DUROC AB YEAR-END REPORT
JULY 2022 - JUNE 2023
UNEVEN DEVELOPMENT IN THE GROUP - CONTINUED STRONG POSITION
Fourth quarter April 2023 - June 2023
- Net sales decreased by 22 percent to MSEK 806.7 (1,033.7) Organic growth** for the remaining operations was-20 percent. The decrease of raw material costs reduces the net sales, as these, to a considerable extent, also reduces the price to the end customer.
- Adjusted EBITDA* decreased by 40 percent to a total of MSEK
- (51.4), equivalent to an adjusted EBITDA* margin of 3.8 percent (5.0). Adjusted EBITDA excluding Griffine was MSEK
- (75.6).
- Adjusted EBIT* totaled MSEK 5.2 (25.7). Adjusted EBIT excluding Griffine was MSEK 5.2 (53.8).
- Operating profit (EBIT) totaled MSEK 14.9 (26.0).
- Cash flow from operating activities totaled MSEK 45.7(-77.3).
- Earnings after tax totaled MSEK-28.0 (30.1) mostly related to non-cash flow affecting tax costs due to changes in deferred tax amounting to MSEK 29.7, mostly due to changed tax rules for deferred tax in Belgium, affected the earnings.
- Adjusted earnings per share totaled SEK-0.97 (0.77).
- Earnings per share totaled SEK-0.72 (0.77).
- Equity totaled MSEK 1,085.8 (1,237.8) and the equity/assets ratio was 58 percent (52).
- During the quarter, the insolvency proceedings in Griffine Enduction S.A has for the most part been finalized. Duroc has no further commitments regarding the business and no further costs are expected to burden the groups' result.
July 2022 - June 2023
- Net sales decreased by 6 percent to MSEK 3,493.1 (3,720.5). Organic growth stood at-12** percent.
- Adjusted EBITDA* decreased by 41 percent to a total of MSEK
- (192.1), equivalent to an adjusted EBITDA* margin of
- percent (5.2). Adjusted EBITDA excluding Griffine totaled MSEK 122.0 (245.5).
- Adjusted EBIT* totaled MSEK 4.6 (90.1). Adjusted EBIT excluding Griffine totaled MSEK 21.7 (159.3).
- The operating loss (EBIT) totaled MSEK-187.6 (83.0), whereof MSEK -179.3 is related to write downs on consolidated level regarding Griffine, see further note 8.
- Cash flow from operating activities totaled MSEK 217.2
- (-36.8).
- Earnings after tax totaled MSEK-238.1 (64.9).
- Adjusted earnings per share totaled SEK-1.17 (1.85).
- Earnings per share totaled SEK-6.10 (1.67).
- Cash and cash equivalents as of June 30th totaled MSEK
- (26.1), and net debt excluding lease liabilities (IFRS 16) totaled MSEK 115.0 (265.7). Unutilized credit facilities totaled MSEK 272.7 (205.0).
- In December 2022, the IFG Holdings Ltd pension fund purchased an annuity through abuy-in solution that provides an annual reduction of expenditures of around MSEK 6 and the cessation of all pension obligations within 12-14 months.
- In view of that the negative result in all material respects consists ofone-off effects not affecting cash flow and that the financial position has strengthened significantly, the board suggests a preserved dividend of SEK 0.25 per share.
