DUROC AB YEAR-END REPORT
JULY 2021-JUNE 2021
STRONG DEVELOPMENT IN MOST OF DUROC - DIVIDEND PROPOSED
Fourth quarter April-June 2022
- Net sales increased by 10 percent to MSEK 1,033.7 (942.1). Organic growth stood at 5 percent.
- Adjusted EBITDA* decreased by 33 percent to total MSEK 51.4 (76.4), equivalent to an adjusted EBITDA* margin of 5.0 percent (8.1).
- Adjusted EBIT* decreased by 52 percent to MSEK 25.7 (53.6). Earnings increased in all companies with the exception of Cotting Group.
- Operating profit (EBIT) totaled MSEK 26.0 (54.4). Griffine, the French part of Cotting Group showed an EBIT amounting to-31,0 MSEK. The rested of the group delivered an EBIT amounting to 51 MSEK.
- Cash flow from operating activities totaled MSEK-77.3(-35.1).
- Profit after tax was MSEK 30.1 (38.1).
- Adjusted earnings per share totaled SEK 0.77 (0.96).
- Earnings per share totaled SEK 0.77 (0.98).
- Equity totaled MSEK 1,237.8 (1,070.3) and the equity/assets ratio was 52 percent (51).
July 2021-June 2022
- Net sales increased by 14 percent to MSEK 3,720.5 (3,254.5). Organic growth stood at 11 percent.
- Adjusted EBITDA* decreased by 14 percent to total MSEK 192.1 (224.2), corresponding to an adjusted EBITDA* margin of 5.2 percent (6.9).
- Adjusted EBIT totaled SEK 90.1 million (125.8).
- Operating profit (EBIT) totaled MSEK 83.0 (88.6). EBIT in Griffine amounted to-85,3 MSEK, the other companies showed an EBIT amounting to 163,3 MSEK.
- Cash flow from operating activities totaled MSEK-36.8 (70.6). Materials price trends have driven a rise in capital tied up, especially in warehouse inventory.
- Profit after tax was MSEK 64.9 (55.4).
- Adjusted earnings per share totaled SEK 1.85 (2.37).
- Earnings per share totaled SEK 1.67 (1.42).
- Cash and cash equivalents at the end of June totaled MSEK 26.1 (59.9) and net debt excluding lease liabilities from IFRS 16 totaled MSEK 265.7 (139.9). Unutilized credit facilities totaled MSEK 205.0 (275.0).
- The board proposes a dividend of 0,25 SEK per share
2021/2022 | 2020/2021 | 2021/2022 | 2020/2021 | |
Group (MSEK) | Q4 | Q4 | Q1-Q4 | Q1-Q4 |
Net sales | 1,033.7 | 942.1 | 3,720.5 | 3,254.5 |
EBITDA | 51.7 | 77.7 | 199.4 | 189.9 |
Adjusted EBITDA* | 51.4 | 76.4 | 192.1 | 224.2 |
Adjusted EBITDA*-margin, % | 5.0 | 8.1 | 5.2 | 6.9 |
Operating profit/loss (EBIT) | 26.0 | 54.4 | 83.0 | 88.6 |
Adjusted EBIT* | 25.7 | 53.6 | 90.1 | 125.8 |
Profit/loss after tax | 30.1 | 38.1 | 64.9 | 55.4 |
Profit per share, SEK | 0.77 | 0.98 | 1.67 | 1.42 |
Adjusted profit per share, SEK* | ||||
0.77 | 0.96 | 1.85 | 2.37 | |
Cashflow from operating activities | -77.3 | -35.1 | -36.8 | 70.6 |
Net debt excl. lease liability from IFRS 16 | 265.7 | 139.9 | 265.7 | 139.9 |
Net debt incl. lease liability from IFRS 16 | 396.0 | 283.3 | 396.0 | 283.3 |
Net debt/Equity ratio, % | 32 | 26 | 32 | 26 |
*Adjusted for items affecting comparability. A reconciliation of amounts can be found on page 18
Duroc acquires, develops and manages companies with a focus on trade and industry. Using their profound knowledge of technology and markets, the Group's companies aim to achieve leading positions in their respective industries. As the owner, Duroc actively contributes to their development. Duroc is listed on Nasdaq Stockholm (short name: DURC). www.duroc.se
D U R O C YE A R E N D R EPO R T Q 4 20 2 1/ 2 02 2 | 2 ( 1 9 ) |
CEO'S COMMENT
Strong development in most of Duroc with high demand and good profitability characterized the quarter despite the more challenging economic climate. The French unit in the Cotting Group depressed the overall picture of the Group's performance.
