Forbo Posts Loss in 2004
Eglisau, Switzerland, March 22--Forbo sales rose in the past year by 1.5% to CHF 1.622 billion (plus 2.3% in local currencies). Overall, Forbo’s three operative businesses achieved fairly satisfactory results, according to the company. The operating profit (EBIT, before special charges) declined by 7.5% to CHF 55.9 million. The Group loss of CHF 157.4 million includes special charges of CHF 161.9 million.
In the year 2004, the flooring business achieved sales of CHF 737.6 million. This is a slight decrease of 0.9% compared with the previous year (minus 1.5% in local currencies). Linoleum recorded strong growth in North America and declining sales in Western Europe. Vinyl sales improved in the contract business, but decreased in the residential market in Western Europe. The operating profit (before special charges) reached its target, but at CHF 42.4 million it was 10.7 % lower than in the previous year.
Companywide, the focus on added-value product segments in the second half-year resulted in a slightly higher gross profit margin for the overall year in spite of rising raw material prices. Clearly higher operating expenses resulted in an operating profit before depreciation and amortization (EBITDA, before special charges) of CHF 143.1 million (previous year: CHF 156.7 million).
The operating profit after depreciation and amortization (EBIT, before special charges) amounted to CHF 55.9 million, a decrease of 7.5 % compared to previous year. The restructuring measures announced particularly for the flooring and belting businesses led to restructuring and impairment charges on tangible and intangible assets of CHF 100.4 million in total. Thus, the operating result (EBIT, after special charges) amounted to CHF –44.5 million.
On the operative level, the adhesives business with CHF 34.9 million made a clearly higher contribution to the Group’s operating profit than in the previous year. At CHF 2.4 million, the operating result of the belting business had a positive influence on the Group result compared with the previous year, whilst flooring contributed an EBIT result of CHF 42.4 million (previous year: CHF 47.5 million).
The Group loss of CHF 157.4 million (previous year: CHF 16.1 million profit) mirrors total special charges of CHF 161.9 million, with the three businesses accounting for CHF 95.6 million (before tax). This means that clearly higher finance and tax expenses also contributed to the Group loss.
In the period under review, the free cash flow amounted to CHF 43.1 million (previous year: CHF 88.5 million). The CHF 45.4 million decrease over the previous year is due to a decline of the cash inflow from operating activities by CHF 28.6 million, on the one hand, and CHF 16.8 million higher investments, after asset disposals, on the other hand.
The cash flow from operating activities and cash inflow resulting from the capital increase (CHF 187 million, net) will be used for restructuring measures, especially in the flooring business, and for selective acquisitions in the adhesives business.
Net debt and the debt to equity ratio were clearly reduced by the successful capital increase of some CHF 187 million (net). At the same time the transaction increased the Group’s financial flexibility. Besides, special charges could easily be absorbed within the equity capital. Net debt at the end of the year was CHF 131.0 million (previous year: CHF 379.3 million).
In view of the Group loss, the Board of Directors will ask the Annual General Meeting of Shareholders on April 29, 2005 to approve its proposal not to distribute a dividend for the business year 2004.
The adhesives business recorded very satisfactory results. Sales reached CHF 577.7 million, plus 3.6 % over the previous year (plus 5.7 % in local currencies). The business benefited from the continued focus on strategic core segments and the integration of the American adhesives manuf