BIC : First Half 2013 Results

BIC Group -Second Quarter and First Half 2013 Results

• First Half 2013 Net Sales up 2.2% on a comparative basis at 937.5 million euros 

• First Half  Normalized IFO:  170.0  million euros - Normalized IFO margin: 18.1% 

• First Half Group Net Income:  -16.2% at 118.1  million euros 

• First Half  EPS:  -16.1% at 2.50 euros 

• June 2013 net cash position: 191.8. million euros 

H1 2013 Key operational figures

Commenting on BIC Group results, Mario Guevara, Chief Executive Officer, said: "BIC 2013 first half sales continued to show strong resilience. This was driven by the solid dynamics of our consumer business sales during the second quarter, in all categories and geographies, and in particular in Europe, the Middle-East, Africa and Asia. BIC APP second quarter net sales showed some improvement in both the U.S. and Europe.

In spite of the decrease in Group Income From Operations, our robust cash generation allows us to continue to invest in new production capacities and to enhance total shareholders remuneration.

In light of these results, we are confident that we will achieve our full year 2013 objectives in an environment that remains volatile."

Full Year 2013 Outlook (unchanged)

Consumer Business
For the full year, we expect net sales on a comparative basis to grow in line with our mid-term objectives of +2% to +4%. Normalized IFO margin should be in the higher end of our 15% to 20% mid-term objectives range.

Advertising and Promotional Products
BIC APP full year 2013 net sales could decline low to mid-single digit. Due to the sales decline, we will realize less favorable volume absorption and therefore Normalized IFO margin could decline to a mid to low-single digit level.
Key figures

Net Sales

BIC Group first Half 2013 net sales were 937.5 million euros, compared to 945.8 million euros in the first Half 2012, down 0.9% as reported, up 1.8% at constant currencies and up 2.2% on a comparative basis. For the second quarter, net sales were 508.9 million euros, up 1.6% as reported and up 4.1% at constant currencies and on a comparative basis.

• The consumer business increased 3.9% on a comparative basis during the first half (+5.7% in the second quarter). Europe showed good results, growing 6.3% in H1 (+8.3% in Q2). First half North America net sales increased 2.6% (+3.9% in Q2). Developing markets grew 3.3% in H1 (+5.3% in Q2), driven by a continued strong performance in Middle-East, Africa and Asia while Latin America remained flat. 

• The Advertising and Promotional Products business decreased 8.4% at constant currencies (-6.0% in the second Quarter).  

Gross Profit

First half gross profit margin decreased 3.8 points to 48.4% of sales versus 52.2% for the same period last year. Production costs were higher year on year due to unfavorable cost absorption and the impact of currency fluctuations on purchases (mainly in Latin America). This was partially offset by the non-recurring 2012 Special Premium to employees¹ (+0.6pts).

Income From Operations (IFO)

The decrease in Normalized IFO margin is due to:  

• Decrease in gross profit margin (-3.8 points and -4.4 points excluding the special margin impact with respectively -4.8 points in Q1 and -4.0 points in Q2 ), 

• Decrease in brand support (+0.4 points of which +0.4 points in Q1 and +0.4 points in Q2), 

• Negative impact of OPEX increase (-0.5 points of which -1.3 points in Q1 and  +0.1 points in Q2) 

• Favorable impact of foreign currency exchange rate (+0.7 points of which +0.8 points in Q1 and +0.6 points in Q2) which partially offset the negative impact in gross profit, 

• Positive impact of H1 2012 accruals relative to the Special Premium to Employees¹ in OPEX (+0.3 points of which +1.0 points in Q1 and -0.3 points in Q2). 

Net Income and EPS

Income before tax decreased 16.9% as reported to 169.8 million euros. First half 2013 finance revenue was +1.4 million euros compared to +5.6 million euros in H1 2012 due to lower interest income combined with less favorable monetary assets revaluation. The tax rate was 31.5%.

First half 2013 Group net income was 118.1 million euros, a -16.2% decrease as reported. Group net income included 1.8 million euros from income from associates (Cello Pens). First half earnings per share (EPS) reached 2.50 euros, compared to 2.98 euros in 2012, down 16.1%. Normalized EPS was down 15.4% at 2.52 euros compared to 2.98 euros in 2012.

H1 2013 Group financial situation

At the end of June 2013, the net cash position was 191.8 million euros, compared to 334.5 million euros as of December 31, 2012 and 167.7 million euros at the end of June 2012.

Evolution of H1 net cash position (in million euros)

Shareholders' remuneration

• 2.56 euros ordinary dividend per share paid in June 2013 (120.8 million euros), 

• 73.3 million euros share buy-back at the end of June 2013 (865,693 shares bought at an average price of 84.72 euros). 