Fourth quarter April-June 2022
Net sales increased by 10 percent compared to the previous year. Operating profit decreased from MSEK 54 to MSEK 26, in all material respects attributable to extensive losses in the French Griffine Enduction SA (part of Cotting Group), which reported a loss of MSEK 31 for the quarter. If Griffine is excluded from the Group, operating profit for the quarter totaled MSEK 57. Other companies noted good demand in general and in most cases high profitability for the period.
Financial year July 2021-June 2022
Duroc comprises seven business units with a total of 16 subsidiary businesses. The absolute majority of them performed well during 2021/22, and in certain cases with splendid earnings.
However, one of these 16 companies, Griffine, delivered a catastrophically poor result, which drags down the impression of Duroc's earnings capability for the year ahead in a way I consider to be unfair.
Griffine has been heavily affected by some of the current circumstances - the semiconductor shortage has ravaged order intake which have led to periodically very low capacity utilization, while French labor market regulations make rapid cost adaptation impossible, to general cost increases for raw materials and logistics etc. The losses finally reached an extent that led us to move ongoing financing from the parent company to local funding. Moreover, we are investigating the conditions for taking measures which enables Duroc de-consolidate Griffine. The priority in these efforts will be to find an industrial partner who can take over the operation as a going concern. In Duroc's assessment, a possible disposal would lead to a significant book value-related loss, which will, however, not impact cash flow in any material respect.
Because Griffine generated an operating loss of approx. MSEK 85 for 2021/22, the measure will significantly strengthen the Group's continued earnings and in pro forma terms, Duroc will retain its strong financial position with equity in excess of SEK 1 billion, limited debt and strong cash flow.
The unfortunate developments at Griffine obscure the picture of an otherwise strong, well performing Duroc where undeniably significant shareholder value has been created in recent years. The DMT Group, which five years ago had annual sales of approx. MSEK 300 that only generated modest or no surpluses, has through successful efforts to coordinate our subsidiaries in the Nordics and the Baltics, delivered annual sales of approx. MSEK 540 with a 9 percent operating margin in 2021/22. The Group has less than MSEK 50 in capital employed.
According to plan, IFG - Duroc's biggest business unit - has developed its offering of more value creating profiled products for various applications while also phasing out more of the low-margin commodity products. The restructuring program in UK, which was less costly than the initial forecast, has enabled an improved product mix with strong margins, while our investment in a state- of-the-art R&D center at Asota GmbH (Linz) is beginning to produce results in the form of sustainable solutions. To an increasing extent, IFG is doing business in niche sectors, which offer better earnings potential than it has historically experienced.
Drake Extrusion, currently Duroc's best-invested operation, was a short-term disappointment in 2021/22. High labor force turnover and significant raw materials price increases combined with an uneven order intake in the profitable yarn segment, has meant the
company's earnings were substantially below budget and the level I believe Drake should achieve in a foreseeable future. Major sums have been invested in new capacity at Drake's facilities in Martinsville, and we have also made certain 'bolt-on' acquisitions in recent years. It's now time for Drake to begin delivering on these investments.
Historically, Rail has had annual sales of around MSEK 80, but it has grown strongly and with good profitability as a result of investments that enabled e.g., a broadening of the customer base. For 2021-22, Rail reported sales of MSEK 130 with a profit margin that compares well with the best in the Swedish mechanical engineering industry.
The Smaller Company portfolio was a major disappointment for us in 2020/21, but the implementation of vigorous measures to reduce costs and boost sales resulted in a significant turnaround in 2021/22. Conditions are excellent for continued good growth and increasing profitability in this group.
Cresco, which was acquired for around MSEK 70 in 2017, continues to deliver high profitability and good innovative abilities. During the year the company, which does business in a sector enjoying good long-term growth, has expanded in North America where conditions are good for taking market share and generating continued growth in sales and earnings.