2022/2023 | 2021/2022 | 2022/2023 | 2021/2022 | |
Group (MSEK) | Q4 | Q4 | Q1-Q4 | Q1-Q4 |
Net sales | 806.7 | 1,033.7 | 3,493.1 | 3,720.5 |
EBITDA | 43.2 | 51.7 | 104.0 | 199.4 |
Adjusted EBITDA* | 30.7 | 51.4 | 114.0 | 192.1 |
Adjusted EBITDA*-margin, % | 3.8 | 5.0 | 3.3 | 5.2 |
Operating profit/loss (EBIT) | 14.9 | 26.0 | -187.6 | 83.0 |
Adjusted EBIT* | 5.2 | 25.7 | 4.6 | 90.1 |
Profit/loss after tax | -28.0 | 30.1 | -238.1 | 64.9 |
Profit per share, SEK | -0.72 | 0.77 | -6.10 | 1.67 |
Adjusted profit per share, SEK* | -0.97 | 0.77 | -1.17 | 1.85 |
Cashflow from operating activities | 45.7 | -77.3 | 217.2 | -36.8 |
Net debt excl. lease liability from IFRS 16 | 115.0 | 265.7 | 115.0 | 265.7 |
Net debt incl. lease liability from IFRS 16 | 251.1 | 396.0 | 251.1 | 396.0 |
Net debt/Equity ratio, % | 23 | 32 | 23 | 32 |
*Adjusted for items affecting comparability. A reconciliation of amounts can be found on page 18.
**Refers to growth adjusted for exchange rate fluctuations and structural changes such as the deconsolidation of Griffine.
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 UR OC YE A R - E N D RE P O R T 2 0 22 / 20 2 3 | 2 ( 1 9 ) |
CEO'S COMMENT
EBIT for the fourth quarter were in line with the update announced on June 21st, i.e., slightly positive. The quarter ended with a good result in June. Net sales decreased by 22 percent to MSEK 806.7 (1,033.7) and the adjusted operating profit totaled MSEK 5.2 (25.7). Units in industrial trading and mechanical engineering developed well during the quarter while the polymer-related subsidiaries noted a continued volatile order intake linked to inventory adjustments and price instability.
The Duroc Group has shown a clear heterogeneous structure during the last few years. Our mostly Swedish based industrial trade and mechanical engineering entities are growing fast, with good profitability, strong free cash flows, as well as a limited amount of capital tied up. Large values have been created in the development of these entities during the last few years which have generated a total EBIT of MSEK 88 with a ROCE of about 50 percent during 2022/2023.
EBIT amounted to MSEK -238,1 (64,9). Then negative result was a consequence of one-offs which mainly includes the non cash flow affective write down of now completely terminated Griffine in the amount of MSEK -179,3. The adjusted EBIT amounted to MSEK 4,6 (90,1). The decrease from last year was mainly due to the polymer-based units, situated in Europe and the US, was suffering from a difficult market conditions and economic environment. displaying a weak ROCE.
The overall earnings of the Duroc Group is therefore being dragged down by the capital intense polymer-based entities, which obscures the considerable value creation that the successes in the other portfolio companies entail.
Fourth quarter April - June 2023
Demand from the metalworking industry in the Nordic and Baltics was good. This contributed to a well performing DMT Group. The demand for mechanical maintenance and industrial motors was strong, which resulted in a good quarter for Rail and the subsidiaries in Smaller Company Portfolio.
The polymer-based portfolio companies, with a focus on fibers and coated textiles experienced a challenging quarter. As a whole, the industry was characterized by inventory adjustments, unstable prices and great uncertainty for the future. Most actors are reported to have suffered from these factors. The polymer- related subsidiaries in Duroc, i.e. IFG, Drake Extrusion, Cresco and Plastibert also noted great order intake fluctuations, which resulted in an underperforming earnings development.
Griffine, underwent a reconstruction process where a third party took over the operation through an assets and liabilities transfer. As a result, a major source of losses with large investment needs has been separated from the group. No further financial effects on the group beyond those reported previously are expected to arise.
Financial year July 2022 - June 2023
The financial year developed far below expectations. Net sales decreased by 6 percent to MSEK 3,493.1 (3,720.5). Adjusted EBIT totaled MSEK 4.6 (90.1). The factors underlying the Group's earnings trend include the totally unsadisfying performance of the above-mentioned Griffine, as well as the market conditions that have affected the fiber industry negatively
At the same time, other portfolio companies have developed according to expectations. DMT has grown its turnover to around MSEK 600 with good profitability, and Rail noted a record year regarding sales and earnings. UPN and DLC in Smaller Company Portfolio distinguished themselves with extremely good earnings development. Like its competitors,
Cresco experienced, as its competitors, a more anxious market and poorer prospects due to the war in its part of the world, while the inflationary effects also had a negative impact on the Belgian unit.
