Groupe SEB : First-Quarter 2013 Revenue

Regulatory News:

Groupe SEB (Paris:SK):

PERFORMANCE IN LINE WITH EXPECTATIONS
SLIGHT INCREASE IN REVENUE
LIMITED DECLINE IN OPERATING RESULT FROM ACTIVITY
SOLID CASH GENERATION

• 2.7% organic growth in revenue
• €73 million in operating result from activity, a moderate decline
• Debt reduced by €88 million in the first quarter, as in 2012

In first-quarter 2013, the economic environment remained generally unstable, due to the impact of the on-going recession. This resulted in sluggish consumer spending in most mature markets, while emerging markets showed a renewed vitality. Against this backdrop, demand for small domestic equipment varied from one region and one product family to another.

The Group’s sales in the first part of the year reflected this mixed picture, and the revenue increase of 2.3% as reported and 2.7% at constant scope of consolidation and exchange rates (like-for-like) comprised very different situations. This rise, due mainly to sales volumes, should obviously be seen in the context of relatively low prior-year comparatives but nonetheless represents a clear break with the downward trend noted in second-half 2012. In this respect, the Group’s performance was encouraging, even if sharp differences and major challenges persist.

The currency effect was small, amounting to a negative €4 million (compared with a positive €19 million in first-quarter 2012), and was due mainly to a decline in the Brazilian real.

Operating result from activity stood at €73 million, down 6% compared with the first three months of 2012. It has to be stressed, as mentioned each year, that first-quarter operating result from activity is not representative of full-year performance.

Debt at 31 March 2013 amounted to €468 million, a decline of €88 million for the quarter, reflecting strong generation of cash.

Sales by region
In France, the strained economic environment had an effect on consumer spending, which deteriorated substantially during the period, impacting both segments of the small domestic equipment market (small electrical appliances and cookware). This weakened economy led to a market that remained highly competitive and promotion-driven. It also had a significant adverse effect on the Group’s revenue, which declined by 4.8%. The fall-off can be attributed to several reasons. On the one hand, it reflected a decline in household spending and in-store traffic; it was also due to a weak market for pressure cookers, still impacted by a large-scale promotional operation conducted by a retailer in first-half 2011 and which continued to weigh on demand; and lastly it resulted from the coffeemaker business, which was adversely affected by a highly promotional environment, especially in single-serve coffeemakers. Pursuing its value-creation strategy, Groupe SEB refused to enter into a price war and saw a temporary erosion in its market share. Nonetheless, it continued to make advances in full-automatic espresso coffeemakers (backed by a complete range of products), consolidated its positions in cookware, and enjoyed a number of sales successes in vacuum cleaners and food processors as well as with new products like the Cookeo multicooker, the Freemove cordless iron and the Soup & Co heating blender.

In other Western European countries, the economic environment remained gloomy and demand for small domestic equipment varied widely between markets in the South (which continued to decline sharply) and in the North (especially Germany and the United Kingdom) which remained rather buoyant. All markets continued to be highly promotion-driven, led by retailers and a number of players of the small electrical appliance industry. After an especially difficult year in 2012, the Group saw its first-quarter 2013 revenue decline only slightly, however with sharp contrasts depending on the country and changes that sometimes went against market trends. Group’s sales in Spain rebounded strongly, led in particular by vacuum cleaners and irons, and energised by a major loyalty programme in hair care with a retailer. In Portugal, the Group also returned to growth, particularly in linen care, food preparation appliances and Dolce Gusto coffeemakers. On the contrary revenue sagged in Italy but solely because of a loyalty programme that was not renewed. While the Group's performance was down in Belgium and the Netherlands, sales in Germany were up slightly, thanks to a number of advertising campaigns and positive results in a Stiftungwarentest comparison of steam generators. Revenue in the United Kingdom continued to increase at a sustained pace, led by strong momentum in cookware as well as in food and beverage preparation appliances, especially Dolce Gusto coffeemakers.