In general, I can declare that Duroc, despite the catastrophic loss at Griffine, is today a strong company with the conditions for increasing earnings and thus shareholder value in the years ahead. If Griffine is excluded from the Group's 2021/22 figures, we see a Duroc that has delivered an EBIDTA of approx. MSEK 255 with an EBIT of approx. MSEK 168, despite Drake's significant under- performance. Were Drake to perform more in line with its assessed capacity, it would indicate an earnings potential (EBIT) in the Group of around MSEK 230 - which in these uncertain times is an assessment that should not be read as a forecast for the year ahead.
Future prospects
Duroc is in a strong position for the future with mainly profitable and well-invested business units, a strong balance sheet and a planned disposal of the loss-making Griffine operation.
-
expect ourwell-performing portfolio companies that make up the absolute majority or Duroc, to continue developing in the right direction, given that nothing unforeseen occurs that has a major impact on business developments as we currently assess them. Drake will have challenges with continued inventory adjustments in the months ahead but is expected to significantly strengthen its earnings from then on. Raw materials prices are clearly on the way down but we must anticipate continued volatility. We anticipate continued high energy prices for the foreseeable future.
The increasingly harsh financial climate with rising inflation and interest rates will not affect Duroc significantly. In my view, it may open an opportunity for us to consider business acquisitions once again.
The Group has low borrowings and a balance sheet that in all material respects refers to tangible assets, while cost increases in the operations are compensated via our customers.
Duroc is ready to take on new challenges and opportunities, and I would like to take this opportunity to thank all of our capable employees who shoulder full responsibility for successfully driving development in our portfolio companies and the parent company. The conditions for continuing to deliver growing shareholder value are in place in a strong Duroc.
John Häger
CEO
D U RO C YE A R - E N D R E PO R T 2 0 21 / 20 22 | 3 ( 1 9 ) |
DEVELOPMENTS IN DUROC PORTFOLIO COMPANIES
Duroc's portfolio companies consist of International Fibres Group (IFG), Drake Extrusion, Cresco, Cotting Group, Duroc Machine Tool Group (DMT Group), Duroc Rail and the Smaller Company Portfolio, which comprises Universal Power Nordic (UPN), Herber and Duroc Laser Coating (DLC). Set forth below are each individual portfolio company's share of net sales and adjusted EBIT for the past 12-month period, July 2021- June 2022. Read more about developments company by company on pages 4-7 and in Duroc's segment report on page 17.
SHARE OF NET SALES (R12)
Duroc Rail | Smaller |
4% | |
Comp Portf | |
DMT Group | 5% |
14% | IFG |
Cotting | 37% |
Group | |
13% | |
Cresco | Drake |
7% | Extrusion |
20% | |
Fourth quarter April-May 2022
Net sales increased by 10 percent to MSEK 1,033.7 (942.1). Organic growth stood at 5 percent, mainly driven by IFG and DMT Group, where DMT enjoyed its strongest quarter ever. While IFG's growth is mainly driven by price increases that compensate for higher materials costs, it also enjoys a more favorable product mix. The Smaller Company Portfolio also increased by 29 percent, mainly as a result of a strong increase in sales at Herber Engineering and the strategic change process at Universal Power Nordic.
Adjusted EBITDA totaled MSEK 51.4 (76.4) and the adjusted EBITDA margin totaled 5.0 percent (8.1). Strong underlying earnings trend in most units despite the impact of higher prices for materials, energy and transport.
Adjusted EBIT totaled MSEK 25.7 (53.6), and operating profit totaled MSEK 26.0 (54.4).
Profit after tax was MSEK 30.1 (38.1).
