CONSOLIDATED FINANCIAL RESULTS Q1 2012

Gr. Sarantis S.A.

Consolidated Financial Results 3M 2012

• Growth by 5.45% on the consolidated turnover.
• Consolidated gross profit amounted to € 24.50 million, increased by 5.04% vs last year’s level. The gross profit margin settled at 46.83%.
• Reduction in the operating profit (EBIT), by 15.8% with a respective decrease of the Group’s profitability margins.
• The Group’s foreign countries maintain their high participation in the consolidated Group sales. Their participation stands at 58.62%.
• The participation of own brands to the Group’s turnover stands at 73%.
• Sound capital structure, and solid net debt position.

3M ’12 Consolidated financial results

The consolidated turnover increased by 5.45% versus last year’s trimester and amounted to €52.31 million from €49.61 mil in 3M 2011.

It is noted that the turnover of 3M12, compared to the 3M11, does not include seasonal sales, particularly sunscreens, which were delayed due to planned promotions. In the 3M11 the seasonal sales amounted to € 4.7 cm, whereas in 3M12 amounted to only € 3.0 million. While the negative effect of exchange rates on sales of affiliates remained significant.

The Gross profit during 3M 2012 has been increased by 5.04% to €24.50 mil., from €23.33 mil last year.  The gross profit margin settled at 46.83% vs 47.02% in 3M 2011.

The EBITDA posted a decrease of 10.78% to €2.69 mil., in 3M12, from €3.02 mil., in 3M 2011.

The earnings before interest and taxes reached €1.73 mil., from €2.06 mil., down by 15.8% and the EBIT margin settled from 4.15% in 3M11, at 3.31% in 3M11.

Profit before tax dropped by 31.03%, from €2.34 mil., in 3M11 to €1.61 mil, due, mainly, to increased financial expenses of €0.4 mil which were mostly attributed to increased interest payments.

The earnings after taxes and minorities reached €1.15 mil., reduced by 41.31% compared to 3M11, while the EATAM margin stood at 2.20% from 3.95% in the respective period last year.

Despite the challenging economic conditions Sarantis Group presents robust financial position, efficient working capital management and low leverage.

Τhe Group’s working capital settled at €69.96 mil. in 3M 2012 from €66.25 mil. in 3M 2011 and €66.88 mil. in 3M 2010, while working capital requirements over sales settled at 31.23% vs 30.14% in 3M 2011.

At the same time the Group benefits from a healthy capital structure and low leverage. In 3M 2012, the Group’s net debt settled at €2.01 mil.

Consolidated Turnover & EBIT SBU analysis

During the first trimester of 2012, total group sales have been increased. All sectors showed improved activity other than the Cosmetics SBU. The shortfall in sales that occurs widely in cosmetics is due to late launch of seasonal, mostly sunscreens, because of planned promotional activities.

Cosmetics recorded a sales drop of 10.00% amounting to €21.25 mil., from €23.62 mil., in 3M 2011.

In this SBU, the own brands demonstrate a decrease of 8.79%, thus their contribution in this SBU’s turnover was increased from 70.17% to 71.12%. The reduction presented in the quarter is not a real reduction in sales, while the image will be normalized in the semester.

Sales of Household Products increased 10.11% amounting to € 23.10 million from € 20.98 million in the corresponding period last year. Sales of own brands in this category rose by 8.37% while their contribution to this category’s sales reached 98.09%. Considerable growth in the category has been posted by the distributed brands, due to the new brands that have been included in the product portfolio.

The category of Other Sales exhibited significant increase of 58.76% during 3M 2012, driven mainly by the subcategory of Selective products and less by the Health and Care. This growth is attributed to the new agreements and acquisitions.

During 3M 2012, consolidated revenues of own brands (cosmetics and household products) amounted to €38.22 million from €37.49 million in 3M 2011, increased by 1.94%. Furthermore, their contribution to the total group turnover stood at 73.05%.

Consolidated revenues of distributed brands during 3M12 amounted to €14.10 million, from €12.12 million in 3M11, increasing by 16.30%. Their participation to the total group sales settled at 26.95%.

The Group’s operating earnings decreased during the 3M 2012 by 15.8%, due mainly to increased advertising and promotional expenses. It should also be noted the fact that in the quarter of 2012 are not included significant sales of seasonal products. The figures regarding the Cosmetics will be more complete in the semester's results.

Cosmetics EBIT decreased in 3M 2012 by 68.62% reaching € 0.55 million from €1.76 million in 3M 2011. The Cosmetics EBIT margin during 3M 2012 settled at 2.59% vs 7.43% in 3M 2011. This category’s contribution to total EBIT fell to 31.80% from 85.34% same period last year.