In North America, sales grew firmly despite disparities between the United States on one hand and Canada and Mexico on the other. In the US, where the economic environment was a little more buoyant than in 2012, consumer spending was up slightly but remained highly volatile. The Group’s performance more or less resembled that of the market. In cookware, T-fal enjoyed robust revenue growth, led by new product launches, a strong marketing dynamic and rapid rise in e-commerce. However, business was more difficult for All-Clad and Emeril which turned in a lacklustre performance in a very competitive environment. In small electrical appliances, Groupe SEB continued to expand its product offering in coffeemakers, with Krups continuing to show renewed vitality, while Rowenta consolidated its positions in a ironing market that declined further. Actifry sales benefited from a positive momentum that the Group attempted to amplify through targeted sales and marketing actions. In Canada, demand for the Group’s products remained very solid, lifted by the strong success of Actifry (which also drove growth in the segment of traditional deep fryers), rising sales for Fresh Express, the continuing strong performance of cookware and by constant extensions of the product range. In Mexico, the rise in revenue was mainly due to a loyalty programme with a retailer, as was also the case in second-half 2012.

In South America, the contraction in reported revenue was due to the on-going decline in the real against the euro, even though sales in Brazil were up significantly compared with a business that started very slowly in 2012. In addition to this positive prior-period comparison, the overall economic climate was more buoyant and favourable to consumer spending. Groupe SEB’s performance was underpinned by a strong product dynamic that resulted particularly in solid demand for food processors and blenders, a lively upswing in cookware following a problematic 2012, and a very satisfying sales development of the Actifry deep fryer. The Group also achieved robust growth in fan sales, for which demand was supported both by favourable weather conditions (unlike in the previous year) and successful new products, especially the Ultimate ceiling fan. In Colombia, the economic environment continued to trend favourably, enabling major advances in small electrical appliances (irons, vacuum cleaners, food processors, blenders and mixers, fans, etc.). However, the situation was more contrasted in the cookware segment, which accounts for the majority of sales and was impacted by temporary excess inventories in the trade, which are currently being drawn down. In the region's other countries, which represent a very small share of revenue, performance varied, with a sharp fall-off in Venezuela, a decline in Chile and strong growth in Argentina.

In Asia-Pacific, the beginning of the year was shaped by results that varied depending on the country and the period. In China, first-quarter like-for-like sales were up sharply, reflecting in particular strong sell-in by retailers in January for the Chinese New Year. In a market gradually stabilising in cookware but remaining negative in small electrical appliances, Supor further consolidated its positions, posting very satisfactory results for Thermospot and ceramic-coated frying pans as well as for pots, pressure cookers (led by the introduction of Clipso models), kitchen tools, rice cookers and electrical pressure cookers. In Japan, after strong momentum in January and February, driven by cookware promotions and by the development of new product categories (vacuum cleaners, mixers and irons including Freemove), demand slowed in March, wiping out many of the gains made over the first two months. In South Korea, where the market was more difficult than in 2012, early-year sales were sluggish. In the region's other markets, further inroads were made, with revenue again rising in Thailand, Malaysia and Taiwan and a strong growth dynamic for fan sales in Vietnam. The exception was Australia, where the Group’s performance was adversely affected by a lacklustre and highly promotion-driven consumer environment.

In Central Europe and other countries (Turkey and countries in the Middle East, Africa...), business performance also varied considerably from one market to another. Despite high prior-year comparatives, the Group again reported sustained sales growth in Russia. In an environment that saw demand hold firm, Groupe SEB further strengthened its market positions, thanks to the vitality of its brands and product portfolio (generators, food preparation appliances, electrical pressure cookers and multicookers, etc.), its new Home & Cook stores, an agile pricing policy and the significant contribution of a loyalty programme with a retail chain. In Ukraine, after a disastrous 2012, the business rebound was very lively in an environment still shaped by price war. At the same time, sales in Central Europe again varied depending on the country, but a recovery is underway in Poland, the region’s largest market. In Turkey, a very active although highly competitive and protected market, the situation remained difficult for the Group, which had to combat low-price offensives from the competition. In this important market, Groupe SEB adjusted its pricing policy without sacrificing its profitability. Lastly, business in the United Arab Emirates, Saudi Arabia, and other Middle Eastern countries saw a temporary decline, due to high inventory levels among retailers, which are currently being drawn down.

