SOURCE: Koninklijke Ten Cate NV

March 04, 2010 02:11 ET

Net profit TenCate EUR 23.9 million; reduction of net debt position by EUR 136 million

ALMELO, NETHERLANDS--(Marketwire - March 4, 2010) -


Dividend EUR 0.60 per share (60% pay-out)

Highlights 2009

* Revenues: EUR 842 million (2008: EUR 1,033 million; -18% autonomous).

* EBITA: EUR 41.5 million (2008: EUR 95.4 million).

* EBITA margin: 4.9% (2008: 9.2%).

* Net profit: EUR 23.9 million (2008: EUR 51.1 million).

* Stringent cash management effective: net debt reduced by EUR 136 million to EUR 195 million.

* Operational cash flow EUR 145 million (+200%).

* Exceptional expenditure in EBITA: EUR 11 million (2008: income EUR 5 million), EUR 6.4 million of which for reorganization costs (approximately EUR 5 million in 4(th) quarter).

* Stock depletion and a restrained policy on credit within synthetic turf activities lead to extra under-utilized capacity.

* Steep decrease in costs as a result of reduction in personnel.

* Dividend proposal: EUR 0.60 per share in cash or as stock dividend, entirely at shareholder's discretion (2008: EUR 0.85 [50% stock dividend / 50% stock dividend option]).


General performance in the fourth quarter of 2009

Revenues declined by 18% in autonomous terms in the fourth quarter (-5% currency effect) to EUR 186 million.

At the TenCate Protective Fabrics market group there were temporarily low revenues in the US as a result of high inventories in the chain with regard to a number of products for the US Army.

In the TenCate Space & Aerospace Composites and TenCate Advanced Armour market groups, traditional year-end orders failed to materialize; a part of these revenues will, however, be shifted to the future.

Less emphasis was placed on discounted off-season sales within the TenCate Grass group. TenCate Grass production volume has been adjusted accordingly and this has resulted in lower debtor and stock positions. A substantial part of the revenues from synthetic turf and the result will be moved from the fourth quarter to the new financial year. The trend in the fourth quarter is consequently not representative of market developments in 2010.

During the fourth quarter measures were taken in the Dutch production at the synthetic turf and composites group, which reduced the break-even level. At the same time some activities were outsourced. This involved costs to the amount of approximately EUR 5 million in the fourth quarter.

The operating result before the amortization of intangible fixed assets (EBITA) declined in the fourth quarter by EUR 21.9 million to EUR 2.4 million (in autonomous terms -85%; currency effect -5%). Approximately half this decrease is the result of exceptional items.

The net result for the fourth quarter amounted to -EUR 1.4 million (2008: EUR 13.8 million).

Annual figures for 2009

Revenues for 2009 as a whole amounted to EUR 842 million (2008: EUR 1,033 million). In autonomous terms, this decline in revenues amounted to 18% (currency effect +2%).

The revenues in the second half of the year (EUR 408 million) were in line with the first half of the year (EUR 434 million).

In view of the situation in international financial markets and among our customers, TenCate adjusted to the new reality and placed the emphasis on cash management. This has resulted in the company no longer temporarily giving the highest priority throughout the year to its objectives relating to revenue growth and profit optimization.

There were non-recurring costs for reorganization (approximately EUR 6 million) and under-utilized capacity. Furthermore, there is a (legal) dispute with the energy supplier relating to the validity of the delivery contract. This involves a cost variance of approximately EUR 5 million annually.

Personnel costs in 2009 were reduced by approximately EUR 17 million. The workforce decreased by 15% over 2009 as a whole.

EBITA declined to EUR 41.5 million in 2009 (in autonomous terms -58%; currency effect +2%).

Net profit for 2009 amounted to EUR 23.9 million, compared to EUR 51.1 million in 2008. Net earnings per share amounted to EUR 0.97 (2008: EUR 2.18).

Corrected for the result on divested activities, impairment of assets and exceptional items (for 2009 as a whole: +EUR 3.2 million; 2008: -EUR 3.5 million), the decline in profits amounted to 42%.

The financial policy was focused particularly on net debt reduction. Operational cash flow rose by approximately 200% to EUR 145 million (2008: EUR 49 million), principally as a result of the cutback in working capital by EUR 105 million (excluding exchange rate effect). The tight financial policy has led to TenCate remaining, by its own, well within the covenants agreed with the banks. As a result, it was possible to avoid refinancing, which would have been detrimental. The debt position was considerably reduced by an amount of EUR 136 million, which will create scope for resumption of the growth strategy in the new financial year. TenCate still has a credit facility on favourable terms (which was concluded earlier). At the current baseline, priority is once again being given to profit growth.

