ECULLY, France – Groupe SEB reported sales of €6,485 million in 2017, for an increase of nearly 30% year-on-year. This included organic growth of 9.2%, a currency effect of -2%, a scope effect of €1,195 million (integration of WMF at January 1 and EMSA for six more months than in 2016) and the reclassification of Supor’s marketing expenses as a sales decrease, for -€74 million.
Vigorous organic sales growth throughout the year was driven by all product lines and by the vast majority of geographical regions.
This growth should be viewed in the light of high comparatives: +8.0% in 2015 and +6.1% in 2016.
In parallel, WMF business activity grew 5.5% over the period, bolstered in particular by strong momentum in Professional Coffee.
T. de La Tour d’Artaise, Chairman and CEO of Groupe SEB, stated:
“Groupe SEB once again posted an excellent year in 2017. The performance of WMF was consistent with our expectations, generating an accretion of 22% on net earnings per share. The ambitious objectives we set for ourselves in 2017 have thus been met.
“2017 was also a year of transformation for the Group with the integration of WMF. Substantial work was already carried out to implement a new organization – now operational –, harmonize processes, pool certain central functions and start unlocking synergies in purchasing, the supply chain and manufacturing. Value accretive projects were launched, including the first concrete initiatives aimed at developing the Consumer business and activating the acceleration program in Professional Coffee. We are aligned with our roadmap and I would like to thank all the Group’s teams for their remarkable commitment.
“Obviously, considerable work still remains to be done, and some projects will take time to deliver their full potential. But as with Supor ten years ago, we are confident in our ability to take best advantage of this transformative acquisition. In 2018, the intensification of projects initiated in 2017 will allow us to start generating tangible synergies in line with our objectives for 2020.”
Sales
Groupe SEB reported sales of €6,485 million in 2017, for an increase of nearly 30% year-on-year. This included organic growth of 9.2%, a currency effect of -2% (stemming primarily from the depreciation of the yuan, pound sterling, Turkish lira, Egyptian lira and US dollar), a scope effect of €1,195 million (integration of WMF at January 1 and EMSA for six more months than in 2016) and the reclassification of Supor’s marketing expenses as a sales decrease, for -€74 million.
Vigorous organic sales growth throughout the year was driven by all product lines and by the vast majority of geographical regions. This growth should be viewed in the light of high comparatives: +8.0% in 2015 and +6.1% in 2016. In parallel, WMF business activity grew 5.5% over the period, bolstered in particular by strong momentum in Professional Coffee.
Operating Result From Activity
Operating Result from Activity (ORfA) totaled €661 million, up 30.8% and comprising the following:
- excluding WMF, Group ORfA amounted to €583 million, up 15% on 2016. Hence, Group operating margin excluding WMF came out at approximately 11%. In addition, the currency effect (-€10 million) was much lower than in previous years (-€122 million in 2016 in particular);
- WMF ORfA excluding one-off PPAs was €95 million, up 12% on 2016;
- the one-off impacts of the WMF purchase price allocation (revaluation of inventories and order books) represented -€17 million and were fully recognized in first-half 2017. Consequently, WMF’s net contribution to Group ORfA totaled €78 million.
As such, Group Operating Result from Activity in 2017 excluding one-off impacts of the WMF purchase price allocation amounted to €678 million, up 34.2%, for an operating margin of 10.5%. It should be noted that the integration of WMF’s Small Domestic Equipment business into the Group’s market companies will not allow for this detailed analysis in 2018.
Operating Profit and Net Profit
At end-December 2017, the Group’s operating profit in its new scope totaled €580 million, compared with €426 million in 2016. The figure takes account of discretionary and non-discretionary profit-sharing expense of €38 million, practically stable on last year. It also includes other operating income and expense of -€44 million (-€42 million in 2016), composed primarily of the industrial and logistics reorganization implemented in Brazil (transfer of production from the Mooca and San Bernardo sites to the new Itatiaia site), charges stemming from the integration of WMF and the pooling of Groupe SEB and WMF entities in several countries, and expenses incurred by the creation of the Group’s global Innovation Hub in Lyon for the Small Electrical Appliance business.
Net financial expense came out at -€72 million, compared with -€58 million in 2016. At €35 million (€30 million in 2016), interest expense rose moderately despite the increase in debt, mainly due to the excellent financing conditions for the acquisition of WMF. Other financial expense primarily included a €9 million increase in the fair value of the optional part of the November 2016 convertible bond issue and unfavorable currency translation adjustments.
Net profit amounted to €375 million, up 45%. The total included a tax expense of €99 million representing an exceptionally low effective tax rate of 19.5% in 2017, thanks notably to a non-recurring effect of the tax reform in the United States and the restitution of the tax on dividends in France. It also comprised non-controlling interests of €34 million, up on last year owing to the continued improvement of Supor’s performance in China.
Dividend
Meeting on February 27, 2018, the Board of Directors proposed the distribution of a dividend of €2.00 per share in respect of the 2017 financial year, up 16.3%. The increase reflects both the excellent performances in 2017 and the Board’s confidence in the outlook for the Group and in its ability to continue integrating WMF in the best conditions. For shareholders having held shares under the registered form for more than 2 years, the dividend will be increased by a loyalty bonus of 10%, taking the total dividend to €2.20 per share (for holdings below 0.5% of the capital).
The coupon detachment date is set for May 21 and the dividend will be paid on May 23, 2018.
Outlook For 2018
Groupe SEB posted an excellent year in 2017, combining strong performances in line with its objectives and a promising start from WMF.
Like 2017, 2018 will be a rich and busy year marked by a two-fold objective:
- Pursue the Group’s profitable growth (former scope) in a small household equipment market that should remain buoyant, by continuing to harness our solid fundamentals – innovation, the power of our brands, broad distribution, international presence, industrial expertise and top-quality execution – to make a difference.
- Pursue in parallel the integration of WMF by rolling out the projects initiated, executing investment and acceleration plans in Professional Coffee, implementing the actions to improve profitability in the Consumer business, and ramping up operational synergies. Delivering on all these topics will once again call for a strong mobilization of the teams.
Moreover, the economic environment is likely to be more challenging in 2018 in terms of commodities and currencies. Despite high comparatives for the former scope and an exceptional 2017 in Professional Coffee for WMF, Groupe SEB’s objective in 2018 is to achieve further organic sales growth, improve its Operating Result from Activity and continue to reduce its debt level in order to bring its net debt / adjusted EBITDA ratio down below 2 at the end of 2018.