Despite the challenges during the year, the Group remains strong. Cost savings, price adjustments and a focus on keeping working capital at reasonable level helped Duroc maintain a good financial position. Net debt remains low and there are significant unutilized credit facilities available for e.g., potential asset acquisitions or investments in existing operations.
Outlook
During the coming financial year, earnings trends in polymer- related companies are expected to turn in the right direction from a low level. Current inventory levels with customers are estimated to be insufficient to cover requirements during the coming 12- month period. Raw materials prices are decreasing, at the time of writing, consumer confidence in the USA is reportedly more positive than before. We have during many years, invested a significant amount in product-and marketing development as well as production equipment and we are well equipped for an expected increase in demand.
The subsidiaries that developed positively in 2022/23 are now stable as a result of the improvement efforts made in recent years. We will also review the very core of Duroc and plan for structural measures aimed at achieving a less volatile earnings development in the years ahead.
Duroc's prudent financial approach has created good conditions for both organic and acquisitional growth moving forward, and despite turbulent market factors, the Group has navigated such that we now find ourselves in a secure position.
We have full control over any strategic transactions in the same time as we can concentrate on business development, and we have many options for taking advantage of any potential opportunity that presents itself.
I would like to take this opportunity to thank our dedicated and capable employees who, in the face of exceptionally challenging factors, made such a strong contribution to Duroc's excellent financial position.
John Häger
CEO
D UR OC YE A R - E N D RE P O R T 2 0 22 / 20 2 3 | 3 ( 1 9 ) |
DEVELOPMENTS IN DUROC PORTFOLIO COMPANIES
Duroc's portfolio companies consist of International Fibres Group (IFG), Drake Extrusion, Cresco, Plastibert (formerly part of Cotting Group), Duroc Machine Tool (DMT), Duroc Rail and Smaller Company Portfolio (SCP), 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 2022 - June 2023. 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) PROFORMA* | ADJUSTED EBIT PER PORTFOLIO COMPANY (R12) | ||||||||
PROFORMA* | |||||||||
Duroc Rail | Smaller | 50 | |||||||
5% | Comp Portf | 40 | |||||||
6% | |||||||||
DMT Group | IFG | 30 | |||||||
19% | 37% | 20 | |||||||
Plastibert | |||||||||
10 | |||||||||
5% | |||||||||
0 | |||||||||
Cresco | Drake | IFG | Drake Cresco Plastibert | DMT Duroc Rail | Smaller | ||||
- 10 | Extrusion | Group | Comp | ||||||
9% | |||||||||
Extrusion | Portf | ||||||||
19% | - 20 | ||||||||
- 30
*Proportion of net sales and adjusted EBIT per portfolio company shown excluding the deconsolidated operation Griffine Enduction S.A.
Fourth quarter April 2023 - June 2023
Net sales decreased by 22 percent to MSEK 806.7 (1,033.7). Organic growth stood at -22 percent, where Cresco, Plastibert, Duroc Rail and Smaller Company Portfolio increased their sales. IFG, DMT and Drake Extrusion reported lower sales than the comparison quarter due to lower sales volumes and strong comparison quarters.
Adjusted EBITDA totaled MSEK 30.7 (51.4) and the adjusted EBITDA margin totaled 3.8 percent (5.0) driven by lower gross profit. Duroc Rail and Smaller Company Portfolio improved their profitability through good cost control. Other portfolio companies reported a lower EBITDA compared to the year-over-year quarter. Adjusted EBIT totaled MSEK 5.2 (25.7) and operating income
MSEK 14.9 (26.0).
