of the quarter;
- Supply shortages and additional raw material and
freight price increases leading to higher purchasing costs in
Q1;
- Purchasing costs inflation now estimated at €100
million for 2021 - Additional selling price increases being
implemented in response with a target to offset around
50%;
- Strong achievements in cost flexing and structural
savings (€24.1 million, o/w €14.7 million of structural cost
savings); cost reduction on track to outreach €30 million in
2021;
- Solid financial structure with net debt post IFRS 16 at
€536.8 million at the end of March, or 2.0x LTM Adjusted
EBITDA;
- Given the acceleration of purchasing cost inflation and
low visibility confirmed in workplace and hospitality, the timing
of the 2022 profitability mid-term objective (Adjusted EBITDA
margin above 12%) should be delayed by at least one
year.
Paris, April 23, 2021: The
Supervisory Board of Tarkett (Euronext Paris: FR0004188670 TKTT)
met on the 23d of April and reviewed the Group’s consolidated
results for the first quarter 2021.
The Company uses alternative performance
indicators (not defined by IFRS) described in detail in appendix 1
(page 5):
€ million |
Q1 2021 |
Q1 2020 |
Variation |
Net sales |
558.8 |
610.7 |
-8.5% |
of which organic growth |
|
|
-3.8% |
Adjusted EBITDA |
34.0 |
42.4 |
-19.8% |
% net sales |
6.1% |
6.9% |
Commenting on these results, CEO Fabrice
Barthélemy said: “The start of the year is challenging but
in line with our expectations, as some commercial segments are
still penalized by the lack of visibility. We are also dealing with
steep purchasing cost inflation combined with supply disruptions.
Given this challenging environment, we are focused on increasing
our selling prices and implementing our cost reduction plans. We
also pursue the strategic initiatives of our Change to Win roadmap,
making significant progress in our transformation journey. However,
the pandemic impact on demand is generating some short term
headwinds and we remain cautious on the pace of recovery.”
- Net sales by segment
in euro millions |
Q1 2021 |
Q1 2020 |
% change |
Organic change |
EMEA |
220.5 |
227.7 |
-3.2% |
-4.0% |
North America |
160.4 |
196.1 |
-18.2% |
-11.0% |
CIS, APAC & LATAM |
112.5 |
109.7 |
+2.6% |
+13.2% |
Sports |
65.4 |
77.1 |
-15.3% |
-9.1% |
TOTAL |
558.8 |
610.7 |
-8.5% |
-3.8% |
The EMEA segment reported net
revenues of €220.5 million, down -3.2% compared to Q1 2020,
reflecting an organic decline of -4.0% and a favorable exchange
rate fluctuations, mainly due to the Swedish krona. Demand remained
below last year but improved slightly compared to Q4 2020.
Commercial activities slightly improved driven by healthcare and
education, while residential was holding well despite recent
lockdowns due to sanitary situation. Workplace, however, remained
particularly weak, resulting in a drop in commercial carpet volumes
versus last year. Spain was also impacted by the lack of renovation
projects in hospitality. Conversely, France and Italy achieved a
significant rebound in Q1 2021. France was particularly strong and
grew double digit thanks to dynamic demand in residential and some
recovery in commercial apart from workplace. The success of rigid
LVT continued during the quarter and Tarkett launched its new LVT
100 collection.
The North American segment
remained depressed in Q1 2021, down -18.2% compared to Q1 2020
reflecting an organic decline of -11.0% and a negative forex impact
mostly related to the depreciation of the dollar versus the euro
compared to last year. Residential continued to grow double digit
similarly to Q4 2020, as the Group further benefitted from positive
trends in private housing construction and renovation. The overall
business remained penalized by the lack of recovery in commercial
activities. Low visibility still penalized workplace and
hospitality. As a result, commercial carpet activity was still down
during the quarter. Sales were better oriented in resilient but
remained below last year, while rubber and accessories, used
primarily in education and healthcare, improved at the end of
the quarter.
