Zumtobel AG results 2004/05: modest growth in Europe against the negative market trend – more distinctive profiles for the Zumtobel Staff, Thorn and TridonicAtco brands – uncompromising pursuit of restructuring programme – targeted investment in growth initiatives – moderate outlook for 2005/06
Dornbirn / Vienna, July 26, 2005: The international Zumtobel lighting group, based in Dornbirn, Austria, closed its books on financial 2004/05 at the end of April 2005 with net income of EUR 29.1 million, more than twice the figure for the previous financial year (EUR 12.6 million). Operating income (EBIT) totalled EUR 83.6 million in the year under review, which equates to an increase of 41.2% over the previous year (EUR 59.2 million).
“This gratifying improvement in earnings is not least the outcome of our uncompromising restructuring efforts that are now visibly bearing fruit after the important groundwork put in over recent years. The decision taken early in 2004 to integrate the production and logistics operations of our two luminaire brands, Zumtobel Staff and Thorn, to form a common supply chain is proving a wise move. Through the increasing concentration of our production capacities we have made a substantial contribution to improving efficiency, our international competitive position and the sustainable profitability of the Group,” said Andreas J. Ludwig, Chief Executive Officer of the Zumtobel Group, commenting on the results for financial 2004/05.
Sales trends: growth in Europe, disappointment in Australia
In terms of sales, the past financial year was once again marked by a difficult market environment, above all in the Group’s core German-speaking markets. Nevertheless, against the market trend and for the first time since 2000/01, Zumtobel was able to increase its sales in Western Europe by a modest +1%. While sales in Germany and Austria again showed a slight fall, the Group’s sales companies in the UK/Ireland, Nordic and Switzerland were the main contributors to this positive trend. Overall, the Zumtobel Group was able to maintain its market shares, grow them slightly in some cases, and further strengthen its position as European market leader. Another fundamentally positive aspect was the development of the Group’s sales inChina, which significantly moved ahead in local currency terms, although the rise in the value of the euro virtually negated this increase.
The situation in Australia, by contrast, was disappointing, with lighting sales falling EUR 4 million and Atco Australia’s components business showing a EUR 20 million downturn. The sharp drop in sales at the Australian Tridonic subsidiary Atco was mainly due to a substantial rise in the value of the Australian dollar against the U.S. dollar, which led to a rapid switchover in technologies from Australian-built magnetic transformers to cheap imported electronic transformers from China. This exceptional situation was a major factor in the slight (-1.1%) overall year-on-year drop in consolidated sales to EUR 1,129.2 million (2003/04: EUR 1,142.2 million).
Evaluating the sales figures for financial 2004/05, CEO Andreas Ludwig said: “Overall we are not entirely satisfied with the way sales have developed, despite the tangible positive trend in Western Europe. We are well aware that, faced with what is still a difficult market environment, we can only reach our growth targets for the Group as a whole by taking a pro-active approach. In the course of the year under review we therefore defined a large number of growth initiatives for all three brands, which we are now pursuing as a top priority.”
Improved financial indicators – reduction in the workforce
As a result of the improvement in earnings, the Group was able to reduce its net debt by EUR 50 million to EUR 397.1 million. Equity capital increased to EUR 173.6 million, while the equity ratio rose from 13.9% in 2003/04 to 17.0% in 2004/05.
”The marked improvement in our financial indicators is the result of our restructuring measures coupled with extremely disciplined cost management. One rewarding outcome is a further drop in our interest margins. The lower level of debt led to a fall of approximately EUR 1 million in net interest paid. For us this is the right way to enhance our ability to step up investments in our business and growth initiatives in future,” commented Thomas Spitzenpfeil, Chief Financial Officer of the Zumtobel Group.
In the year under review the Zumtobel Group was already able to post a slight year-on-year increase in investment activities, which rose to a total volume of EUR 63.6 million. At the same time, the number of employees at the Group fell from 7,643 to 7,000 full-time positions on the balance-sheet date. This was primarily due to the closure of production sites in Denmark and Australia, and the sale of the plant in Belleville, France.
Three strong brands form the basis for future success
The success of the Zumtobel Group is founded to a decisive degree upon the Group’s three strong and internationally well-positioned brands: Zumtobel Staff and Thorn in the luminaire business and TridonicAtco in the luminaire components sector. In terms of brand strategy, the past financial year was dominated by the ongoing establishment of distinctive profiles for all three brands.
For the Zumtobel Staff brand the emphasis was on the further internationalisation of the brand and the strengthening of its portfolio in the retail, professional office lighting and lighting management sectors. Among the most significant projects in 2004/05 were the lighting solutions for the new BMW plant in Leipzig (Architect: Zaha Hadid), the new A1 Concept Store in Vienna (EOOS), the Langen Foundation in Hombroich (Tadao Ando), a major pan-European order from Deutsche Telekom, and the Galleria Ferrari in Maranello, where the stage was set by star designer Massimo Iosa Ghini using the “Solar” spotlights that he developed for Zumtobel Staff.