Earnings after tax totaled MSEK -28.0 (30.1) due to a reduction in allowed deductions for deferred tax in Belgium.
DEVELOPMENT OF DUROC'S NET SALES PROFORMA*
MSEK
-
000
900
800
700
600
500
400
300
200
100
0
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 |
2020/2021 | 2021/2022 | 2022/2023 |
*Duroc Group development excluding Griffine Enduction S.A.
July 2022 - June 2023
Net sales decreased compared to the previous financial year and totaled MSEK 3,493.1 (3,720.5). Organic growth stood at
-12 percent, mainly due to lower sales volumes in IFG and Drake, and this was partly offset by increased sales in other companies.
Adjusted EBITDA totaled MSEK 114.0 (192.1) and the adjusted EBITDA margin was 3.3 percent (5.2), driven by higher costs for energy and labor. Duroc Rail and Smaller Company Portfolio increased their EBITDA compared to the previous year.
Adjusted EBIT totaled MSEK 4.6 (90.1) and operating income totaled MSEK -187.6 (83.0).
Earnings after tax totaled MSEK -238.1 (64.9).
DEVELOPMENT OF DUROC'S OPERATING PROFIT/LOSS (EBIT) PROFORMA*
MSEK 100
50 | |||||||||||
0 | |||||||||||
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 |
- 50 | 2020/2021 | 2021/2022 | 2022/2023 |
- 100 - 150 - 200
Q3 2020/2021 was affected by restructuring costs totaling MSEK 35.5. Q2 2022/2023 was affected by a group-related impairment of assets totaling MSEK 179.3 related to Griffine Enduction S.A.
D UR O C YE A R - E N D RE P O R T 2 0 22 / 20 23
International Fibres Group (IFG) is one of Europe's leading manufacturers of 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 interiors and nonwoven fabrics, which means a diversified customer portfolio. IFG has production facilities in Belgium, the United Kingdom and Austria.
4 ( 1 9 )
Share of Duroc's sales (R12)
37%
- Net sales decreased by 19.9 percent compared to the fourth quarter in the previous year, mainly due to lower prices for input goods*. Even though volumes decreased by 1 percent compared to theyear-over-year quarter, IFG can see a brighter, if slightly volatile, market ahead. The automotive segment noted continued high order intakes.
- EBIT totaled MSEK 4.4 (27.1), mainly due to decreased sales. The cost base was somewhat lower than theyear-over-year quarter, attributable mainly to lower energy and haulage costs. While compulsory pay rises in Belgium and Austria were partially offset by layoffs and reduced labor forces, they still had a negative effect on EBIT.
- Net debt remained low and totaled MSEK 37.8 (87.1) excluding IFRS 16 effects.
- During the year, IFG, in collaboration with its customers, focused on developing and broadening its product offering in niche products and sustainability where the margins are better than in the volume segment. There continues to be a growing market for more technologically advanced, sustainable products.
2022/ | 2021/ | 2022/ | 2021/ | |
2023 | 2022 | 2023 | 2022 | |
Amounts in MSEK | Q4 | Q4 Q1-Q4Q1-Q4 | ||
Net Sales | 305.2 | 381.0 | 1,201.5 | 1,384.9 |
Growth, Net Sales % | -19.9 | 5.5 | -13.2 | 19.8 |
Organic growth % | -26.4 | 2.0 | -18.4 | 17.4 |
EBITDA | 11.4 | 32.3 | 12.7 | 100.9 |
EBITDA margin % | 3.7 | 8.5 | 1.1 | 7.3 |
Adjusted EBITDA | 11.4 | 31.9 | 12.7 | 91.9 |
Adjusted EBITDA-margin, % | 3.7 | 8.4 | 1.1 | 6.6 |
EBIT | 4.4 | 27.1 | -15.2 | 76.9 |
EBIT margin % | 1.4 | 7.1 | -1.3 | 5.6 |
Net Debt/Net Cash (-) | 116.9 | 155.6 | 116.9 | 155.6 |
of which from leasing IFRS 16 | 79.2 | 68.5 | 79.2 | 68.5 |
Capital employed | 483.4 | 561.8 | 483.4 | 561.8 |
ROCE % | -3.2 | 16.7 | -3.2 | 16.7 |
Adjusted ROCE % | -3.2 | 14.7 | -3.2 | 14.7 |
*Price mechanisms in customer agreements for polypropylene 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 producer of polypropylene-based colored 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 including flooring, rugs, furniture, technical filters, car interiors and nonwoven fabrics. The business is located in Virginia, USA.
