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PRESS RELEASE
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Download Univar N.V. First
Half 2002 Results (PowerPoint Required)
Univar reports first half results 2002: sales US $2,266 million, net income US $7.1 million
Amsterdam, The Netherlands – August 22, 2002 – Univar N.V. ("Univar") (Euronext Amsterdam: UNIVR) a leading international chemical distributor today announces its results for the first half ended 30 June 2002.
Highlights H1 2002
Outlook 2002
Key results H1 2002
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Pro forma |
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In US$ millions |
H1 2002 |
H1 2001 |
% |
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Net Sales |
2,266.3 |
2,485.1 |
-8.8% |
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Group operating income before depreciation and |
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amortisation (EBITDA) |
75.4 |
93.7 |
-19.5% |
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Group operating income before amortisation (EBITA) |
51.3 |
66.1 |
-22.4% |
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EBITA margin (EBITA: Net Sales) |
2.3% |
2.7% |
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Net income before extraordinary results |
11.0 |
19.2 |
-42.7% |
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Net income (loss) |
7.1 |
(4.3) |
265.1% |
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In US$ |
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Net income per Common share before extraordinary results |
0.34 |
0.61 |
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Net income (loss) per Common share |
0.21 |
(0.17) |
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Cash flow return (CFROI) |
11.1% |
15.6% |
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The decline in EBITA during the first half of 2002 was not unexpected given that the first quarter of 2001 was relatively strong, while the first quarter of 2002 was slow to recover from last year’s weakness in the markets served by Univar attributable to the overall difficult economic environment. Results for the second quarter 2002 were essentially the same as the same period last year, but stronger than the first quarter of 2002, reflecting the anticipated beginning of an improved level of performance.
Net income for the first half of 2002 includes an extraordinary loss after taxes of $3.9 million which includes Univar’s share of split-off costs and restructuring expenses in Europe.
The net loss in 2001 includes a $23.5 million extraordinary loss after taxes for integration costs on the acquisition of Ellis and Everard.
CEO Comments
"Our performance during the first half of the year, while disappointing, is within management’s expectation and somewhat understandable, given the difficult economic environment in which we are operating and the many distractions to management associated with our split-off from Royal Vopak," said Gary E. Pruitt, Univar CEO. "With the split-off and integration activities related to the Ellis & Everard acquisition now behind us, our focus is very much ‘back to basics.’ Managers, for the first time in many months, are able to devote their full attention to our core chemical distribution business activities. We have every confidence that this renewed focus on the marketplace, along with basic business process improvements underway in all of our operations, will lead to a higher level of performance despite the continuation of a challenging economic environment."
Results by Segment
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North America |
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Pro-forma |
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In US$ millions |
H1 2002 |
H1 2001 |
% |
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Net Sales |
1,540.0 |
1,640.7 |
-6.1% |
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Group operating income before depreciation and |
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amortisation (EBITDA) |
52.1 |
61.1 |
-14.7% |
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Group operating income before amortisation (EBITA) |
37.6 |
44.5 |
-15.5% |
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EBITA margin (EBITA : Net Sales) |
2.4% |
2.7% |
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Cash flow return (CFROI) |
13% |
17% |
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Net sales decreased by US $100.7 million. Gross margin percentage increased despite slow economic growth and the sluggish US industrial manufacturing environment, as the business worked hard to counter these negative economic impacts and year-to-year price deflation. Operating expenses decreased by 1.2%. The food and pharmaceutical and oil and gas segments performed relatively well, while slowdown continued in the compounding, chemical manufacturing, forest products and electronics segments. Results are improving as the year progresses and the second half is expected to be stronger than the second half of 2001, in which pro-forma EBITA was a very weak $30.3 million.
In the US – a reorganization was completed to consolidate the Company’s various marketing activities under the control of a new senior management team. Concurrently, the US business has established three strategic goals for the coming years. First, to become the lowest cost provider in the chemical distribution channel, principally by optimizing physical and capital assets, productivity improvements through increased use of technology platforms, and eliminating errors and rework in the delivery of products and services. Second, to use its market leading position to drive aggressive growth. Central to this objective is the company’s plan to execute behind a focused marketing effort for key products, including "Univar branded" products. Third, Univar USA will establish price leadership within the chemical distribution segment through internal national price coordination of key commodity products, utilizing technology enhancements to implement this process.
In Canada – Our business continues to perform at record levels, seemingly unaffected by market conditions prevalent elsewhere in the geographies served by Univar. To further consolidate its leading market position, Canada will move to a formalized "trans-Canada" structure for marketing and product procurement management. Key product and supplier management programs are also being implemented by the Canadian management.
