ECULLY, France – In an economic environment that grew more difficult over the course of the year, Groupe SEB continued to develop its business activity at a brisk pace in 2018. Sales rose 5.1% to €6,812 million, notably including organic growth of 7.8% and a currency effect of -3.2%, stemming primarily from the depreciations of the Chinese yuan, Brazilian real, Turkish lira, Russian rouble and US dollar.
Organic growth benefits from the Group’s global footprint, the breadth of our product offering and reflects the good trends in business in most of our markets.
It also comprises non-recurring items in Brazil (recognition of a tax receivable, transporter strike in the spring, slower-than-expected ramp-up in cookware at the Itatiaia site, bankruptcy of a customer) and France (impact of the yellow vests movement in the fourth quarter), which affected the geographical regions concerned but whose net impact on Group sales and Operating Result from Activity was immaterial.
Operating Result from Activity (ORfA)
Operating Result from Activity (ORfA) came out at €695 million in 2018, up 2.5% vs 2017 before the non-recurring impacts of the WMF purchase price allocation. At constant scope and exchange rates, ORfA totaled €736m, up 8.5%. The FY 2018 currency effect was -€45 million, compared with -€10 million in 2017. The most negatively impacting currencies were the Turkish lira, Russian rouble, Argentinian peso and Brazilian real. The positive trend in ORfA in 2018 should also be appreciated in the light of exceptionally demanding comparatives in 2017. In this respect, it stands as a solid performance.
Organic growth of 8.5% in ORfA in 2018 can be broken down as follows:
- A volume effect of +€85 million relating to the favorable trend in business;
- A price-mix effect of +€80 million, made up of a continued move upmarket, price hikes (for example, in Turkey and Russia) and higher promotional activity;
- A €48 million increase in the cost of sales, largely owing to the rise in commodity prices (-€57 million vs. 2017);
- A €24 million increase in investments in growth drivers (innovation, operational marketing and advertising, the latter being now over 40% digital);
- Higher commercial and administrative costs, by €35 million, linked to both the Consumer business – especially directly operated stores – and the Professional Coffee businesses, the accelerated development of which calls for investments, mainly in the sales force.
Operating Profit and Net Profit
Groupe SEB reported operating profit of €625 million in 2018, versus €580 million in 2017. The total includes a discretionary and non-discretionary profit-sharing expense of €34 million, versus €38 million last year, as a result of lower performance in France. It also comprises other operating income and expense of -€36 million (-€44 million in 2017), including notably the end of the industrial and logistics reorganization plan in Brazil, costs linked to the integration of WMF and an additional goodwill depreciation for Maharaja Whiteline.
Net financial expense came out at -€32 million in 2018, versus -€72 million in 2017. This change reflects a decrease in the fair value of the optional part of the ORNAE bonds (bonds redeemable in cash and/or in existing shares) and the recognition of positive interest income on the tax receivable in Brazil.
Net profit attributable to the owners of the parent rose 11.8% to €419 million. It includes a tax expense of €131 million, corresponding to an effective tax rate of 22.1% in 2018. As a reminder, the effective rate for 2017 (19.5%) benefitted from non-recurring effects stemming from tax reform in the United States and the restitution of the tax on dividends in France. Group net profit is net of non-controlling interests of €43 million (€34 million in 2017), the increase in which is linked to Supor’s excellent performance in China.
Balance Sheet
At December 31, 2018, equity totaled €2,307 million, up €343 million on end-2017.
At end-2018, net debt amounted to €1,578 million, versus €1,905 million a year earlier, decreasing by €327 million. The drop comes from a strong generation of operating cash flow, at €552 million for the year (€322 million in 2017).
The working capital requirement, at €1,120 million, represented 16.4% of sales, benefiting from continued efforts to optimize various items and from higher mobilization of trade receivables.
The Group’s debt ratio was 68% at December 31, 2018 (97% at end-2017) and the net debt/adjusted EBITDA ratio was 1.9, versus 2.4 at December 31, 2017.
Wilbur Curtis sales have been increasing steadily, amounting to more than $90 million, primarily in the US. Major customers include coffee roasters, specialty coffee retailers, convenience stores, fast-food chains, hotels and restaurants. Wilbur Curtis has built and maintains a long-term relationship with its customers, leveraging its professional sales force to ensure extensive national coverage. Its high-performance production facility located in Montebello, California, employs 300 people.
Already present in professional coffee with Schaerer and WMF full-automatic espresso coffee machines, Groupe SEB confirms its determination to continue expanding in this high-potential sector. Wilbur Curtis, a filter coffee specialist in the United States, brings the Group a very valuable strategic complement to its product offering and customer portfolio. The Group is targeting leadership status in professional coffee in the United States.
Family concert reaffirms its long-term support to SEB
Family shareholders gathering over 260 people (3/4 of the capital held by the Founder Group), grouped with their entities, VENELLE INVESTISSEMENT and GENERACTION*, signed a new shareholders’ agreement replacing the various existing agreements, in order to strengthen their ties and the stability of SEB’s capital.
This shareholders’ agreement will be communicated to the French Financial Markets Authority (AMF) in charge of regulatory announcement.
Along with other family shareholders, the parties signing this agreement thereby continue their declared concert initiative, confirming their ambition to implement a shared sustainable management policy as regards SEB, for the purpose of ensuring continuity in their controlling position.
FEDERACTIVE and its members did not wish to sign this agreement and have stated they are leaving the concert.
As a result, the family concert holds 32.27% of the capital and 40.14 % of SEB’s voting rights**.
The Founder Group, including FEDERACTIVE, holds 41.67% of the capital and 52.28% of the voting rights**.
* Association of family shareholders created in May 2017
** Based on capital and theoretical voting rights at Extraordinary General Meeting at December 31, 2018