ADJUSTED EBIT PER PORTFOLIO COMPANY (R12)
80 | ||||||||||||||||||||
60 | ||||||||||||||||||||
40 | ||||||||||||||||||||
20 | ||||||||||||||||||||
0 | ||||||||||||||||||||
IFG | Drake | Cresco | Cotting | DMT Group Duroc Rail | Smaller | |||||||||||||||
-20 | Extrusion | Group | Comp Portf | |||||||||||||||||
-40 | ||||||||||||||||||||
-60 | ||||||||||||||||||||
-80 | ||||||||||||||||||||
July 2021 to June 2022
Net sales increased by 14 percent to MSEK 3,720.5 (3,254.5). Organic growth stood at 11 percent. Good growth in the business, especially in DMT Group, Duroc Rail and Smaller Company Portfolio. Cresco remains at a strong, stable level while growth in IFG and Drake Extrusion is mainly driven by increased raw materials prices. The semiconductor shortage is keeping Cotting Group's sales at very low levels.
Adjusted EBITDA totaled MSEK 192.1 (224.2) and the adjusted EBITDA margin totaled 5.2 percent (6.9). IFG, Cresco, DMT Group, Duroc Rail and Smaller Company Portfolio have developed their businesses based on their respective strategies, which has led to excellent earnings trends. Cotting Group has suffered from low volumes, and Drake Extrusion was not able to fully meet existing demand due to the challenging American labor market situation. Adjusted EBIT totaled MSEK 90.1 (125.8) and operating profit MSEK 83.0 (88.6) including restructuring costs and the impairment of intangible assets totaling MSEK 7.1 (37.2).
Profit after tax was MSEK 64.9 (55.4).
DEVELOPMENT OF DUROC'S NET SALES
MSEK | |||||||||||
1 000 | |||||||||||
900 | |||||||||||
800 | |||||||||||
700 | |||||||||||
600 | |||||||||||
500 | |||||||||||
400 | |||||||||||
300 | |||||||||||
200 | |||||||||||
100 | |||||||||||
0 | |||||||||||
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 |
2019/2020 | 2020/2021 | 2021/2022 |
DEVELOPMENT OF DUROC'S OPERATING PROFIT (EBIT)
MSEK | ||||||||||||
170 | ||||||||||||
150 | ||||||||||||
130 | ||||||||||||
110 | ||||||||||||
90 | ||||||||||||
70 | ||||||||||||
50 | ||||||||||||
30 | ||||||||||||
10 | ||||||||||||
-10 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 |
-30 | 2019/2020 | 2020/2021 | 2021/2022 | |||||||||
Operating profit for Q1 and Q2 2019/2020 includes MSEK 65.7 and MSEK
1.2 respectively for negative goodwill from business acquisitions. Q3 2020/2021 was affected by restructuring costs totaling MSEK 35.5.
D U RO C YE A R - E N D R E PO R T 2 0 21 / 20 22 | 4 ( 1 9 ) |
International Fibres Group (IFG) is one of | Share of Duroc's sales |
Europe's leading manufacturers of | (R12) |
polypropylene-based staple fibers, an input | |
product with reinforcing, insulating, | |
separating or draining properties. The fiber is | |
used in the production of e.g. flooring, rugs, | |
furniture, filters, foodstuff packaging, car | 37% |
interiors and nonwoven fabrics, which means | |
a diversified customer portfolio. IFG has | |
production facilities in Belgium, the United | |
Kingdom and Austria. |
- The change in the product mix and the strategic capacity adaptations implemented in the third quarter of the previous year have consolidated the good profitability development, and the adjusted EBITDA for the full year increased by 33 percent. Adjusted EBITDA is on par with theyear-over-year quarter, mainly due to higher prices for the relevant materials, energy and haulage during the final months of the financial year.
- Organic growth stood at 5.5 percent while sales volumes decreased by 17.4 percent. While this is in part an effect of the product mix, the main impact is from increased raw materials prices*.
- The semiconductor shortage in the automotive industry, high inflation and the impact of the Ukraine war on the market have continued to contribute to lower volumes.
- The war in Ukraine and its impact on the oil price has led to higher polypropylene prices, and this has also driven up the levels of net debt and capital employed.