Net revenues in the CIS, APAC and Latin
America segment were up +2.6% compared to Q1 2020,
reflecting an organic growth of +13.2% and unfavorable forex
impacts, mostly driven by the Russian ruble and the Brazilian real.
In CIS countries, the volume effect was largely positive thanks to
buoyant residential activity. However, product mix was impacted by
the increased share of entry and mid-range products compared to
last year. The lag effect on sales and Adjusted EBTIDA (net effect
of currency and selling price adjustments) was negative during the
quarter as the extent of the ruble depreciation was not fully
covered by selling price increases. Revenues also continued to grow
in Latin America thanks to strong organic growth in Brazil
reflecting sustained selling price increases. Revenues also
progressed in APAC driven by the rebound in Australia and a solid
level of activity in the rest of Asia.
Net revenues of the Sports
segment were down -15.3% compared to last year, driven by
an organic decline of -9.1% and a negative forex impact related to
the dollar depreciation versus the euro. In 2020, the Covid-19
pandemic affected the sports business in North America later than
flooring activities, as some projects started to be delayed and
cancelled in H2 2020. As a result of this late impact, the pipeline
of ongoing projects for Q1 2021 was low, particularly in turf
activities in North America.
- Adjusted EBITDA
The Adjusted EBITDA amounted to €34.0 million in
Q1 2021, or a margin of 6.1% compared to 6.9% in Q1 2020. While the
Group remained focused on flexing costs given the revenue decrease,
the increase in raw material prices and freight costs affected the
profitability. Purchasing cost inflation first impacted North
America and is now also impacting CIS countries and EMEA.
The volume and mix effect amounted to -€20
million, mostly driven by lower volumes in North America and EMEA.
Selling prices increased by +€3.3 million. This partially offset
purchasing cost inflation, which represented a negative impact of
-€5.6 million in Q1. Raw material prices and freight costs
continued to increase in Q1 2021. Shortages in the supply chain
also contributed to the inflationary environment and could generate
production disruptions in Q2. As a result, Tarkett is implementing
additional selling price increases in Q2. Salary increases amounted
to -€2.6 million year-over-year, reflecting the contained wage
increases of 2020.
Tarkett continued the roll-out of its actions to
improve the cost structure, resulting in structural savings of
€14.7 million. In addition to these actions, Tarkett flexed its
costs by €9.4 million to adapt to the demand level. Overall cost
reduction amounted to €24.1 million in Q1 2020, out of which €9.9
million of net productivity gains from operations and €14.2 million
of SG&A costs savings.
Exchange rates (CIS countries excluded) were
flat year-over-year, while the lag effect (net impact of currency
and selling-price movements in the CIS countries) was negative of
-€3.0 million).
A bridge analysis of Q1 2021 Adjusted EBITDA
compared to Q1 2020 Adjusted EBITDA is available at the end of this
document (appendix 2).
- Cash flow and financial
situation
The Group plans to pursue the tight management
of its working capital over 2021. Working capital increase in Q1
has been more limited than normal, as seasonal inventory build-up
has been controlled and sometimes limited by supply disruptions.
Factoring programs amounted to €124.3 million at the end of March,
or a decrease of €9.6 million compared to the end of December.
Capex are below last year in Q1 and are expected above last year
for the full year at around €90 million (€76 million in 2020).
At the end of March 2021, net indebtedness post
IFRS 16 amounted to €536.8 million or 2.0x LTM Adjusted EBITDA
(compared to € 473.8 million and 1.7x at the end of December
2020; €763.8 million and 2.7x at the end of March 2020). The
seasonal increase was below historic levels, reflecting subdued
activity in Q1.
- 2021 Outlook & Mid-term
objectives
As anticipated volume recovery has not yet
started in commercial as the lack of visibility is still penalizing
some end-user segments (Workplace, Hospitality and Sports).
