Quarterly financial statements: Earnings impacted by unfavourable exchange rates and high commodity prices
During Q1 of the offset 2018/19 financial year, Flügger group A/S saw revenue on par with the same period last year and a drop in earnings of 25%. Flügger is experiencing growth in the Danish and Polish markets, but total earnings have been impacted by declines in the Swedish, Icelandic and Chinese markets, rising commodity prices and negative exchange rate effects.
Flügger posted net revenue of DKK 538 million in Q1 of the financial year, compared to DKK 539 million in the same period last year, essentially unchanged. Adjusted for the negative exchange rate impacts, revenue rose by 2.4%.
Earnings in Q1 have declined 25% to DKK 61 million, compared to DKK 82 million for the same period last year. The drop in earnings is primarily due to difficulties passing on the large price increases we have seen for several key product ingredients to our sales prices.
In Denmark (including Iceland, Greenland and the Faroe Islands), revenue rose by 4% compared to the same period last year, despite a 17% drop in revenue for Iceland, primarily due to poor summer weather, leading to unfavourable conditions for external painting work.
Flügger has faced challenges in the Swedish market and has seen a 7% drop in revenue, corresponding to a 1% drop in local currencies. The decline is partly due to lower sales of private label products (segment 2) to DIY stores and other independent distributors.
In Norway, revenue is on a par with last year.
Revenue rose by 12% in Poland, while sales to other countries, including Exports and China, fell by 11%. Flügger has experienced challenges in deliveries to China during the period. These have stabilised now, and we are increasing our focus on creating a scalable product range that best matches the sales opportunities on this market.
Flügger maintains its outlook for the 2018/19 financial year, i.e. growth in net revenue of 0-2% and operating profit corresponding to an EBIT margin of 3-4%.
Jimmi Mortensen, CEO:
“The building paint and accessories sector in the Nordic market is characterised by overcapacity and increasing consolidation, which is affecting Flügger and other players in the sector. We will intensify the ongoing consolidation of our own stores and focus on greater availability in terms of location, product range and services.
We will also focus closely on continuing to adjust our price structure, so it reflects the much higher costs of raw materials and transport, which impact our earnings. We will continue to follow our strategy and accelerate its implementation in order to free up resources for investment in organic and acquisitive growth-promoting initiatives.”