Share of Duroc's sales (R12)
19%
- Net sales decreased by 28.8 percent in relation to theyear-over- year quarter and organic growth was -33.8 percent. This was mainly due to a drop in volumes by 25 percent and because price mechanisms in contracts led to a reduction in sales prices.
- Demand for staple fibers declined and sales volumes decreased by 37 percent compared to the same quarter during the previous year. We note a certain nervousness in the market due to the banking crisis, and over the short term customers drew down on their inventories, which affected order intake. Sales of filament yarn increased during the quarter and volumes were 48 percent higher than theyear-over-year quarter. While the macroeconomic situation still affects the industry and end consumers, the company notes that customer inventories are now reaching their lowest levels.
- The EBIT totaled MSEK-0.1 (4.2). The cost base was higher than the year-over-year quarter, mainly due to reduced sales, higher personnel costs and increased costs for energy and maintenance.
- Because it kept personnel on during the pandemic, Drake received a government grant in the form of a retroactive refund of Social Security contributions totaling USD 1.1 million, and this had a positive impact on the EBIT.
2022/ | 2021/ | 2022/ | 2021/ | |
2023 | 2022 | 2023 | 2022 | |
Amounts in MSEK | Q4 | Q4 Q1-Q4Q1-Q4 | ||
Net Sales | 144.6 | 203.1 | 623.8 | 746.3 |
Growth, Net Sales % | -28.8 | 13.1 | -16.4 | 19.9 |
Organic growth % | -33.8 | -2.3 | -27.5 | 8.6 |
EBITDA | 8.9 | 12.7 | 4.1 | 26.4 |
EBITDA margin % | 6.2 | 6.3 | 0.7 | 3.5 |
Adjusted EBITDA | -2.8 | 12.7 | 13.0 | 26.4 |
Adjusted EBITDA-margin, % | -2.0 | 6.3 | 2.1 | 3.5 |
EBIT | -0.1 | 4.2 | -32.3 | -3.8 |
EBIT margin % | -0.1 | 2.1 | -5.2 | -0.5 |
Net Debt/Net Cash (-) | 24.7 | 44.7 | 24.7 | 44.7 |
of which from leasing IFRS 16 | 7.6 | 11.1 | 7.6 | 11.1 |
Capital employed | 307.6 | 342.8 | 307.6 | 342.8 |
ROCE % | -10.2 | -1.2 | -10.2 | -1.2 |
Adjusted ROCE % | -7.3 | -1.3 | -7.3 | -1.3 |
D UR O C YE A R - E N D RE P O R T 2 0 22 / 20 23
Cresco develops, produces and sells textile- based solutions for the professional 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 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.
5 ( 1 9 )
Share of Duroc's sales (R12)
9%
- Net sales increased by 8.6 percent during the fourth quarter, primarily due to foreign exchange effects. Organic growth was-0.4 percent. Volumes were 6 percent lower than the year-over- year quarter, which was compensated by increased prices.
- EBIT was affected by increased materials prices, where delayed price rises were not able to fully compensate for raw materials costs. Otherwise, cost adaptations were made on an ongoing basis such that the cost base did not increase compared to the fourth quarter of the previous year, despiteinflation-based pay increases and higher energy costs.
