Chihuahua, Mexico, July 18--The second quarter of 2003--traditionally the slowest quarter of the year for Interceramic--saw sales increase slightly from the same period in 2002 but not up to the company's expectations for the quarter.
With the North American construction industry retaining continuing strength in the face of the global economic downturn, the markets are extremely competitive with considerable supply of products from producers all over the world for consumers to choose from.
The burgeoning supply has made it increasingly difficult to differentiate products and grab consumer attention. The firm's consolidated sales of US$72.2 million for the second quarter of the year were 5.49 percent more than second quarter sales of US$68.4 million in 2002, but lower gross margin for the period resulted in gross income for the quarter virtually identical to the same period a year ago.
For the first six months of 2003, consolidated sales were pretty much flat, at US$146.3 million compared to US$145.0 million in the first half of 2002.
Sales in Mexico for the second quarter were up 7.17 percent from the second quarter of 2002, at US$37.9 million. The amount of product sold by the company in Mexico in the second quarter increased by 22.64 percent over the second quarter of 2002 with increased sales levels coming both from independent and company owned distribution.
The same basic trend holds true for the first six months of 2003, with Mexican sales of US$79.9 million barely ahead of sales of US $79.6 million, while product sales grew by 16.95 percent over the two respective periods.
However, the company's expectations for sales in Mexico remain much higher, particularly in the better margin products. Much has been invested by the company in sales and customer service infrastructure over the past year in order to facilitate higher product sales, and its objective for the rest of the year in Mexico is raise sales levels.
In the International markets, second quarter 2003 sales were slightly better than sales in the same period of last year, up 3.69 percent to US$34.3 million from US$33.1 million. Sales for the quarter were also up from the first quarter of the year--6.69 percent higher--and represent record sales for a quarter in the International markets.
For the first half, International sales of US$66.4 million were only 1.59 percent higher than in the first six months of 2002 with the amount of product sold over the first six months of 2003 in the International markets 10.47 percent lower than last year.
Even with higher consolidated sales for the second quarter of 2003 over the second quarter of 2002, the increased levels of operating expenses to enable movement of greater product volume through the firm's distribution networks in the U.S. and Mexico impacted operating income as sales did not catch up. At US$4.7 million, operating income for the quarter was 26.00 percent behind operating income of US$6.4 million recorded in the same period of last year.
EBITDA suffered as well, dipping to US$8.6 million in the second quarter of 2003, 13.81 percent lower than the US$10.0 million of last year. On a six-month basis, operating income of US$11.1 million is 24.78 percent less than operating income of US$14.8 million recorded in the first six months of 2002 and EBITDA of US$18.8 million falling 14.46 percent behind the US$21.9 million in the first six months last year.
While results were disappointing, the firm's recent investment in customer service improvements such as the Oracle supply chain management system, increased levels of inventories and a completely revamped tile selection and packaging system gives Interceramic an edge over its cometitors, even the more distant in Europe and South America.