The operating profits of own brands within this category decreased by 66.73% standing at €0.56 million from €1.70 million in 3M 2011.

The EBIT of Household Products posted a considerable increase of 222.93% during the 3M 2012 to €1.14 million from €0.35 million in 3M 2011. The EBIT margin of the household products stood at 4.94% during 3M 2012 from 1.68% in 3M 2011. The increase is due both to the "Own Brands" which present an increased EBIT of around 210.27% which amounts to € 1.10 million, and also to the "Distributed brands". This growth is attributed both to recent acquisitions (Domet and Topstar) and also to the new business deals.

The "Other sales" are recovering, as shown in the figures for the quarter of 2012; EBIT increased by 108.01%, which is due to the selective distribution channel and is attributed into the recent business deals.

The loss from the Estee Lauder JV stood at €-0.34 mil., during 3M 2012, down by 44.84% versus the same period last year, and they are according to the budget.

The Own brands portfolio, generated income of €1.74 million in 3M 2012 versus €2.05 million in 3M 2011, decreased by 15.52%. The contribution of own brands (cosmetics and household products) to the total EBIT during 3M 2012 stood at 100.18%.

EBIT of distributed brands during 3M 2012 amounted to €0.34 million, from € 0.24 million in the corresponding period last year, posting a 41.70% increase. Their contribution to total EBIT corresponded to 19.40% from 11.53%. In addition, Estee Lauder JV presented increasing losses which amounted to € -0.34 million and are within the budgeted figures.

Consolidated regional analysis

The Group’s consolidated turnover was supported by both the Greek and the Group's foreign markets.

Despite the adverse economic environment in Greece and the drop in the Greek retail sector sales, Sarantis Group managed to increase the local sales 8.73%, at €21.65 millions, from €19.91 million last year.  This amount does not include the late launch of seasonal products in the first quarter of 2012.

As far as the foreign markets of the Group are concerned, turnover was up by 3.25% to €30.67 mil from €29.70 mil in 3M 2011.

It is also worth to note that the currency movements still had considerable impact in the Foreign Countries turnover during the first quarter (increase by 8.25% in local currencies and circa 5.00% average currencies devaluation).

During 3M 2012, the foreign countries contribution to the Group’s sales stood at 58.62%, marginally decreased in comparison to 3M 2011.

The Group’s operating profit has been decreased by 15.8% during the 3M 2012. The decrease in Group's EBIT was mainly from Greece, and is due both to increased expenditure on advertising and promotion, and also due to the fact that in the trimester 2012, are not included significant sales of seasonal products,  which were introduced late in the market due to planned promotional activities.

The Greek EBIT in 3M 2012 was decreased by 31.69% to €1.43 mil., from €2.10 mil in 3M 2011.

Excluding the loss from the Estee Lauder JV, Greek EBIT during 3M 2012 amounted to €1.77 mil from €2.33 mil., down by 24.01%.

Greek EBIT margin, excluding Estee Lauder JV, stood at 8.19% from 11.71% in the respective period of 2011.

The foreign countries posted an increase in EBIT of 837.16% during 3M 2012, amounting to €0.30 mil., from €-0.04 mil.  The increase is attributed entirely to Poland's performance. Foreign countries EBIT margin during 3M 2012 stood at 0.98% from -0.14% same period last year.

Objectives & Prospects

The Group's financial results for the first quarter of 2012 are in general in accordance to the budget.

The consolidated Group sales rose in the quarter of 2012. This increase is greater if we include the seasonal sales that have been delayed this year, due to planned promotional activities.

Increased A&P expenses, higher financial cost, in addition to the negative results from the EL JV pressed the earnings. As expected, the adverse conditions in the economic environment remained during the first quarter of 2012, while the situation is not expected to improve in the foreseeable future. Therefore, the management focuses on aligning the cost structure with the expected revenues, and adjusts the product portfolio with the consumer trends.

The management remains dedicated to its policy, for sound capital structure, low net debt, containment of operating cost and in general for efficient management of working capital, with the objective to further enhance the Group’s financial position.

At the same time, the management, as always, remains focused on its strategic pillars of growth that support and secure a profitable outlook for Sarantis Group and specifically on the following:

• Organic growth of the core business activities.
• Increase of the existing market shares.
• Continuous examination of the situation in the economies of the Group’s countries and modification of the business where deemed necessary according to the new market conditions.
• Examine possible acquisition targets in the Group’s foreign countries, as long as market share, profitability and cost structure allow for synergies. The Group’s management considers that current conditions are in favor of exploring possible new acquisitions.

Financial Results Analysis (698.1KB)