Nevertheless, the Group anticipates significant growth in Q2 2021
from the lows reached in Q2 2020. For the rest of the year, Tarkett
remains cautious and forecasts a muted recovery of commercial
activities and further growth in residential. The public investment
plans in various key regions, particularly the stimulus plan in
North America, may stimulate the commercial recovery in the latter
part of the year, but there are no signs of acceleration as of
today.
In this context, Tarkett is pursuing its Change
to Win strategic roadmap to foster sustainable growth and gain
market shares with the objective to grow above GDP growth in key
regions in 2021 and 2022. This includes leveraging its strong
expertise in Healthcare and Education, developing innovative and
environmentally-friendly solutions for customers, reinforcing its
presence and usage of digital tools and platforms and fostering
innovation. The Group will also continue optimizing its cost base.
Tarkett expects its structural cost savings to outreach €30 million
per year in 2021.
Prices of oil derivative materials and freight
costs have rapidly increased in the past months. Additional oil
price increases combined with production disruption at major
suppliers in Q1 are driving up Tarkett expectations in terms of
inflation, which was initially anticipated at €50 million in
February as indicated in full year 2020 earnings release.
Furthermore, prices of other raw materials such as wood also
increased in Q1. The Group now estimates a negative gross impact
from purchasing cost of around €100 million in 2021 (o/w €5.6
million in Q1). Tarkett is implementing additional selling price
increases across its regions with the objective to offset around
50% of this inflation in 2021.
Given this inflationary context and the slow
recovery of some commercial segments (workplace and hospitality),
Tarkett confirms that the 2022 Adjusted EBITDA margin objective of
at least 12% will be achieved later than initially anticipated,
which was stated as likely in its 2020 earnings release. The Group
now anticipates it will be delayed by at least one year, at the
soonest in 2023.
In this volatile environment, Tarkett plans to
remain selective in its capital spending and continues to tightly
monitor working capital. Notwithstanding higher working capital
requirements, the Group anticipates to generate positive free cash
flow in 2021. Tarkett significantly reduced its net financial debt
in 2020 and is already operating within its targeted financial
leverage for the end of the year (net debt to Adjusted EBITDA after
IFRS 16 application between 1.6x and 2.6x at each year-end).
The analysts’ conference will be held on
Monday April 26, 2021 at 9:30 am CET and an audio
webcast service (live and playback) along with the results
presentation will be available on:
https://www.tarkett.com/en/content/financial-results
This press release may contain forward-looking statements. Such
forward-looking statements do not constitute forecasts regarding
results or any other performance indicator, but rather trends or
targets. These statements are by their nature subject to risks and
uncertainties as described in the Company’s annual report
registered in France with the French Autorité des Marchés
financiers available on its website (www.tarkett.com). These
statements do not reflect the future performance of the Company,
which may differ significantly. The Company does not undertake to
provide updates of these statements
Financial calendar
- April 30, 2021: Annual General Meeting
- July 29, 2021: H1 2021 financial results - press release after
close of trading on the Paris market and conference call the
following morning
- October 28, 2021: Q3 2021 financial results - press release
after close of trading on the Paris market and conference call the
following morning
Investor Relations
ContactTarkett – Emilie Megel –
emilie.megel@tarkett.com
Media contactsTarkett -
Véronique Bouchard Bienaymé - communication@tarkett.com Brunswick -
tarkett@brunswickgroup.com - Tel.: +33 (0) 1 53 96 83 83
About Tarkett
With a history of 140 years, Tarkett is a
worldwide leader in innovative flooring and sports surface
solutions, with net sales of € 2.6 billion in 2020. Offering a wide
range of products including vinyl, linoleum, rubber, carpet, wood,
laminate, artificial turf and athletics tracks, the Group serves
customers in over 100 countries across the globe. Tarkett has more
than 12,000 employees and 33 industrial sites, and sells 1.3
million square meters of flooring every day, for hospitals,
schools, housing, hotels, offices, stores and sports fields.
