Door Van Leeuwen Pipe and Tube Group - Profit and positive outlook Van Leeuwen Pipe and Tube Group
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The Van Leeuwen Pipe and Tube Group realized a positive operating result in 2009, despite the difficult economic conditions. This was achieved particularly because of the company’s spread across regions and market segments. Costs were reduced where necessary, and stocks were adjusted to the level of activity.
The company was confronted with an abrupt decrease in demand, declining material prices and a declining gross margin. The operating result before tax and participating interests is € 8.7 million (2008: € 43.2 million). The net profit is € 1.9 million (2008: € 35.2 million). Revenue declined by approximately 40% to € 457 million in 2009. The company was able to maintain a solid financial position in 2009. The company's balance sheet with a 50% solvency remained strong.
The market in 2009 was characterized by a significant drop in demand in almost all sectors and regions and a sharp decline in prices, particularly for welded pipes. The sharply declining prices were also caused by excessive capacity expansion in factories worldwide in recent years. Despite the decline in market volume, Van Leeuwen succeeded in maintaining its market share.
To bring stock levels in line with lower market volumes and to limit as much as possible the negative impact of the decline in prices, Van Leeuwen reduced stock levels throughout the world by more than 30%. By implementing cost reduction measures, total operating costs declined by 17% (more than € 16 million) in comparison to 2008. Policy was to limit the impact of these cost reduction measures on our workforce as much as possible, thus maintaining knowledge and expertise within the company. Forced layoffs were avoided as much as possible in this respect. In total, the number of employees was reduced by 11%.
Developments worldwide
In Europe there was a sharply reduced demand for pipe and tube materials. End users in the industrial market applied a very conservative purchasing policy, also caused by limited credit facilities. Markets in France and Germany were hit hard by the drop in demand. Van Leeuwen’s subsidiary in France was not able to escape a drastic reorganization. Sales came under tremendous pressure in Central European countries. In the energy segment a clear decline in orders became evident and customers around the globe adopted a conservative stance in terms of new investments, also caused by financing problems. Nevertheless, Van Leeuwen managed to book a number of interesting projects in the process industry towards the end of 2009.
In Canada declining investments in the oil and gas sector led to a significantly lower market volume in comparison to previous years. The impact of the global crisis was also clearly evident in Australia and Asia. Here the Van Leeuwen companies, due to their strong office network, were able to make a positive contribution to the Group result, even under these difficult market conditions. Distribution activities of the joint venture in China in particular were successful, as were the specialized stocks with products of high quality alloys in the Middle East.
In 2009 Van Leeuwen continued to make investments in the company. Activities in Indonesia were further expanded. A new office and warehousing facility was brought on-stream in Sydney, Australia, at the end of 2009. New IT-systems were implemented in Europe and Singapore.
Financial details
The Group's consolidated revenue amounted to € 457 million, a drop of more than 40% in relation to the previous financial year. The margin consequently also significantly declined. A total cost reduction of more than € 16 million (17%) was achieved in comparison to the previous financial year. The operating result before tax and participating interests at € 8.7 million was significantly lower than in 2008 (€ 43.2 million). As a result of the company's positive cash position, interest charges were almost nil. The net operating result amounted to a profit of € 1.9 million (2008: € 35.2 million).
The balance sheet retained its strength during the financial and economic crisis in 2009, with a solvency ratio at year-end amounting to 50% on Group capital totaling € 146 million (2008: € 161 million). The approach in recent years to refrain from acquisitions based on the often disproportionately and unjustifiably high transaction prices appeared to be correct. In addition to reducing working capital from € 186 million (2008) to € 126 million (2009), this turned out to be an important factor in safeguarding the company's solid financial foundation.
Outlook
There are some signs of an increasing demand, although this still varies by sector. The company’s more than 85 years of history teaches that a substantial recovery in revenue and net profit after a sharp decline in market demand generally only takes place after two to three years. The market is adopting a wait-and-see attitude. The expectation is that 2010 will be a year with weak demand and, at first, continued uncertainty.
Peter Rietberg, Chairman of the Board: “Based on a balance sheet with a strong solvency and ample cash and cash equivalents, the company's financial situation provides a strong base for expansion. The confidence of our customers and the support of our suppliers are of paramount importance for the continuity and growth of the company. The combination of competent employees, financial strength, a rich history and a focus on specialisms once again offers our company many opportunities for a strong 2010.”