H1 2013 operational trends by category

Consumer Categories

Stationery

First half 2013 Stationery net sales decreased 2.4% as reported and were up 0.3% at constant currencies. Second Quarter 2013 net sales were up 0.4% as reported and up 2.3% at constant currencies.

Developed markets

• H1 net sales grew high-single digit in Europe. The second quarter performance benefited from good 2013 back-to-school sell-in, notably in France due to earlier sell-in than last year (positive phasing impact). Strong back-to-school sell-in was also noted in Spain, Greece and the UK. The Office Products channel however, continued to be slow, declining low single digit compared to last year.  

• In North America, BIC net sales decreased low-single digit in H1, in line with the stationery market which dropped almost 2% through June vs. last year. Office Product channels were the hardest hit while retail mass market was flat. BIC has held share during this period. Looking forward to back-to-school, BIC's sell-in is expected to grow low single-digit vs. last year, but as always sell-out and replenishment data will be needed to measure the full 2013 back-to-school season. 

Developing markets

• H1 net sales decrease low-single digit in developing markets.  

• In Latin America, net sales decreased mid-single digit. The stationery market has not been immune to the overall economic conditions. Slowing consumer demand has resulted in customer inventory reduction particularly in Mexico and Brazil. 

• Sales in the Middle-East-Africa and Asia grew high-single digit, with notably a strong performance of Southern African countries. 

H1 2013 Stationery normalized IFO margin was 14.5% compared to 19.8% in H1 2012. Q2 2013 normalized IFO margin was 17.6% compared to 22.6% in Q2 2012. Excluding the positive impact of the Special Premium for employees in H1 2012 (+0.7 pts), the decrease is due to unfavorable fixed cost absorption and the impact of currency fluctuations on purchases, mainly in Latin America.

Lighters

First half 2013 Lighter net sales increased 2.0% as reported and 5.2% at constant currencies. Second quarter net sales were up 3.4% as reported and +6.9% at constant currencies.

Developed markets

• H1 net sales grew low-single digit in Europe, driven by strong growth in Eastern Europe and a good resilience in Western Europe, where the overall market was flat, with Southern European countries declining high-single digit. 

• H1 net sales grew mid-single digit in North America. At the end of June 2013, BIC^® Products continued to outperform the pocket lighter market in the U.S. Our sales continue to be driven by consumer interest for our wide variety of added-value sleeve designs as well as by our continued distribution gains.   

Developing markets

• H1 Net Sales grew mid-single digit in Developing Markets, with a solid performance in Asia and low-single digit growth in Latin America. Although the second quarter showed improving market trends compared to Q1 2013, the overall pocket lighter market remained soft, affected by anti-tobacco regulation. In this context, we continued to gain market share. 

H1 2013 Lighters normalized IFO margin was 36.2% compared to 38.6% in H1 2012. Q2 2013 Lighters normalized IFO margin was 38.6% compared to 40.2% in Q2 2012. Excluding the positive impact of the Special Premium for Employee in H1 2012 (+0.6 pts), the increase in net sales was offset by an increase in raw material (partially compensated by price increases implemented during the second quarter) and unfavorable fixed cost absorption.

Shavers

First half 2013 Shaver net sales increased 2.4% as reported and +5.8% at constant currencies. Second quarter net sales were up 6.0% as reported and +9.5% at constant currencies.

Developed markets

• In Europe, H1 net sales grew mid-single digit. We continued to gain market share, notably in Eastern Europe thanks to new listing in several countries; combined with increased visibility in stores for our triple blade products such as the BIC^® 3, the BIC^® Flex 3 and BIC^® Miss Soleil. 

• In North America, H1 net sales grew low-single digit, measured against a very strong H1 last year. In the promotionally active U.S. market, we held shares in both men and women segments. 

Developing markets

• H1 2013 Net Sales grew high-single digit. Latin America registered high-single digit growth, driven by the continued success of our one-piece triple blade shavers (BIC^® 3 Action). Results were aided by the launch of our new BIC^® Flex 4 refillable shaver, which has been listed by the major customers in Brazil.  

H1 2013 Shaver normalized IFO margin was 15.5% compared to 17.1% in H1 2012. Q2 2013 Shavers normalized IFO margin was 16.0% compared to 18.2% in Q2 2012. Excluding the positive impact of the Special Premium for Employees in H1 2012 (+1.0 pts), the decrease is due to unfavourable fixed cost absorption, and the impact of currency fluctuations on purchases.

Other consumer products

H1 2013 other consumer products net sales increased 5.0% as reported, +6.0% at constant currencies and +17.2% on a comparative basis. Second quarter net sales were up 12% as reported, +13.0% at constant currencies and on a comparative basis, driven by the strong performance of BIC Sport.

