Door Petra van Zandvoort - Van Leeuwen presents record result for 2006
- substantial rise in turnover and profit
- strong market demand, stable prices
- continuing growth in 2007
Van Leeuwen Pipe and Tube Group made a net profit in 2006 of € 40.3 million, almost 15% more than in the record year of 2005 (2005: € 35.3 million). Last year closed with a 12% higher turnover of € 619 million (2005: € 552 million). In virtually all market segments and geographical areas the trends were positive. The Van Leeuwen Pipe and Tube Group continued its policy of expanding its commercial network and investing in logistical efficiency. The company’s effective, professional organization enabled it to benefit from growth in the traditional regions of Europe, Asia and the Middle East, and from opportunities in upcoming markets like China and Central Europe. The huge demand for tube products came mainly from the oil and gas energy markets.
The operating result for 2006 was € 53.8 million (2005: € 36.8 million). Due to a significantly higher tax burden of € 15.2 million (2005: € 1.8 million), the net profit rose less than the operating result. Interest charges fell by € 0.4 million to € 1.3 million. Working capital and inventories rose as a result of increased activity. Solvency dropped to 42.0% (2005: 46.2%), which is still a comfortable ratio. The strong balance sheet position provides sufficient room to finance projected growth.
Market trends for the Van Leeuwen Pipe and Tube Group in 2006 were almost without exception positive: strong market demand and stable prices. Growth outside Europe, particularly in Asia and the Middle East, continued thanks to the high investment level in both production and processing of oil and gas. Furthermore, the market for construction products revived after a weaker 2005. The largest sales volume increases in precision and mechanical products occurred in the automotive and mechanical engineering sectors. Another positive factor was the generally stable price level in combination with often long delivery times, which enabled the Van Leeuwen Pipe and Tube Group to make the most of its strong stock position and good relationship with key suppliers.
An economic revival in Germany was the catalyst for the recovery of the Construction division, where volume increased and prices improved as the year went on. Despite heavy competition, mainly sales from stock increased. The Precision division showed strong volume growth, particularly in the mechanical engineering sector. One of the ways the Van Leeuwen Pipe and Tube Group managed to increase turnover from existing and new customers was by offering a broader range of products and services.
The market for stainless steel products was governed to a large extent by the explosion in nickel prices. Even so, the Stainless division experienced a healthy rise in sales volume. The Process Industry division had an excellent year again. The Van Leeuwen Pipe and Tube Group’s strong inventory position enabled it to capitalize on shortages in international markets.
This year the strongest growth again took place outside Europe. Market conditions in Asia were good and the Van Leeuwen Pipe and Tube Group posted record turnover and profit figures. The company opened its own office in Indonesia. The joint venture in China was formally launched and won its first major order. Growth in the Middle East still appears to be accelerating and the Van Leeuwen Pipe and Tube Group was in a good position to respond through its offices in Abu Dhabi and Dubai. Canada also had another good year, even though activity slowed somewhat in the fourth quarter due to falling oil and, in particular, gas prices.
Organizational developments
In 2006, the Van Leeuwen Pipe and Tube Group continued to work steadily on growth by investing in its commercial network, acquisitions and joint ventures, supported by an efficient logistics infrastructure, new IT systems and efficient day to-day management. In 2006, the logistics facilities in the Netherlands (Beesd) and France (Meyzieu) were expanded. Expansion is also planned for the current year in Belgium, the United Kingdom, France, Singapore, Canada, Australia and Qatar. Alongside these are a variety of projects designed to improve warehouse efficiency and optimize transport flows. New ERP systems continue to be implemented in support of operating processes in China, Belgium, the Netherlands (Deventer) and Singapore, while continuous improvements are being realized in other branches. A stock management programme will be rolled out worldwide this year. The Van Leeuwen Pipe and Tube Group again focused on maintaining close ties with its traditional suppliers, and the company is actively developing new supplier relationships in emerging regions like China, India and Eastern Europe. Once again a great deal of time and effort was put into risk management, reporting, and internal control.
Outlook
Experience in recent years prompts discretion in producing forecasts. If the current favorable market conditions continue, the result will once again be gratifying. The Van Leeuwen Pipe and Tube Group anticipates further growth and market penetration. The possibility of unexpected political and macro-economic developments, particularly with negative consequences for oil prices, should not be ruled out. It could influence the results substantially. Based on these facts the company expects further growth in 2007 and a gratifying result in all respects.