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Groupe SEB: Nine-month 2017 Sales and Financial Data |

Groupe SEB: Nine-month 2017 Sales and Financial Data

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Regulatory News:

Groupe SEB (Paris:SK):


  • 9-month sales: €4,459m, +32.4% and +9.6% LFL*
  • Third-quarter sales: €1,518m, +26.1% and +8.8% LFL*
  • 9-month Operating Result from Activity: €389m, +25% and €406m, +30
    %,

    before one-off impacts of WMF purchase price allocation
  • Net financial debt: €2,075m, up €56m on December 31, 2016

* Like-for-like: at constant exchange rates and scope of consolidation

GENERAL COMMENTS ON GROUP PERFORMANCE

In third-quarter 2017, Groupe SEB continued its strong growth momentum
and its performance at September 30 was consistent with the good results
of the first half year as well as with the Group’s 2017 guidance.

Third-quarter sales totaled €1,518 million, up 26.1% and
comprising

organic growth of 8.8% (+€106 million), a currency
effect of -3.6% (-€44 million) and a scope and reclassification effect
of +20.9% (+€251 million).
The latter includes WMF sales,
consolidated since January 1, 2017, for €269 million, and the €18
million reclassification of some of Supor’s marketing spend to sales
deductions, with no impact on Operating Result from Activity. It should
be noted that EMSA, consolidated since July 1, 2016, no longer has an
impact on scope as of the third quarter.

Group sales in the first nine months came out at €4,459 million.
The 32.4% increase comprises organic growth of 9.6% (+€324
million), which continued to be driven by all the product lines, a currency
effect of -1.1%
(-€36 million) and a scope and reclassification
effect of +23.9%
, or €803 million (WMF and EMSA for +€813 million
and +€44 million, respectively, together with the Supor reclassification
of -€54 million).

Operating Result from Activity (Résultat Opérationnel d’Activité,
ROPA)

amounted to €389 million in the first nine months, up
25% on end-September 2016. It reached €406 million before one-off
impacts of WMF purchase price allocation
, divided into
€351
million for the Group excluding WMF (+12.5 %), and €55 million of WMF
contribution
, up 22%. The currency effect in the first nine months
was -€5 million, compared with -€104 million at end-September 2016.

Net financial debt stood at €2,075 million at September 30, 2017, compared
with €2,019 million at end-2016.

SALES BRIDGE BETWEEN 9-MONTH REVENUE, 2016 ? 2017

REVENUE BY REGION

 

Revenue (€m)

 

Nine-months

2016

 

Nine-months

2017

 

Change 2017/2016

 

 

 

 

 

As reported

 

Like-for-like*

EMEA

 

EMEA

Western Europe

Other countries

 

1.586

1.148

438

 

1.723

1.224

499

 

+8.7%

+6.7%

+13.8%

 

+7.4%

+4.4%

+15.3%

AMERICAS

 

AMERICAS

North America

South America

 

617

374

243

 

646

388

258

 

+4.7%

+3.5%

+6.4%

 

+2.6%

+3.6%

+1.1%

ASIA

 

ASIA

China

Other countries

 

1.165

844

321

 

1.277

944

333

 

+9.6%

+11.8%

+3.9%

 

+16.3%

+21.5%

+2.5%

 

 

TOTAL, EXCL. WMF

 

3.368

 

3.646

 

+8.3%

 

+9.6%

 

 

WMF

 

 

 

813

 

+8.0%

 

 

 

 

Groupe SEB

 

3.368

 

4.459

 

+32.4%

 

 

*Like-for-like: at constant exchange rates and scope of
consolidation

 

Rounded figures in € million

 

Percentages based on non-rounded figures

 

Sales (€m)

 

Third-quarter
2016

 

Third-quarter
2017

 

Change 2017/2016

 

 

 

 

 

As reported

 

Like-for-like

EMEA

 

EMEA

Western Europe

Other countries

 

570

416

154

 

604

427

177

 

+6.2%

+2.8%

+15.3%

 

+8.2%

+3.8%

+20.3%

AMERICAS

 