2021/ | 2020/ | 2021/ | 2020/ | |
2022 | 2021 | 2022 | 2021 | |
Amounts in MSEK | Q4 | Q4 | Q1-Q4 | Q1-Q4 |
Net Sales | 381.0 | 361.0 | 1,384.9 | 1,155.8 |
Growth, Net Sales % | 5.5 | 93.6 | 19.8 | 8.3 |
Organic growth % | 2.0 | 101.8 | 17.4 | 13.2 |
EBITDA | 32.3 | 33.2 | 100.9 | 43.4 |
EBITDA margin % | 8.5 | 9.2 | 7.3 | 3.8 |
Adjusted EBITDA | 31.9 | 32.1 | 91.9 | 69.1 |
Adjusted EBITDA-margin, % | 8.4 | 8.9 | 6.6 | 6.0 |
EBIT | 27.1 | 26.5 | 76.9 | 13.5 |
EBIT margin % | 7.1 | 7.3 | 5.6 | 1.2 |
Net Debt/Net Cash (-) | 155.6 | 87.3 | 155.6 | 87.3 |
of which from leasing IFRS 16 | 68.5 | 66.3 | 68.5 | 66.3 |
Capital employed | 561.8 | 421.8 | 561.8 | 421.8 |
ROCE % | 16.7 | 3.7 | 16.7 | 3.7 |
Adjusted ROCE % | 14.7 | 11.2 | 14.7 | 11.2 |
*Raw materials prices at IFG have risen since the second half of the 2020/2021 financial year. Price mechanisms in customer agreements mean that sales increase as raw materials prices rise and decrease as prices fall. Because raw materials prices affect both the sales price and raw materials costs, gross profit remains unchanged, but with a certain lag.
Drake Extrusion is North America's leading | Share of Duroc's sales |
producer of polypropylene-based colored | (R12) |
filament yarn and staple fiber. Filament yarn | |
is used mostly by customers who produce | |
fabrics for the furniture industry. Staple fiber | |
is used for production in a variety of areas | 20% |
including flooring, rugs, furniture, technical | |
filters, car interiors and nonwoven fabrics. |
The business is located in Virginia, USA.
- Sales volumes decreased by 9 percent in the quarter, and the increase in sales revenues is entirely attributable to price increases, which compensated for increased raw material prices and labor costs.
- While demand for staple fiber from automotive has recovered somewhat, it is not back to the levels seen before the semiconductor shortage. A certain weakening in the demand for furniture fabrics was noted during the quarter as a result of inflation and a more uncertain economic environment.
- The labor situation has stabilized and led to our ability to report a positive EBIT during the final quarter of the year.
- The improvement in earnings was dampened in the last month of the quarter as raw materials prices rose once again as a result of the war in Ukraine.
2021/ | 2020/ | 2021/ | 2020/ | |
2022 | 2021 | 2022 | 2021 | |
Amounts in MSEK | Q4 | Q4 Q1-Q4Q1-Q4 | ||
Net Sales | 203.1 | 179.6 | 746.3 | 622.2 |
Growth, Net Sales % | 13.1 | 131.5 | 19.9 | 14.4 |
Organic growth % | -2.3 | 159.5 | 8.6 | 26.9 |
EBITDA | 12.7 | 11.5 | 26.4 | 44.6 |
EBITDA margin % | 6.3 | 6.4 | 3.5 | 7.2 |
EBIT | 4.2 | 6.5 | -3.8 | 20.3 |
EBIT margin % | 2.1 | 3.6 | -0.5 | 3.3 |
Net Debt/Net Cash (-) | 44.7 | 26.1 | 44.7 | 26.1 |
of which from leasing IFRS 16 | 11.1 | 12.8 | 11.1 | 12.8 |
Capital employed | 342.8 | 278.6 | 342.8 | 278.6 |
ROCE % | -1.2 | 8.2 | -1.2 | 8.2 |
D U RO C YE A R - E N D R E PO R T 2 0 21 / 20 22 | 5 ( 1 9 ) |
Cresco develops, produces and sells textile- | Share of Duroc's sales |
based solutions for the professional | (R12) |
cultivation of crops and is one of the leading | |
players on the global market. The products | |
contribute to favorable environments in | |
greenhouses, mushroom farms and | |
composting installations. The most important | 7% |
product is a climate screen for greenhouses that controls the cultivation climate, contributing to a more efficient process with lower energy consumption. Cresco's production facility is in Belgium.
- Net sales decreased by 26 percent during the fourth quarter compared to the strongyear-over-year quarter, and organic growth decreased by 29 percent.
