Picanol - Nothing succeeds like success

During 1H13, Picanol Group realised turnover of € 304.1m, an increase of 39% compared to € 219.1m in the weaker 1H12. After the 36.5% sales increase in 1Q13 to € 146.1m, turnover in 2Q13 increased 41% to € 158m.

As expected, the Weaving Machines division had a strong start to 2013, based on the well-filled order book at the end of 2012. 1H13 was characterized by a high global demand for Picanol weaving machines, forcing the group to focus heavily on flexibility in order to handle production peaks. 1H13 sales increased to € 267.0m (€ 185.4m in 1H12).

The Industries division also realised a strong 1H13, thanks to higher demand from Weaving Machines and projects for other customers. 1H13 Industries sales increased to € 37m (€ 33.7m in 1H12).
EBITDA increased in 1H13 to € 62.4m (€ 38.4m in 1H12) and EBIT nearly doubled to 60.1 (34.5m in 1H12). Picanol 1H13 net result was € 42.4m (€ 25.4m in 1H12). Shareholders equity at the end of June was € 261m (217.7m end 2012) end net cash position increased to € 187.3m (135.1m end June 2012 and € 168.2m end 2012).

Based on the current order book, Picanol Group expects to realise in 2H13 a slight turnover increase in comparison to the stronger 2H12. In our current model we were banking on a 8.9% decline to € 221m, so we have to upgrade our model.

According to Picanol, the planned investments in Ypres for an amount of € 12m are on track and a further investment of € 5.5m in new CNC machine is approved. The preparatory work for the new production facilities in Ypres has been started and the expansion of the HWS molding line for Industries was realized. In combination with further productivity and quality improvements, the Picanol Group wants to increase its competitiveness with these targeted investments in Ypres.
 
Recall that SNPE and Picanol have signed on 25 July 2013 a binding agreement for the sale by SNPE to the Picanol Group of a stake held by SNPE in Tessenderlo Chemie, representing 27.6% of the share capital of Tessenderlo Chemie for a price of € 22/sh. SNPE, is for 99.9% owned by the French state. Throughthe acquisition of a 27.6% stake in Tessenderlo Chemie, Picanol diversifies it activities, combining its cyclical weaving machine business with Tessenderlo’s counter-cyclical chemical business. We are positively surprised to see that Picanol invests its excess cash in a well known company, which is listed on Euronext Brussels. Also important is that by taking over the 27.6% stake from SNPE, Picanol takes away the share price overhang in Tessenderlo Chemie which has been there for more than a decade.

Conclusion: Very good 1H13 numbers and we are positively surprised that Picanol expects to realise in 2H13 a slight turnover increase in comparison to the stronger 2H12 We increase our Target Price to € 29 and maintain our BUY rating.