AMERICAS

North America

South America

 

265

160

105

 

246

145

101

 

-7.4%

-9.7%

-3.8%

 

-3.3%

-6.1%

+0.9%

ASIA

 

ASIA

China

Other Asian countries

 

369

259

110

 

399

285

114

 

+8.0%

+10.5%

+2.3%

 

+18.3%

+23.4%

+6.5%

 

 

TOTAL, EXCL. WMF

 

1.204

 

1.249

 

+3.8%

 

+8.8%

 

 

WMF

 

 

 

269

 

+4.0%

 

 

 

 

Groupe SEB

 

1.204

 

1.518

 

+26.1%

 

 

*Like-for-like: at constant exchange rates and scope of
consolidation

 

Rounded figures in € million

 

Percentages based on non-rounded figures

SALES BY REGION

EMEA

WESTERN EUROPE

In a European market that continued to trend positively as a whole, the
Group posted organic growth of 3.8% for the quarter and 4.4% for the
first nine months. Business activity in the third quarter was more
contrasted, with excellent performances in some markets, serving to
substantially strengthen our positions, and more complicated contexts in
others. Our ongoing development in physical retail together with our
rapid growth on e-commerce platforms contributed to the increase in our
sales.

In France, third-quarter sales, down 3.5%, reflected a mixed picture. In
cookware, following a first half-year strongly impacted by the
non-repeat of 2016 loyalty programs, the situation improved. In
contrast, in small electrical appliances, business activity was
characterized by a major divergence between “sell-inâ€� (our sales to our
clients), which decreased, and “sell-outâ€� (resale to final consumers),
which posted double-digit growth and led to significant market share
gains. This disparity is related to stock clearances on the part of some
retailers and logistics disruptions at end-September leading to delivery
postponements, in a context of still robust final demand. The end of the
year should see an improvement in “sell-inâ€�.

In Germany, the impressive momentum of the first half-year gathered yet
more speed owing to two reasons. First, the core business continued to
be fueled by the continuous roll-out of our flagship products (cookware,
automatic espresso machines, Dolce Gusto, Optigrill, Actifry, vacuum
cleaners), bolstered by wide-ranging marketing and advertising campaigns
and by gains in product listings. Second, new loyalty programs were
started up with retail customers. In Switzerland and Austria, the new
Nespresso partnerships are generating significant additional revenue
this year. In Spain, growth at end-September, driven by almost all
categories, remained solid, despite a third quarter penalized by a
complicated general backdrop. In Italy, we consolidated our market
shares through our mainstays (vacuum cleaners, ironing, electrical
cooking), both in physical and online retail. The Group trend in the UK
remained positive despite the uncertain economic and currency
environment. Business was much softer in Belgium, the Netherlands and
Scandinavia.

The third quarter also saw the continuation of the takeover of WMF’s
Consumer business by Groupe SEB market companies in Europe, apart from
Germany, Austria and Switzerland. While the new organization led to a
few temporary disruptions, it also served to strengthen activation plans
for the coming months with a view to reversing the difficult trend of
early 2017, due in part to high stock levels in the trade.

OTHER EMEA COUNTRIES

In the other EMEA countries, demand is rising sharply overall. At
+20.3%, organic growth in Group sales accelerated once again in the
third quarter, driven by the vast majority of countries and reflected in
market share gains.

In Central Europe (and Romania in particular), in the Balkan countries
and Ukraine, the robust increase in our business activity was based on
the geographical roll-out of our innovations, solid relationships with
retailers, reinforced over the years, and powerful marketing support. In
Russia, the Group continued in the third quarter to largely outperform
the market in both cookware and small electrical appliances, thanks to
new headway in ironing, coffee making (automatic espresso machines and
Dolce Gusto), hand-held mixers and grills, as well as substantial
progress in vacuum cleaners. We are also shoring up our positions in the
retail, notably through the network of Group proprietary stores. In
Turkey, despite price hikes made to offset the depreciation of the
Turkish lira, the Group posted organic growth of nearly 40% in the third
quarter, driven notably by cookware, electrical cooking and vacuum
cleaners. Growth is underpinned by increasingly local production and the
output of our plant in Egypt. However, this strong momentum should be
placed in perspective with the generally unstable environment, which
calls for a certain amount of caution.