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Europe |
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Pro-forma |
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In US$ millions |
H1 2002 |
H1 2001 |
% |
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Net Sales |
726.3 |
844.4 |
-14.0% |
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Group operating income before depreciation and |
|
|
|
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amortisation (EBITDA) |
23.9 |
32.4 |
-26.2% |
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Group operating income before amortisation (EBITA) |
14.3 |
21.4 |
-33.2% |
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EBITA margin (EBITA: Net Sales) |
2.0% |
2.5% |
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Cash flow return (CFROI) |
10% |
14% |
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Net sales decreased by US $118.1 million. Gross margin percentage strengthened compared to last year, while operating expenses were reduced by 5.4%.
The economic slowdown has impacted all Univar operations throughout Europe. It now appears that the worst may be over but the prospect of a quick recovery is not likely. Of note, improvement was achieved in the second quarter relative to the first quarter 2002, and the second half is expected to show significant improvement over the same period in 2001.
Our European organization is in the process of restructuring to develop and execute on a new European strategy. A key element in the new strategy is the intention to adopt a single trading name – Univar – across Europe, simplifying the interface between Univar and its suppliers. As part of this new strategy, the group is undergoing a strategic decentralization, relying on our experienced country manager team to exercise appropriate local autonomy ("going back to basics"). In keeping with our goal of becoming a low cost provider, certain roles and functions will be highly coordinated within the group, including key product management, accounting and financial reporting, IT and Safety, Health & Environment oversight. The majority of activities, however, are being placed in control of the country organizations. We are quickly establishing a cohesive European management team.
As part of our re-focusing efforts in Europe, Univar announced on July 23, 2002, the sale of its 95 percent holding in Progiven S.A.S. to French Middle Market Fund (Managed by Banexi Capital Partenaires, a BNP-Paribas bank subsidiary). Progiven S.A.S., a non-core asset for Univar, is in the business of manufacturing additives aimed a protecting waterborne materials from aggressors such as bacteria, fungi, algae and insects. The sale will result in a net gain on book value to Univar of US $5.8 million, to be recognized during the second half of the year.
Business Process Improvement
We have significant opportunity to achieve fundamental business process improvement throughout our organizations. Univar has already initiated a process to capitalize on this opportunity by forming work teams to move our companies forward together in areas where either our size, capability, or competitive insight make it possible to better leverage our circumstance. Key managers are being designated from our operating groups to head these process teams, while facilitation and progress monitoring will come from the corporate staff. A critical objective of this activity is to create an environment for sharing "best practices" throughout the organization, while ensuring that our global management team benefits from the experience of face-to-face working opportunities.
Split-off Completed
On June 29, 2002 the split-off of Univar N.V. from its former parent company, Vopak N.V., was completed. For the past two months, Univar has been successfully operating as an independent public company. Significant reorganizations in the European and US operating companies are either underway, or in the case of the United States, complete. In each case the new structure has served to simplify operations, clarify reporting relationships among key operators, and facilitate management’s quick and decisive response to the dynamic demands of our competitive marketplaces. The corporate infrastructure necessary to support independent status is now largely in place, and by year-end, management anticipates there will be no remaining dependence upon Vopak for services or support.
Outlook 2002
The management of Univar anticipates that recovery in the markets served by Univar will continue, but perhaps, at a more modest pace than has been our experience during the second quarter. While stock market volatility creates uncertainty about the pace of recovery, we envision continued momentum in the second half of the year. Based on this assumption, and the expectation of further fundamental business process improvements, Univar expects operating income before amortization of goodwill (EBITA) for the balance of 2002, to slightly exceed EBITA achieved in the first half of the year. This would result in EBITA for the full year 2002, slightly in excess of pro-forma EBITA in 2001.
Pension Costs
In the Univar N.V. Information Memorandum, dated May 31, 2002, the company clearly disclosed that continuing volatility in stock markets could have a material adverse effect on the company’s financial statements, due to a decline in pension assets relative to accrued liabilities. At that time it was estimated that the current gap between the value of pension plan assets and total future pension liabilities was approximately US $29 million (after-tax). Final quantification of this difference cannot be determined until the pension plan measurement date of December 31, 2002. The company is currently evaluating the most appropriate method of accounting for pensions, including expansion of the application of US FAS 87 to all Univar entities. In this event any charge applicable to pension asset deterioration in the 2002 financial statements would be a charge to balance sheet equity and not a current P&L expense.