- The quarter was characterized by general restraint in customer investment appetite due to volatile energy prices and market uncertainties, which were reflected in lower activity in the ongoing greenhouse projects Cresco is delivering to.
- Higher energy and raw materials prices have led to capital tied up in inventory.
- June developed better than expected with an increased order intake and order levels totaling MEUR 11.3, which was on par with the previous quarter.
- In the longer term, rising energy prices are expected to lead to increased demand for Cresco's climate screen range as the products contribute to energy efficiency and cost savings.
2021/ | 2020/ | 2021/ | 2020/ | |
2022 | 2021 | 2022 | 2021 | |
Amounts in MSEK | Q4 | Q4 | Q1-Q4Q1-Q4 | |
Net Sales | 64,2 | 86,6 | 276,3 | 296,8 |
Growth, Net Sales % | -25,9 | 22,3 | -6,9 | 14,8 |
Organic growth % | -28,5 | 22,3 | -7,8 | 14,8 |
EBITDA | 7,2 | 20,8 | 35,5 | 46,7 |
EBITDA margin % | 11,2 | 24,0 | 12,9 | 15,7 |
EBIT | 5,8 | 19,4 | 30,1 | 41,8 |
EBIT margin % | 9,0 | 22,4 | 10,9 | 14,1 |
Net Debt/Net Cash (-) | 38,1 | 27,8 | 38,1 | 27,8 |
of which from leasing IFRS 16 | 4,8 | 5,0 | 4,8 | 5,0 |
Capital employed | 218,5 | 172,8 | 218,5 | 172,8 |
ROCE % | 16,0 | 24,7 | 16,0 | 24,7 |
Cotting Group has been established in the international coated textiles market for more than 60 years. Its products consist of PVC and PU coated fabrics that are used in a variety of areas, including the fashion industry, protective clothing, hospital beds, car interiors, dental chairs, furniture and wall coverings. Cotting has production facilities in France and Belgium.
Share of Duroc's sales (R12)
13%
- Net sales increased a little during the quarter, but continue to be heavily affected by Griffine's lower volumes in above all automotive, which remain at a lower level due to the semiconductor shortage.
- The effect ofcost-cutting measures together with raised prices to customers to compensate for increased raw materials prices helped dampen the losses, but as yet the price increases have not fully taken effect. High prices for materials and energy continue to be a challenge.
- EBIT total MSEK-30.0(-7.9) for the quarter, primarily due to the low sales volumes in Automotive.
- Despite a market slowdown in June, demand for new cars is high due to the component shortage that is a factor in the inability of production to meet demand. Thus, the sales situation is expected to improve in the long term. However, Griffine will have to face low or negative earnings until the semiconductor situation improves. Plastibert is not affected to the same extent and its order intake is good.
2021/ | 2020/ | 2021/ | 2020/ | |
2022 | 2021 | 2022 | 2021 | |
Amounts in MSEK | Q4 | Q4 Q1-Q4Q1-Q4 | ||
Net Sales | 128.5 | 123.3 | 478.7 | 535.6 |
Growth, Net Sales % | 4.2 | 46.7 | -10.6 | -7.9 |
Organic growth % | 1.0 | 54.3 | -11.4 | -4.0 |
EBITDA | -25.0 | -3.6 | -53.1 | 4.5 |
EBITDA margin % | -19.5 | -2.9 | -11.1 | 0.8 |
Adjusted EBITDA | -25.0 | -3.6 | -51.4 | 10.7 |
Adjusted EBITDA-margin, % | -19.5 | -2.9 | -10.7 | 2.0 |
EBIT | -30.0 | -7.9 | -87.3 | -12.4 |
EBIT margin % | -23.4 | -6.4 | -18.2 | -2.3 |
Net Debt/Net Cash (-) | 165.3 | 33.9 | 165.3 | 33.9 |
of which from leasing IFRS 16 | 2.8 | 4.9 | 2.8 | 4.9 |
Capital employed | 329.3 | 292.7 | 329.3 | 292.7 |
ROCE % | -28.4 | -4.3 | -28.4 | -4.3 |
Adjusted ROCE % | -23.1 | -2.1 | -23.1 | -2.1 |
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Duroc AB published this content on 19 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 August 2022 08:33:03 UTC.