The third quarter confirmed the difficult stance in Saudi Arabia and
India, whereas growth in local currency remained strong in Egypt.

AMERICAS

NORTH AMERICA

Following a soft second quarter, revenues for the third quarter declined
by roughly 6%. The decrease resulted from underperforming United States
and Canada.

In the former, while the overall impact of the launch of the new Krups
electrical cooking range at the start of the year has faded over the
months, despite substantial stock replenishment, third-quarter sales
were negatively impacted on three counts:

  • as reported in recent quarters, the difficulties of several US retail
    companies have led to store closures, stock clearances limiting
    sell-in or voluntary measures to reduce our customer risk. These
    effects are not fully offset yet by the increase in online sales;
  • competition in the cookware market has grown fiercer, with the arrival
    of new players;
  • in a contracting ironing market, Rowenta sales were down, with the
    strong momentum in garment steamers failing to neutralize the downturn
    in irons.

To respond to these issues, the Group is rolling out initiatives to
limit the impacts, but does not expect to right the situation by year’s
end.

Similarly, in Canada, following an excellent first half, the third
quarter proved difficult both in cookware and small electrical
appliances. Yet the launch of new products, gains in product listings,
retail expansion and large-scale promotional campaigns all stand as
positive factors for the end of the year. In contrast, third-quarter
business activity in Mexico was particularly robust, with growth of over
50% in pesos. The performance was fueled by the Group’s mainstay
categories (including cookware, irons and blenders) and by the
introduction of a new loyalty program with one of our key customers.

SOUTH AMERICA

The third quarter saw a turnaround in the exchange rate trend, with the
Group’s main operating currencies in Latin America, the Brazilian real
and Colombian peso, once again depreciating against the euro. As a
result, for the continent and in the first nine months, the difference
between reported sales (+6.4%) and LFL sales (+1.1%) shrank considerably
compared with the first half. The third quarter ended with the Group
posting a slight increase in sales on a like-for-like basis.

In Brazil, the overall environment remains complicated. Yet economic
indicators are showing signs of improvement, with consumption initiating
a slight recovery. Group sales in the third quarter remained stable
overall in real. The decline in fans (due to mediocre weather) and food
preparation was offset by an increase in cookware (particularly pressure
cookers), linen care (new iron models and strong performances in
semi-automatic washing machines) and single-serve coffee machines (Dolce
Gusto). In a more positively trending market, the ramp-up at the new
Itatiaia site will enable the Group to take optimum advantage of
increased competitiveness. In Colombia, the sales drop in pesos stemmed,
as in the first half, entirely from a downturn in fans, which continued
to be impacted by poor weather, while cookware, blenders and irons
enjoyed growth. Lastly, the Group benefited from strong momentum in
Argentina, similar to that in the first half of the year.

ASIA

CHINA

In a market that remained structurally buoyant, the Group achieved an
over 23% rise in sales in the third quarter on a like-for like basis,
once again reinforcing its positions in an environment that is still
extremely competitive. The vigorous growth was fueled by all business
activities and a policy of constant innovation. It is based on Supor’s
ongoing rapid development of online sales, its continued territorial
expansion, and powerful in-store and online marketing campaigns. In
cookware, while the Group’s main pillars – frying pans and saucepans,
pressure cookers, product sets, and woks – remained robust contributors,
momentum was driven in particular by accessories and kitchen tools,
especially vacuum flasks and thermos mugs. In small kitchen electrical
appliances, sales were boosted mainly by rice cookers, electric pressure
cookers, high-speed blenders, baking pans and slow cookers. Supor also
confirmed its headway in non-kitchen electrics, scoring major successes
in air purifiers and garment steamers and stepping up vacuum cleaner
sales.