Sales by product family

Product performance varied depending on the segment.

• Home comfort products posted the best performance in the first quarter, led by very vigorous fan sales in Latin America and Vietnam, thanks to favourable weather conditions (unlike in 2012).
• The Group also pursued its development in home care products by extending its vacuum cleaner line-up and continuing to build its international presence, in particular with Air Force models.
• In food preparation appliances, the solid growth in sales extended across nearly all categories: blenders (especially the continued success of the Soup & Co heating blender), meat mincers in the Central Europe, Russia and Middle East region, kitchen machines in Europe, and mixers and beaters in such markets as Japan and South Korea.
• In electrical cooking, brisk sales mainly reflected strong demand for rice cookers and electrical pressure cookers that extended well beyond the Chinese market.
• Demand for cookware continued to trend positively overall, led by China, Canada and Brazil and lifted by the introduction of a ceramic-coated range.
• On the other hand, sales of personal care products were sluggish in the first quarter, in line with a lacklustre market, despite the clear success of the Steampod hair straightener designed in partnership with L’Oréal.
• In the ironing segment, despite the international development of the Freemove cordless iron, sales declined in the absence on the shelves of a renewed range of steam generators expected for soon.
• Lastly, in beverage preparation appliances, higher sales of Dolce Gusto and full-automatic espresso coffee machines failed to offset the decline in sales of Nespresso machines, in an increasingly competitive market for single-serve coffeemakers.

Operating result from activity
In first-quarter 2013, operating result from activity amounted to €73 million, compared with €78 million in the prior-year period. The 6% decline was due to an unfavourable geographic mix and an increasingly competitive and promotion-driven environment, which nonetheless did not slow advertising and marketing spending for the period.

Analysis of debt at 31 March 2013
Net debt at 31 March 2013 totalled €468 million, compared with €556 million at 31 December 2012. The reduction was due to solid cash generation in the first quarter, which was on a par with the first three months of 2012, and has further strengthened the Group’s financial position.

Significant Events of the First Quarter

Creation of Groupe SEB Egypt for Household Appliances
During the first quarter, a joint venture – 75%-owned by Groupe SEB – was created with Egypt’s Zahran industrial group, which holds forefront positions in the country's small domestic equipment market and was previously the Group's leading retailer of cookware. Called Groupe SEB Egypt for Household Appliances, the joint venture is the Group’s first direct setting up in Africa and is intended to give a powerful impetus to its sales in the country, which were previously made indirectly through retailers. Operational in March, the joint venture was fully consolidated but had no significant impact on the first quarter’s financial statements.

SEB ALLIANCE invests in ETHERA
SEB ALLIANCE, Groupe SEB’s investment company, has invested, alongside the Emertec fund and NEC-K, in ETHERA, a Grenoble-based start-up company that is developing innovative solutions to measure and eliminate indoor air pollutants. The three partners have invested a combined total of €3 million.
ETHERA uses a unique nanoporous sensor technology which easily and accurately measures the concentrations of chemical air pollutants and purifies the air with a pollutant capture system. The company aims to become the market leader in indoor air quality.

Upcoming events

Annual General Meeting of Shareholders: 14 May 2013 – Paris, Palais Brongniart, 2:30 p.m.
First-half 2013 revenue and earnings: 25 July, 6:30 a.m.

www.groupeseb.com

The world leader in small domestic equipment, Groupe SEB operates in nearly 150 countries with a unique portfolio of top brands marketed through multi-format retailing. Selling some 200 million products a year, it deploys a long-term strategy focused on innovation, international development, competitiveness and service to clients. Groupe SEB has nearly 25,000 employees worldwide.

GROUPE SEB
DIRECTION DE LA COMMUNICATION FINANCIÈRE
Chemin du Petit Bois I BP 172 - 69134 ECULLY Cedex France I T.+33 (0)4 72 18 16 40 • Fax +33 (0)4 72 18 15 99
Société au capital de 49 951 826 € I 300 349 636 R.C.S Lyon I T.V.A FR 1230034963600112