SURTECO SE derives cautious optimism from the domestic market

Even though there have been tentative signs of an economic recovery in some markets for SURTECO SE since September, the leading international supplier to the construction and furnishing industry is not yet projecting a sustainable recovery in its business over the medium term.

The lack of economic impetus resulted in a decline in sales revenues of 20 percent to € 253.8 million at SURTECO SE over the past nine months by comparison with the previous year. An analysis of the detailed data shows that domestic sales are currently significantly more stable than foreign business. During the first half of the year, SURTECO SE demonstrated a decline in domestic sales of only 15 percent, whereas the drop in foreign sales was 26 percent on 30 June. During the past three months of the reporting period, domestic sales dropped by only 11 percent, so that accumulated domestic sales revenues only fell short of the equivalent year-earlier figure by 14 percent at € 93.7 million. However, this contrasted with the ongoing decline in foreign business of 23 percent to € 160.1 million.

The main sales drivers are the product lines grouped in the Strategic Business Unit Plastics (including plastic edging tapes, plastic components, skirtings and wall edging strips) with which SURTECO SE generated sales amounting to € 158.4 million in the first nine months of the current business year and hence came 20 percent below the value for 2008.

In the Strategic Business Unit Paper, SURTECO SE supplies paper-based surface materials (including edgebandings, flat foils, decorative papers) and alongside furniture manufacturers these products are primarily targeted on the door and caravan industry. These market segments posted a slight increase in demand in Germany during the third quarter. Nevertheless, sales of € 95.4 million with these products based on specialist papers for technical applications were still 18 percent below the equivalent year-earlier figures on 30 September.

Despite the difficult conditions and tense relationships prevailing in the market, SURTECO SE is in a position to report satisfactory income. After nine months, EBITDA reached € 40.8 million and hence fell proportionately slightly less than sales development at 17 percent. The EBITDA margin at 16.1 percent for the reporting period was 0.5 percentage points above the corresponding value for 2008.

The improved EBITDA margin is linked with a restructuring and cost-reduction programme introduced in 2008. This package of measures was the response of SURTECO SE to the economic turbulence – and appropriate provisions for this programme were formed in the previous year. Site optimization in North America has meanwhile been completed. As announced, the plant in Montreal was closed and production transferred to the plants in Brampton/Canada, Greensboro/USA, and Santiago/Chile. The merger of Döllken & Praktikus GmbH with Döllken-Weimar GmbH - retroactive effect to 1 January 2009 - constituted a further step towards simplification of the Group structure and concentration of the sales and logistics activities in the area of skirtings.

Even if current developments in the market provide no concrete indicators for significant optimism, SURTECO SE intends to continue taking an offensive approach to structuring its future. A sales company was recently founded in Moscow and this highlights the Group’s commitment to being close to the Russian market and markets in neighbouring countries. In Santiago de Chile, the number of extrusion lines was increased at a new plant in order to give SURTECO SE the capability to meet the demand for “special surfaces” in the South American market.