Committed to change the game with circular economy and to reducing
its carbon footprint, the Group has implemented an eco-innovation
strategy based on Cradle to Cradle® principles, fully aligned with
its Tarkett Human-Conscious Design™ approach. Tarkett is listed on
Euronext Paris (compartment B, ISIN: FR0004188670, ticker: TKTT).
www.tarkett.com
Appendices
1/ Reconciliation table for alternative performance
indicators (not defined by IFRS)
- Organic growth measures the change in net sales as compared
with the same period in the previous year, at constant scope of
consolidation and exchange rates. The exchange rate effect is
calculated by applying the previous year’s exchange rates to sales
for the current year and calculating the difference as compared
with sales for the current year. It also includes the impact of
price adjustments in CIS countries intended to offset movements in
local currencies against the euro. In Q1 2021, a -€8.9 million
negative adjustment in selling prices was excluded from organic
growth and included in currency effects.
- Scope effects reflect:
- current-year sales for entities not included in the scope of
consolidation in the same period in the previous year, up to the
anniversary date of their consolidation;
- the reduction in sales relating to discontinued operations that
are not included in the scope of consolidation for the current year
but were included in sales for the same period in the previous
year, up to the anniversary date of their disposal.
€ million |
Net Sales 2021 |
Net Sales 2020 |
% Change |
o/w exchange rate effect |
o/w scope effect |
o/w organic change |
|
|
Total Group – Q1 |
558.8 |
610.7 |
-8.5% |
-4.7% |
- |
-3.8% |
|
- Adjusted EBITDA is the operating income before depreciation,
amortization and the following adjustments: restructuring costs,
gains or losses on disposals of significant assets, provisions and
reversals of provisions for impairment, costs related to business
combinations and legal reorganizations, expenses related to
share-based payments and other one-off expenses considered
non-recurring by their nature.
€ million |
Adjusted EBITDA 2021 |
Adjusted EBITDA 2020 |
% margin 2021 |
% margin 2020 |
|
|
Total Group – Q1 |
34.0 |
42.4 |
6.1% |
6.9% |
|
€ million |
Of which adjustments |
Q1 2021 |
Restructuring |
Gains / losses on assets sales / impairment |
Business combination |
Share-based payments |
Other |
Q1 2021 adjusted |
Result from operating activities (EBIT) |
(4.2) |
1.5 |
(2.0) |
0.0 |
0.6 |
0.7 |
(3.4) |
Depreciation and amortization |
37.2 |
- |
- |
- |
- |
- |
37.2 |
Others |
0.2 |
- |
- |
- |
- |
- |
0.2 |
EBITDA |
33.2 |
1.5 |
(1.9) |
0.0 |
0.6 |
0.7 |
34.0 |
2/ Bridges (€ million)
Net sales by division
Q1 2020 |
610.7 |
+/- EMEA |
(9.2) |
+/- North America |
(21.6) |
+/- CIS, APAC & LATAM |
14.5 |
+/- Sports |
(7.0) |
Q1 2021 LfL |
587.3 |
+/- Currencies |
(19.6) |
+/- Selling price lag effect in CIS |
(8.9) |
Q1 2021 |
558.8 |
Adjusted EBITDA by nature
Q1 2020 |
42.4 |
+/- Volume / Mix |
(20.0) |
+/- Sales Pricing |
3.3 |
+/- Raw Material & Freight |
(5.6) |
+/- Salary Increase |
(2.6) |
+/- Productivity |
9.9 |
+/- SG&A |
14.2 |
+/- One-offs & Others |
(4.8) |
+/- Selling price lag effect in CIS |
(3.0) |
+/- Currencies |
0.1 |
Q1 2021 |
34.0 |
- Tarkett_Q1 2021_Results_ENG
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