Dividend policy

The dividend policy is based on a pay-out ratio of 40% of net profit, payable in cash or in shares charged to the share premium reserve, according to the shareholders' preference.

In view of the transient nature of trends during 2009 and the focus on cash management related to this, which resulted in a significant improvement in the financial position, a once-only proposal has been made to increase the pay- out ratio and to fix the dividend at EUR 0.60 per EUR 2.50 par value share, entirely in cash, or in shares charged to the share premium reserve, according to the shareholders' preference.

Financial

TenCate has pursued a cautious investment policy. Investments decreased by EUR 30.7 million to EUR 17.3 million, with a depreciation and amortization level of EUR 42.7 million (2008: EUR 42.3 million). The largest item concerned the investment in Dubai (synthetic turf production) and was related to the completion of the 2008 expansion programme.

The net interest-bearing debt for 2009 decreased to EUR 195 million (end of December 2008: EUR 331 million). The available credit facility amounts to EUR 389 million.

The net financing expenses (corrected for the impairment on an associated company to the amount of EUR 4.9 million) declined from -EUR 13.7 million to -EUR 7.8 million, mainly as a result of a lower average interest rate and also due to a lower average debt.

The tax rate at 28% remained virtually the same as in the previous year (27%). The high tax rate in the US was compensated for by such factors as the utilizing of fiscal loss compensation and the forming of deferred tax debits.

Current performance and outlook

There is currently a higher order intake for protective fabrics. Prospects relating to aerospace activities have improved slightly. The military aviation market is developing favourably.

In the light of the order portfolio, the start of the year seems very promising for the TenCate Advanced Armour market group. The recent acquisition of the armour company AML UK represents a strengthening of these activities. This transaction has now been completed.

As announced earlier, a large defence contract (minimum EUR 40 million) was acquired in January 2010. This contract is related to the armouring concept with regard to types of helicopter from Eurocopter, a subsidiary of EADS. This contract is of strategic value, as TenCate is directly involved at the design stage and in the integration of the safety concept into the aircraft. This will increase the likelihood of follow-up orders.

A number of orders for vehicle armouring and personal protection to the amount of US$ 25 million were also recently announced in the American market, with an option on an increase to US$ 35 million.

The geosynthetics market in North America is showing no signs of recovery. There are opportunities for infrastructure and environmental projects in the rapidly growing Asian market.

The adjustment to the sales policy in the fourth quarter involving the synthetic turf activities resulted in a sharp drop in off-season pre-sales, but will improve the baseline for the revenues and the result in the current financial year. Policy will be focused on improving margins at the TenCate Grass group.

TenCate's financial position has been considerably strengthened compared with the beginning of last year. Consequently, the company is better able to optimally employ its production capacity and respond to seasonal and project-based fluctuations in demand.

Despite lower net profits for 2009, good strategic progress was made in various areas. The baseline was strengthened, in view of the strongly improved financial position and the reduced cost base. As a result, a higher result is expected for 2010 - barring unforeseen circumstances - despite the fact that in the majority of core markets there is no clear sign of an economic recovery yet.

Performance by sector

Advanced Textiles & Composites Sector

+--------------+---------+---------+-------+--------+
|(x EUR mln.)  | H2 2009 | H2 2008 |  2009 |   2008 |
+--------------+---------+---------+-------+--------+
|              |         |         |       |        |
+--------------+---------+---------+-------+--------+
| Net revenues |   182.0 |   232.8 | 397.3 |  481.0 |
+--------------+---------+---------+-------+--------+
| EBITA        |    11.4 |    30.7 |  31.7 |   61.5 |
+--------------+---------+---------+-------+--------+
| EBITA margin |    6.2% |   13.2% |  8.0% |  12.8% |
+--------------+---------+---------+-------+--------+

The autonomous decline in revenues in 2009 amounted to 20% (currency effect +3%). EBITA declined in 2009 by 52% in autonomous terms (currency effect +4%). This decline can mainly be attributed to the TenCate Space & Aerospace Composites and TenCate Advanced Armour market groups.

In 2008 there were occasional large American orders for vehicle armouring. In Europe major orders were deferred. This makes it difficult to compare the revenues with 2009.

Within the TenCate Space & Aerospace Composites market group there was a slow-down in building rates and a delay at the start of the production of the new generation of aircraft. Considerable stock depletion also occurred in the entire production chain, which gave rise to a temporary halt in production of the related composite materials (TenCate Cetex(r)). This trend had already started in the fourth quarter of 2008. The outlook for TenCate Cetex®, however, remains positive.