Profile Univar
Univar is the leading independent chemical distributor in the world Univar. The company is engaged in the chemical distribution business throughout both North America and Europe. Univar purchases a vast array of commodity products in bulk quantities, processes these, repackages them in appropriate quantities and then sells and delivers them to some 250,000 industrial end-users. In addition, Univar provides a number of related services to its customers, such as blending of chemicals, managing customer inventories, providing technical support and packaging and labelling. Univar operates a network of 195 distribution centres, spread across the United States, Canada and 14 European countries. In 2001, Univar generated net sales of US $4.7 billion and group operating income (EBITA) of US $96.4 million. Univar has approximately 7,000 employees based throughout North America and Europe. The company is headquartered in The Netherlands, with North American offices in Bellevue, Washington. For more information, visit: www.univarcorp.com
For more information please contact:
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Univar N.V. John Sammons Senior Vice President and Chief Administrative Officer Tel: +1-425-990-1016 Fax: +1-425-990-1017 E-mail: john.sammons@univarcorp.com Website : www.univarcorp.com
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Citigate First Financial Barbara Jansen Tel: +31 (0)20 575 40 80 Fax: +31 (0)20 575 40 20 E-mail: bjansen@citigateff.nl |
###
ANNEX 1: CONSOLIDATED INCOME STATEMENT
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First half year |
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Pro forma |
% |
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In US$ millions |
2002 (unaudited) |
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2001 |
Change |
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Net Sales |
2,266.3 |
2,485.1 |
-8.8 |
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 |
-2.165,5 |
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55,6 |
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Cost of sales |
(1,824.8) |
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(2,019.0) |
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Gross margin |
441.5 |
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466.1 |
-5.3 |
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1,0 |
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22,1 |
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9,0 |
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308,8 |
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5,9 |
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6,9 |
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4,5 |
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Wages, salaries and social security charges |
(207.5) |
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(213.6) |
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Afschrijving goodwill |
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Depreciation |
(24.1) |
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(27.6) |
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Other operating expenses |
(158.5) |
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(158.7) |
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Total operating expenses |
(390.1) |
(399.9) |
-2.5 |
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Operating income |
51.4 |
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66.2 |
-22.4 |
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Income from equity participations |
(0.1) |
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(0.1) |
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Group operating income before amortization of goodwill (EBITA) |
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51.3 |
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66.1 |
-22.4 |
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Amortization of goodwill |
(8.5) |
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(9.0) |
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Group operating income after amortization of goodwill (EBIT) |
42.8 |
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57.1 |
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-25.0 |
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Net interest expense |
(14.2) |
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(14.7) |
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Income from ordinary activities before income taxes |
28.6 |
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42.4 |
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-32.5 |
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Income taxes |
(17.6) |
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(23.2) |
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Income from ordinary activities after income taxes |
11.0 |
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19.2 |
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-42.7 |
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Extraordinary loss after taxes |
(3.9) |
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(23.5) |
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Net income (loss) |
7.1 |
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(4.3) |
+265.1 |
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Dividend on cumulative financing preference shares |
(0.8) |
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(0.8) |
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Net income (loss) for holders of common shares |
6.3 |
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(5.1) |
+223.5 |
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Net income for holders of common shares (excluding extraordinary items) |
10.2 |
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18.4 |
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-44.6 |
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Fully diluted earnings per share (excluding extraordinary items after income taxes) |
.34 |
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.61 |
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Fully diluted earnings per share |
.21 |
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(.17) |
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ANNEX 2: CONSOLIDATED BALANCE SHEET
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In US$ millions |
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Pro Forma |
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Pro Forma |
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30-06-2002 (unaudited) |
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31-12-2001
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30-06-2001
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Intangible fixed assets |
320.8 |
321.9 |
327.4 |
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Tangible fixed assets |
464.2 |
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460.3 |
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506.1 |
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Financial fixed assets |
1.5 |
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1.6 |
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1.7 |
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Total fixed assets |
786.5 |
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783.8 |
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835.2 |
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Inventories |
400.5 |
420.1 |
430.2 |
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Trade debtors |
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Other assets |
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Accounts receivable |
988.8 |
696.3 |
827.8 |
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Prepaid expenses |
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Other financial assets |
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Prepaid expenses and accrued income |
25.1 |
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21.2 |
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35.2 |
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Cash and cash equivalents |
74.0 |
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66.6 |
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72.2 |
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Total current assets |
1,488.4 |
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1,204.2 |
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1.365.4 |
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Bankoverdrafts |
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Short term borrowings |
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Short-term finance |
57.3 |
242.0 |
272.2 |
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Current portion of long-term debt |
10.7 |
10.5 |
24.2 |
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Trade creditors |
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Other current liabilities |
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Trade accounts and other accounts payable |
944.7 |
732.4 |
834.8 |
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Dividends |
0.9 |
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- |
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- |
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Total current liabilities |
1,013.6 |
984.9 |
1.131.2 |
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Current assets less current liabilities |
474.8 |
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219.3 |
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234.2 |
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Total assets less current liabilities |
1,261.3 |
1,003.1 |
1.069.4 |
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Long-term debt |
416.1 |
273.8 |
273.4 |
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Deferred taxes |
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Deferred taxes cons adj |
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