As a reminder, to better reflect the nature of some expenses and ensure
full consistency with other Group entities in terms of financial
statements, an adjustment was made to the accounting format, whereby in
the first nine months €54 million in marketing expenses was reclassified
as a sales decrease (of which €18 million in the third quarter), with no
impact on Operating Result from Activity.

OTHER ASIAN COUNTRIES

Business activity continued to improve in non-China Asia in the third
quarter, with sales up 6.5% like-for-like, accelerating sharply on the
second quarter (+4.6%). However, excluding Japan and South Korea, the
driving forces of the region, it remained contrasted by market.

In Japan, in a somewhat lackluster market, the momentum established in
the second quarter continued, underpinned in particular by cookware and
kitchen tools, kettles, small food preparation appliances and ironing,
with a special mention going to garment steamers, a fast-growing but
increasingly competitive segment. All our flagship products were
supported by major growth drivers. Our self-owned stores also
contributed to the strong sales performance. In South Korea, the Group
maintained the solid momentum of the second quarter, fueled by cookware,
food preparation (blenders and mini-blenders) and a special oven
campaign with a retail customer. In Australia, we delivered an excellent
third quarter, with the successful launch of new cookware ranges, a
strong performance by Optigrill and our ongoing development in linen
care.

In the other South-East Asian countries, apart from the sharp drop in
sales in Singapore resulting from the non-repeat of a special deal in
2016, revenue continued to recover progressively in Thailand and
Vietnam, while growth gathered speed in Malaysia.

WMF

At end-September 2017, WMF sales totaled €813 million, up 8% compared to
2016 first 9 months, driven by the professional business (coffee and
hotel equipment: €426 million, +18%) when the small domestic equipment
business showed a slight decrease (€387 million, -1%).

WMF sales came out at €269 million in the third quarter, up 4% year on
year. The professional business was up 11%, and small domestic
equipment, down 3%. Compared to the first 6 months, the slowdown in
growth, which was expected, reflects the gradual dilution of the major
effect of the two large deals signed in 2016 with Canadian and Japanese
customers for Professional Coffee Machines, the large share of which has
been delivered in fourth-quarter 2016 and in the first half of 2017.
Apart from these contracts, WMF’s core business in professional coffee
continues to post double-digit growth with an excellent performance
across all markets. At end-September, despite a slight improvement in
the third quarter, the hotel equipment business remains on a negative
trend.

In parallel, following a positive second quarter, WMF’s Consumer
business slowed somewhat in the third quarter, down 3%, as a result of a
slight decrease in cookware sales in Germany and one-off disruptions in
activity in Europe, linked to the sales reorganization of subsidiaries.
However, WMF is showing:

  • a satisfying sales growth in its stores in Germany;
  • the continued development of sales in small electrical appliances,
    with the notable success of the Mini ranges and the Kult X MixGo
    blender;
  • solid growth in Asia-Pacific (China, South Korea, etc.), heightened by
    a cookware loyalty program in Taiwan.

OPERATING RESULT FROM ACTIVITY

At end-September 2017, Operating Result from Activity (Résultat
Opérationnel d’Activité, ROPA) totaled €389 million. The amount factors
in the impacts of the WMF purchase price allocation:

  • non-recurring impacts, fully integrated in the first half, of -€17
    million and concerning the re-evaluation of WMF stocks and the order
    book;
  • recurring impacts (depreciation) of -€7 million (-€9 million on an
    annual basis).

ROPA excluding the non-recurring impacts of the WMF purchase price
allocation amounted to €406 million, compared with €312 million in the
first nine months of 2016. It includes a +€55 million contribution from
WMF, up 22%, and a currency effect of -€5 million.

Third-quarter ROPA came to €175 million, including a scope effect of
+€24 million and currency effects of +€12 million. Beyond the first
impact of the increase in commodity prices, it includes a rise of nearly
€25 million in growth driver investments versus last year, ahead of a
fourth quarter expected to be much more moderate. Indeed, compared to
2016, the phasing of our RD, advertising and marketing investments in
2017 reflects our will to better balance the allocated amounts over the
quarters.

