Zurich/Eglisau, Swiitzerland, Mar. 23--In 2003, the Forbo Group had to struggle with adverse economic conditions in important core markets coupled with an unfavorable exchange rate development of the US dollar.
However, the market positions were maintained to a large extent and in some regions the positions could be improved in local currency terms. Nevertheless, the
profitability is unsatisfactory and did not meet the firm's expectations.
Sales rose to CHF 1,599 million or 4% compared with the previous year when sales amounted to CHF 1,531 million. In local
currency the increase was 7%. The sales growth was almost completely the result of acquisitions made in 2002. All in all, the sales development in Western Europe was unsatisfactory. Positive exceptions are France and Southern Europe for the flooring and adhesives businesses, and Germany for belting.
Eastern Europe, North America and especially Asia remained on a growth course in
all three businesses.
The Forbo Group has a solid market position in its three core businesses. Economically speaking, the result achieved in the
course of the year did not meet expectations. The main reason for this result was the global economic situation characterized also in 2003 by substantial and declining investments in public buildings, offices and production plants – investments that are critical for our business.
Additional factors were the uncertainties over the Iraq war and the SARS lung disease in Asia. The disappointing economy was coupled with strong pressure on sales prices especially in Germany, the Netherlands, Great Britain, Scandinavia, and Switzerland.
The weak demand in the important core markets of Forbo had a significant impact on sales and profit. Additionally, the Group suffered from a very unfavorable exchange
rate of the US dollar during this time.
The decline in high-margin markets had a significant impact on profit. In addition, the US dollar weakness left its marks as the
Forbo Group generates a considerable sales percentage in North America and Asia on the basis of exports from the Euro currency
zone. Substantial overcapacities reinforced the intense competition resulting in fiercer competition. Higher raw material prices for
adhesives were another negative cost factor.
After higher amortization of goodwill due to acquisitions, the operating profit (EBIT) amounted to CHF 60 million, clearly below the previous year’s result (CHF 88 million). Lower EBIT combined with higher financial expenses and a higher tax rate led to an unsatisfactory Group profit of only CHF 16 million (previous year: CHF 43 million).
The flooring business recorded sales of CHF 729 million in 2003 compared with CHF 736 million in the previous year. This corresponds with 46% (48% the previous year) of total Group sales. Linoleum sales were CHF 362 and declined by 2% in local currency.
The main reason for the decrease is cited as the hesitant building and investment activities in the public sector. However, the market in France was seen as strengthening, as were Germany and southern Europe. Sharp decreases were observed in Great Britain, Benelux and Scandanavia, while North America continues to be a growth market.
Vinyl sales were CHF 309 million (in local currency, a decline of 1%). France showed good growth, as did southern and eastern Europe and Asia. Sales of vinyl in retail channels declined in Germany and the Benelux countries.