Other consumer products H1 2013 IFO was -4.5 million euros, including -5.4 million euros (compared to -5.8 million euros in H1 2012) of expenses related to the portable Fuel Cell project.

Advertising and Promotional Products

First half 2013 Advertising and Promotional Products net sales decreased 9.6% as reported and -8.4% at constant currencies. Second quarter 2013 net sales were down 7.5% as reported, and -6.0% at constant currencies.

• In the U.S., First half sales were negatively impacted by the consequences of the service level deterioration BIC APP went through with the ERP implementation at the end of 2012. Our new innovative Brite-Pix imprint technology has been well received. 

• In Europe, H1 net sales remained affected by the economic crisis, especially in southern countries. However, the second quarter showed some recovery, notably in Stationery products.  

In H1 2013, BIC APP's normalized IFO margin was -1.4% compared to +1.9% in H1 2012. Excluding the positive impact of the Special Premium for Employees in H1 2102 (+2.4ppts), the decrease in Normalized IFO margin is due to the decrease in net sales. Q2 2013 BIC APP normalized IFO margin was 2.0% compared to 10.0% in Q2 2012.
MISCELLANOUS

First Quarter 2013

• On 22 march 2013, the European Union Commission published its decision to extend with retroactive effect the anti-dumping tax on Chinese flint lighters (expired in December 2012) to flint lighters of Vietnamese origin imported in the European Union between 27 June 2012 (the official opening of the anti-circumvention inquiry) and 13 December, 2012  (the expiration of the anti-dumping tax on Chinese flint lighters). This decision is an official acknowledgement by the European Union commission that some Chinese flint lighters exporters have circumvented the anti-dumping tax through unjustified declarations of Vietnam origin. BIC has always asserted that the anti-dumping tax was massively circumvented. 

• On 12 March 2013, following a complaint based on misleading advertising and unfair competition filed by BIC, Bobigny commercial court has ordered the company Polyflame to cease claiming compliance with ISO 9994 international safety standard (notably on packaging) of  two out of eight lighters models targeted in the procedure they market in France. Polyflame has filed an appeal against this judgment. 

Second Quarter 2013

• On May 3, 2013, BIC Group and Cello Group have jointly filed an agreement with the Bombay High Court to allow BIC Group to acquire the remaining 40% of the last (7th) stationery entity of Cello Group. After reviewing the filling, the Court has rendered the agreement enforceable. The agreement provides for closing before the end of 2013, based on the original term and conditions. BIC Group has a call option to increase its ownership in Cello Pens from 40% to 55% on or before 01 October 2013. Cello Pens is India's largest manufacturer and distributor of writing instruments. With its broad portfolio of products and countrywide distribution network, the Cello^® brand is one of the most recognized in India.   

BIC Group net sales change by geography

Impact of change in perimeter and currency fluctuations

IFO and Normalized IFO by category

Condensed Profit and Loss Account

Condensed Balance Sheet

Cash flow statement

As of 30 June, 2013, the total number of issued shares of SOCIÉTÉ BIC is 48,525,152 shares.
Total treasury shares at the end June 2013 is 1,645,763.

 Glossary

• At constant currencies: Constant currency figures are calculated by translating the current year figures at prior year monthly average exchange rates. All net sales category comments are made at constant currencies or comparative basis. 

• Comparative basis: at constant currencies and constant perimeter. Figures at constant perimeter exclude the impacts of acquisitions and/or disposals that occurred during the current year and/or during the previous year, until their anniversary date. 

• Normalized IFO: normalized means excluding restructuring, BIC APP integration plan expenses, gain on disposal of phone cards activity in France (in H1 2012) and real estate gains. 

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SOCIÉTÉ BIC condensed financial statements as of June 30, 2013 were closed by the Board of Directors on July 31, 2032. The auditors have performed their limited review procedures on these financial statements and the limited review report on the condensed financial statements is being issued. The 2013 half-year Financial report will be filed with the French financial markets authority (AMF) and available online on BIC's website (www.bicworld.com), headline Finance, on August 2, 2013.
A presentation related to this announcement is available on BIC's web site, headline Finance.
This document contains forward-looking statements. Although BIC believes its expectations are based on reasonable assumptions, these statements are subject to numerous risks and uncertainties.
A description of the risks borne by BIC appears in the section, "Risk factors" in BIC's 2012 Registration Document filed with the French financial markets authority (AMF) on March 27, 2013.

[1] : In H1 2012, 8.8 million euros accruals were booked following the decision to pay a special premium to all BIC employees who have not been granted performance share plans in 2011. 11.1 million euros were accrued in Q1 2012, of which +2.2 million euros were reversed in Q2 2012.

[2] During the First half 2013, BIC Corporation bought 2,832 shares (0.2 million euros) to cover long term share performance plan in the U.S.