DEBT AT SEPTEMBER 30, 2017

At September 30, 2017, net financial debt stood at €2,075 million, up
€56 million on end-December 2016; this evolution reflects the usual
seasonality of the Group’s activity. The generation of operating cash
flow for the period totaled €124 million, based on a further improvement
in the working capital requirement. This amount is in line with our
expectations and our announced deleveraging objectives.

OUTLOOK

The Group’s high quality nine-month performance is consistent with our
expectations.

It leads us to confirm our 2017 objectives as stated at end-July. For
2017, and despite recent changes in exchange rates, the Group is
targeting:

  • organic sales growth exceeding 7% and an increase in reported revenue
    by more than 30%;
  • an increase in Operating Result from Activity, before one-off impacts
    of WMF purchase price allocation, by at least 30%;
  • an accretion of the consolidation of WMF of over 20% on 2017 net
    earnings per share. before the impact of the purchase price allocation.

GLOSSARY

On a like-for-like basis (LFL) – Organic

The amounts and growth rates at constant exchange rates and
consolidation scope in a given year compared with the previous year are
calculated:

  • using the average exchange rates of the previous year for the period
    in consideration (year, half-year, quarter);
  • on the basis of the scope of consolidation of the previous year.

This calculation is made primarily for sales and Operating Result from
Activity.

Operating Result from Activity (ORfA)

Operating Result from Activity (ORfA) is Groupe SEB’s main performance
indicator. It corresponds to sales minus operating costs, i.e. the cost
of sales, innovation expenditure (RD, strategic marketing and design),
advertising, operational marketing as well as commercial and
administrative costs. ORfA does not include discretionary and
non-discretionary profit-sharing or other non-recurring operating income
and expense.

Adjusted EBITDA

Adjusted EBITDA is equal to Operating Result from Activity minus
discretionary and non-discretionary profit-sharing, to which are added
operating depreciation and amortization.

Net debt (or Net indebtedness)

This term refers to all recurring and non-recurring financial debt minus
cash and cash equivalents as well as derivative instruments linked to
Group financing having a maturity of under one year and easily disposed
of. Net debt may also include short-term investments with no risk of a
substantial change in value but with maturities of over three months.

Operating cash flow

Operating cash flow corresponds to the “net cash from operating
activities / net cash used by operating activities� item in the
consolidated cash flow table, restated from non-recurring transactions
with an impact on the Group’s net debt (for example, cash outflows
related to restructuring) and after taking account of recurring
investments (CAPEX).

This press release may contain certain forward-looking statements
regarding Groupe SEB’s activity, results and financial situation. These
forecasts are based on assumptions which seem reasonable at this stage
but which depend on external factors including trends in commodity
prices, exchange rates, the economic environment, demand in the Group’s
large markets and the impact of new product launches by competitors.

As a result of these uncertainties, SEB cannot be held liable for
potential variance on its current forecasts, which result from
unexpected events or unforeseeable developments.

The factors which could considerably influence Groupe SEB’s economic
and financial result are presented in the Annual Financial Report and
Registration Document filed annually with the Autorité des Marchés
Financiers, the French financial markets authority.

Listen to the recorded audiocast of the presentation on our website on
30 October from 9:00 PM CET onwards:

www.groupeseb.com
or click
here

2018 SCHEDULE

January 23, after trading

Provisional 2017 sales

 

March 1, before trading

2017 sales and results

 

 

 

May 16

Annual General Meeting

 

July 24, before trading

H1 2018 sales and results

April 26, after trading

Q1 2018 sales and financial data

October 25, after trading

9-month 2018 sales and financial data

Find us on www.groupeseb.com

The world leader in small domestic equipment, Groupe SEB operates in
nearly 150 countries with a unique portfolio of top brands including
Tefal, Rowenta, Moulinex, Krups, Lagostina, All-Clad, WMF and Supor,
marketed through multi-format retailing. Selling some 250 million
products a year, it deploys a long-term strategy focused on innovation,
international development, competitiveness and service to clients.
Groupe SEB has nearly 32,900 employees worldwide.

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