Thorn successfully continued their repositioning in the mid-to-high-end segment in financial 2004/05, re-connecting with the brand’s traditional roots. The guidelines for successful brand marketing were laid down in the newly developed Thorn Design Philosophy. In the year under review, Thorn were able to post a 14% increase in the proportion of sales accounted for by new products. One major contributory factor here was the successful launch of “Rivers” (wall and ceiling luminaires), “Concavia” (high-bay luminaires) and “Jet” (street lighting). The highlights of the past year included such prestigious projects as Terminal 5 at Heathrow and the new Wembley stadium, lighting concepts for the Sazka Arena in Prague, the Peugeot Design Centre in Paris and the Nam Wan tunnel in Hong Kong, as well as the opening of the Thorn Lighting Application Studio at the heart of London in the spring of 2005.
Components manufacturer TridonicAtco focused its activities in the year under review on further strengthening its uniform international market profile. A key factor here was the renaming of Knobel (Switzerland) and Electro-Terminal (Austria) as TridonicAtco Schweiz and Tridonic Atco connection technology respectively. Product development activities were primarily channelled into the new dimming platform “Helios”, the safety ignitor “ZRM powerPULSE” and the “PCI BO11” electronic control gear family. A powerful innovation driver in the components business is the development of LEDs, where activities are focused at the Jennersdorf plant (Austria). With the new high-power LED “EOS”, TridonicAtco brought a product featuring pioneering technology to market. Major projects in financial 2004/05 included providing the lighting technology for the Rondo1 complex in Warsaw. TridonicAtco also showcased its innovation leadership in the context of such high-profile projects as the “House of the Future” in Munich and the “Garden of Light” at the Hampton Court Flower Show.
In the current financial year the Zumtobel Group will be continuing its restructuring efforts. The main objectives here are to optimise the take-up of capacity at the existing, mainly West-European production plants, to reduce the level of vertical manufacturing by stepping up the outsourcing of simple components, and to establish production capacities in low-wage countries.
Plans include the closure of production facilities at the Tettnang (Germany) plant belonging to subsidiary Reiss International in the course of 2006. The production of moisture-proof luminaires and components is scheduled to be distributed among other Group locations and suppliers, while the sales organisation for the OEM brand Reiss International will remain intact. The Zumtobel Group will also be expanding its luminaire production activities in Asia and Eastern Europe. At the Group’s Guangzhou (South China) location, a new facility will begin production in the late autumn of this year, taking over from the existing plant that is currently overloaded. Plans also envisage the construction of a new plant in Romania by mid-2006. Both of these facilities will serve the growth markets of Asia and Eastern Europe, as well as manufacturing selected components for Western European markets.
Components manufacturer TridonicAtco will also be strengthening its commitment to Asia. From the beginning of August its subsidiary Jet Stream will be turning out electronic control gear at a new plant in Shenzhen (South China). In addition to products specially developed for this plant, a proportion of the ignitors currently manufactured in Dornbirn will also be produced in China in future. This measure will affect only a few employees, who will be able to take up new duties within the expanding business activities of the Dornbirn plant.
Investing in growth: new markets, new applications, new technologies
Another focus of activities in the current financial year is on a variety of growth initiatives targeting new markets, new fields of application and new technologies. Commenting on this strategy for growth, CEO Andreas Ludwig said: “As a global player in the lighting industry our aim is to grow our business internationally and thereby strengthen our market position. We cannot expect any help from the Western Europe markets, where the economic environment remains difficult. So we will be actively investing in targeted growth initiatives.”
In terms of geographies, Zumtobel has defined China / Southeast Asia and Eastern Europe as growth markets. In addition, the Zumtobel Staff brand has developed new initiatives for growth in North America. The first step in this direction came in April 2005 with the opening of an initial Zumtobel Staff Lighting Forum in central New York.
Where new product applications are concerned, Zumtobel Staff is concentrating on the hospitality and wellness segment, on lighting controls, and on developing a stronger offer for electricians and electrical consultants. The Thorn brand will be further strengthening its expertise in outdoor lighting systems in the current financial year and accessing new markets in this sector.
On the innovative technologies front, the portfolios of all three brands will be enhanced with new pioneering products. Special attention here will be paid to the subject of LEDs, where one of the most significant developments was the founding of the Lexedis Lighting joint venture in Jennersdorf (Austria) in March 2005.
Restructuring of the Zumtobel Lighting Division
With effect from July 1, 2005, Zumtobel has further optimised the structure of its luminaire business. To enable the product portfolio and market approach of the two luminaire brands Zumtobel Staff and Thorn to become even more clearly differentiated in the future, the marketing and sales organisation was brought under the control of a single management function, filled by Peter Matt, formerly CEO of Zumtobel Staff and now Executive Vice President Marketing & Sales of the Zumtobel Lighting Division. In the context of this restructuring, key business processes were also optimised and decision paths shortened. The “Salomon” optimisation programme triggered at the beginning of May will lead to further improvements in efficiency and enhanced cost management in the administration, sales and logistics sectors in the course of the year.
Outlook for financial 2005/06
Given the prevailing difficult economic environment, above all in Central Europe, the Management Board is anticipating only modest sales growth in the current financial year. This forecast was confirmed by the development of business in the course of May and June when the Group was able to chart further moderate growth in Europe. With a view to the various growth initiatives, Group CEO Andreas Ludwig is assuming that the associated investments will lead to significant growth in the medium term. Thanks to a rigorous programme of restructuring, the Zumtobel Group will continue to post improved results, although in view of the substantial investment activity the results will not match the dynamic growth of the past financial year.
The Zumtobel Group at a glance:
* all figures in million euros
** FTE on balance-sheet date
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