Resilux - EBIT infected by increase of provisions on clients

Yesterday after market, Resilux announced a poor set of FY11 results. We were expecting a weaker 2H11 influenced by the poor weather conditions in Europe in July and August. These have led to lower sold volumes in 2H11. Volumes sold increased by only 4.6% compared to 2H10. As a reminder, due to the good weather conditions in the spring, the season started early and already during 2Q11 highvolumes were realised. The 2011 turnover increased by 22.6% to € 286.5m. This is the result of the increased volumes and the increased prices for raw material. As known Resilux can pass on fluctuations in raw material prices to the customers.

More than the sales number, we focus on the added value. Compared to 2010, this increased by only 6.0% to € 55.9m (already € 32m in 1H11). This increase is lower than the increase in volume. There has been a high volatility of the prices of raw materials in 2011. After a very good spring, the demand has slowed down due to the economic crisis and the poor weather. These market conditions were combined with a very quick and sharp decrease of the raw material prices. All these factors have led to margin pressure in 2H11, but still somewhat in line with what we were expecting. EBITDA increased slightly and amounts to € 28.3m, we were banking on € 29.1m. We were more (negatively) surprised by the EBIT number. Due to the increased non cash costs, the 2011 EBIT decreased by € 3.2m and amounted to € 14.7m (€ 17.8m in 2010, KBCS € 17.62m). That 2H11 was very weak can be seen in the fact that Resilux realised in 1H11 already € 12.1m. This bad performance is explained by the operational non cash costs that increased by € 3.3 m and amounted to € 13.6m. The depreciations on fixed assets increased by € 1.3 million. This is the result of the increased capital expenditures of the last years. Furthermore, and totally to our surprise, the non cash costs include in 2011 also € 1.8m more of provisions for doubtful accounts receivables than in 2010.

In 2011 a pre-tax profit of € 10.9m was realised compared with € 14.8m in 2010. After taxes, Resilux ended 2011 with a net profit of € 9.1m or a decrease by 28.6%. After the result of the joint venture AirO-Lux (-€ 1.1m) profit amounted to € 8.0m compared to € 12.2m in 2010. Resilux will propose a stable gross dividend of € 1.65.
The net investments of € 17.5m (€ 12.0m in 2010) were mainly for the increase of capacity (machines and moulds) which was in line with our estimates. In the US a rented building was purchased and in Switzerland land was acquired. At the end of the year net financial debt amounted to € 44.4m (€ 30.5m end 2010) was also higher than our expectations. The increase is mainly the result of increased working capital.

Conclusion
In 2012 Resilux expects to realise EBITDA in line with 2011 but through lower non cash costs and lower financial expenses they intend to increase the net result compared to 2011. Resilux also plans to focus on a reduction of working capital and a reduction of the net financial debts. After this poor set of results, we have lowered our TP to € 60 and our rating to Accumulate.