The start of two development centres in 2009 in which TenCate occupies a leading position, in part supported by Airbus (TAPAS) and Boeing (TPRC), underline the importance of innovative lightweight materials for the aviation industry and other areas of application (wind energy, automotive, etc.).

In the military aerospace and satellite industries TenCate's composite materials are being used more and more.

The economic situation led to a decline in the demand for safety fabrics for professional wear and work wear for industrial customers. This trend affected Dutch production in particular, which principally serves this market. American demand for flame-retardant fabrics for military uniforms by contrast continued to rise significantly, which compensated to a large extent for the decline in revenues within the TenCate Protective Fabrics market group.

Geosynthetics & Grass Sector

+--------------+-------------------+----------------+
| (x EUR mln.) | H2 2009   H2 2008 |   2009    2008 |
+--------------+-------------------+----------------+
|              |                   |                |
|              |                   |                |
| Net revenues |   199.3     261.3 |  392.1   497.8 |
|              |                   |                |
| EBITA        |    12.3      20.9 |   16.8    37.8 |
|              |                   |                |
| EBITA margin |    6.2%      8.0% |   4.3%    7.6% |
+--------------+-------------------+----------------+

The autonomous decline in revenues of the Geosynthetics & Grass sector amounted to 19% (currency effect +1%). The decline in revenues in 2009 occurred in both market groups in equal measure. EBITA for 2009 as a whole fell by 51% in autonomous terms (currency effect 0%), which can mainly be attributed to the TenCate Grass group. The effects of the tight financial markets had a negative effect on customers' purchasing capacity, and TenCate exercised caution in relation to suppliers' credit. As a result of the risk-limiting revenue policy, there were considerable under-utilization results.

At the TenCate Grass group therefore cyclical economic factors to a lesser extent form the underlying causes of the decline in revenues and profit. In the fourth quarter in particular TenCate actively focused on reducing the financing of customers and the limiting of stockpiling. The traditional pre-season sale of synthetic turf products was at a considerably lower level in the fourth quarter. As a result of forced stock depletion, margins were under pressure during the entire year.

The geosynthetics market in the US remained at a low level. The promised incentives from the American government relating to infrastructure projects have not yet resulted in recovery in the projects market.

The Asian and South American markets developed favourably.

Technologies / Technical Components Sector / Holding & Services

+--------------+-------------------+---------------+
| (x EUR mln.) | H2 2009   H2 2008 |  2009   2008  |
+--------------+-------------------+---------------+
|              |                   |               |
|              |                   |               |
| Net revenues |    27.2      26.9 |  52.7    53.8 |
|              |                   |               |
| EBITA        |    -3.1      -1.5 |  -7.0    -3.9 |
+--------------+-------------------+---------------+

The result in this sector is due entirely to the Holding, which derived its income mainly from the interest on loans. This interest is not visible at EBITA level. Xennia Technology and TenCate Enbi made a positive contribution to the result.

In the fourth quarter an increase in revenues could be seen at TenCate Enbi and there was recovery in the results, partly due to the cost measures implemented. The increase in revenue can in part be attributed to newly developed products for new markets, such as insulation products for solar boilers and the automotive sector.

Xennia Technology is making good progress in the marketing of components for industrial inkjet applications and has made a positive contribution to the result of this sector. From 2010 onwards, Xennia will to an increasing degree start to supply specialist inks for advanced printing and coating applications, in addition to components,

Royal Ten Cate
Almelo, Thursday 4 March 2010

For further information:

The press conference on the annual results 2009 will be webcast in Dutch only on 4 March 2010 between 10:30 and 12:00 hrs CET. Register via www.tencate.com.

F.R. Spaan, Director Investor Relations & Corporate Development
Tel.              : +31 546 544 977
Mobile            : +31 612 96 17 24
E-mail            : f.spaan@tencate.com
Internet          : www.tencate.com

Royal Ten Cate (TenCate) is a multinational company which combines textile technology, chemical processes and material technology in the development and production of functional materials with distinctive characteristics. TenCate products are sold throughout the world.

Systems and materials from TenCate come under four areas of application: safety and protection; space and aerospace; infrastructure and the environment; sport and recreation. TenCate occupies a leading position in safety fabrics, composites for space and aerospace, antiballistics, geosynthetics and synthetic turf. TenCate is listed on the NYSE Euronext (AMX).


[HUG#1390796]

Press release, key figures & explanatory notes as PDF: http://hugin.info/130798/R/1390796/348729.pdf

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