- The market showed continued signs of recovery where the EU gasprice-ceiling contributed to a degree of market stabilization. The demand for energy-saving climate screens for greenhouses and recyclable ground cover fabric made from PLA (a biodegradable corn-based polymer) increased, while the investments deferred by customers due to the prevailing global situation must be made in the fullness of time.
- Moving forward, Cresco's efforts will focus on R&D, sales in new markets and continued cost adjustments.
2022/ | 2021/ | 2022/ | 2021/ | |
2023 | 2022 | 2023 | 2022 | |
Amounts in MSEK | Q4 | Q4 Q1-Q4Q1-Q4 | ||
Net Sales | 69.7 | 64.2 | 278.9 | 276.3 |
Growth, Net Sales % | 8.6 | -25.9 | 0.9 | -6.9 |
Organic growth % | -0.4 | -28.5 | -5.8 | -7.8 |
EBITDA | -1.3 | 7.2 | 1.5 | 35.5 |
EBITDA margin % | -1.8 | 11.2 | 0.5 | 12.9 |
EBIT | -2.8 | 5.8 | -4.2 | 30.1 |
EBIT margin % | -4.0 | 9.0 | -1.5 | 10.9 |
Net Debt/Net Cash (-) | 31.2 | 38.1 | 31.2 | 38.1 |
of which from leasing IFRS 16 | 4.9 | 4.8 | 4.9 | 4.8 |
Capital employed | 224.1 | 218.5 | 224.1 | 218.5 |
ROCE % | -1.9 | 16.0 | -1.9 | 16.0 |
Plastibert has been established in the international coated textiles market for more than 60 years. Its products comprise PVC and PU coated fabrics that are used in a variety of areas, including rainwear and protective clothing, PPE, furniture for public spaces, wall coverings and vehicle interiors. Plastibert's production facility is in Belgium.
*Plastibert was previously a part of Cotting Group together with French Griffine Enduction SA, but now that Griffine is no longer consolidated into the group's accounts, it reports as its own business area.
Share of Duroc's sales (R12)
5%
- Net sales increased by 3.2 percent during the quarter, and organic growth decreased by-5.6 percent mainly due to lower volumes that were partially offset by price rises, which had a positive effect on the gross profit margin in this and the previous quarter.
- During the quarter, operating earnings totaled MSEK-1.3(-1.8), an improvement compared to the comparison quarter. Primarily due to a reduction of energy costs and a slight increase in personnel costs that could be compensated by layoffs.
- The company noted an increased order intake in both the furniture upholstery and automotive segments. The medical segment is stable while mattresses, protective fabrics and the smaller segments decreased.
- A project was launched aimed at improving capacity utilization in production. Operating income margins are expected to continue improving moving forward as the price increases take effect.
2022/ | 2021/ | 2022/ | 2021/ | |
2023 | 2022 | 2023 | 2022 | |
Amounts in MSEK | Q4 | Q4 Q1-Q4Q1-Q4 | ||
Net Sales | 45.6 | 44.2 | 176.9 | 168.8 |
Growth, Net Sales % | 3.2 | 3.9 | 4.8 | 2.9 |
Organic growth % | -5.6 | 0.8 | -0.2 | 2.1 |
EBITDA | -0.3 | -0.8 | -7.5 | 2.1 |
EBITDA margin % | -0.6 | -1.8 | -4.2 | 1.2 |
EBIT | -1.3 | -1.8 | -11.8 | -2.0 |
EBIT margin % | -2.9 | -4.1 | -6.7 | -1.2 |
Net Debt/Net Cash (-) | 6.0 | 4.3 | 6.0 | 4.3 |
of which from leasing IFRS 16 | 0.3 | 0.4 | 0.3 | 0.4 |
Capital employed | 70.1 | 74.2 | 70.1 | 74.2 |
ROCE % | -16.2 | -3.0 | -16.2 | -3.0 |
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Duroc AB published this content on 18 August 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 August 2023 07:16:01 UTC.
