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Big drop in profits for Zumtobel Group

6 March 2012 10.45 GMT

(Austria) - Nine month report sees LED business prosper but profits dramatically reduced due to increased investment and weak components performance.

There were mixed results in the Zumtobel Group's latest nine month report which saw a growth in revenue in its lighting sector but a dramatic fall in profits due in part to its failing components business and erratic regional performance.

Whilst overall revenue rose 6.1% to EUR 964.2 million, year-to-date net profit fell 64.1% to EUR 18.9 million. The Lighting Segment registered a 10.3% increase in revenues to EUR 712.4 million in the first nine months as the Zumtobel and Thorn brands were able to meet its European growth targets, supported by the growth drivers of energy efficiency and LEDs. However, the business in Asia and the USA failed to match up to expectations.

Revenues in the Components Segment business with ballasts, controls and LED components fell by 3.2% to EUR 310.9 million including a sharp 13.2% downturn in the third quarter. In addition to the challenging market environment, temporary weaknesses in performance and in the product portfolio were responsible for this disappointing development.

“Overall we are less than satisfied with developments in the first nine months. While we can see that our growth strategy is beginning to take hold, above all in the Lighting Segment in Europe, we are currently facing some major challenges in the Components Segment in particular. Here we are going to be focusing our resources firmly on our core business in the general lighting sector and in the near future will be expanding our portfolio in terms of both conventional electronic ballasts and LED products. We will be paying special attention to improving the development process, streamlining our inventory management and a gradual reduction of our magnetic ballast activities,” explained Zumtobel Group CEO Harald Sommerer who, following the change in management at Tridonic in January, is also responsible for managing the Components Segment business as interim CEO.

The Group’s LED business continued its highly positive development. In the LED luminaire segment growth was actually much stronger than expected. Year-to-date revenues from the sale of LED products rose 92.3% to EUR 129.4 million from EUR 67.3 million in the previous year. The share of Group revenues generated by LED products rose from 7.4% in the previous year to 13.4%.

The technology shift from conventional to LED products has meant vastly higher investment for research & development, marketing and sales. Adjusted earnings before interest and taxes (adj. EBIT) amounted to EUR 34.1 million for the first three quarters of 2011/12, which is substantially lower than the comparable prior-year value (EUR 64.4 million). This decline resulted, above all, from planned and ongoing investments in growth – in particular the expansion of sales structures – as well as from the effects of the technology shift. The weak performance of the Components Segment also impacted profitability.

In a statement, the Zumtobel Group said it faced “major challenges in an uncertain market environment” before going on to say: “In the Lighting Segment, the Zumtobel Group Executive Board is expecting further sound business development and plans to continue on its chosen course for Zumtobel and Thorn in Europe over the coming months. In view of the structural challenges, the Board is assuming that the Group will be unable to reach its growth targets in Asia and the USA in the course of the current financial year. In the Components Segment, visibility is still very limited and the challenges are significant, so a fast return to growth is not to be expected. The Board is expecting only slight year-on-year growth in revenues and a significant decline in the EBIT margin for the Zumtobel Group in 2011/12, above all due to the negative impact of developments in the Components Segment. In spite of this less favourable outlook, the Board still believes in the strategic importance of the investments in the technology shift and in the global growth strategy.”


Zumtobel Group CEO Harald Sommerer: “facing some major challenges”.

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