After closing 2023 in a more restrained manner than in the previous year, 2024 appears to begin in the same way. Sales are falling in almost all divisions of the company.
With a drop in turnover of 10%, to 234.7 million euros, Corticeira Amorim closed the first three months of this year with profits of 16.1 million euros, a reflection, according to the company’s statement sent to the CMVM, of the costs non-recurring items from the restructuring of Amorim Cork Flooring and debt service. Factors that add to the decrease in business volume.
After closing 2023 below one billion euros in sales, a record reached in the previous year, and 9.5 million euros less in profits, Corticeira Amorim appears to be, this year, at the same pace of evolution. In the company led by António Rios Amorim, profits of 16.1 million euros represent 32.4% less than those obtained in the same period last year.
Of the five business lines into which the company is divided, only the composite cork division achieved a year-on-year increase in its turnover, which even so did not exceed 0.6%. All other four divisions show decreases ranging between 4.6% and 16.5%.
EBITDA on sales improved to 18.6% (18.4% year-on-year in the first three months of 2023), but EBITDA decreased to 43.7 million euros (-8.8%). Corticeira highlights the following positive aspects: increase in sales prices and reduction in non-cork raw materials; and as negative factors: operational deleveraging, rising cork prices and rising electricity costs.
For Rios Amorim, president and CEO, “the first three months of the year were affected by unfavorable market conditions. Faced with the negative effects of operational deleveraging, reflecting a contraction in volumes in the sectors where we operate, and the increase in cork consumption prices, our efforts were focused on increasing industrial efficiency, improving the mix and gaining market share”.
In the flooring segment, “in view of the lack of encouraging signs from the European market, the implementation, in the short term, of an Industrial Optimization Plan that aims to reduce operational losses and increase the efficiency of Amorim Cork Flooring became inevitable. In a context marked by high uncertainty, we intend for 2024 to be a positive year for Corticeira Amorim. We count on the resilience and dedication of our People, confident that the investments made in recent years will allow us to continue to provide innovative products and solutions, conquer new markets and customers, protecting profitability levels and reinforcing financial solidity”, he says, quoted by communication sent to CMVM.
In the first quarter of 2024, Corticeira Amorim’s consolidated sales reached 234.7 million euros (M€), a decrease of 9.7% compared to the same period in 2023, mainly due to the reduction in sales volumes. All Business Units (BU) registered pressure on sales, except Amorim Cork Composites, whose sales grew slightly to €27.5 M (+0.6% compared to the same period last year).
Amorim Cork’s sales (-10.4% compared to the same period last year), which represented 77% of consolidated sales, were penalized by the reduction in volumes, across all segments, even though they benefited from improvements in the product mix and implementation of price increases.
Consolidated EBITDA totaled €43.7 M, which compares with €47.9 M in the first quarter of 2023. The consumption of cork raw materials acquired at higher prices and the negative effects of operational deleveraging were decisive for this reduction . Amorim Cork and Amorim Cork Composites were the BUs that stood out in terms of improved profitability in the period, reflecting, among others, lower costs of non-cork raw materials and better industrial efficiencies, the document also states. The consolidated EBITDA margin was 18.6% (1Q23: 18.4%).
Following results attributable to non-controlling interests, Corticeira Amorim ended the first quarter of 2024 with a net profit of €16.1 million, a reduction of 32.4% compared to the same period last year. This evolution reflects the inclusion of non-recurring costs of the short-term implementation of an Industrial Optimization Plan at Amorim Cork Flooring (4.0 M€), as well as the increase in financial charges as a result of the increase in interest rates and higher level of debt.
At the end of March, net interest-bearing debt fell to €236.7 M (12M23: €240.8 M), despite the increase in working capital needs (€25.7 M) and the increase in investment in fixed assets (12.4 M€).
“Influenced by the economic context affecting the construction sector and the intensification of competition from Asian producers, the flooring market in Europe faced sales reductions of 14% in 2022 and around 20% in 2023, recording significant losses that have led to the big players in the sector to implement measures to reduce costs”, the company also states.
This unfavorable context also penalized the activity and results of Amorim Cork Flooring which, in recent years, has presented losses that worsened in the first months of 2024. Considering the demanding macroeconomic context, the lack of signs of recovery in the flooring industry and the current competitive weaknesses of Amorim Cork Flooring, “it was decided to initiate a process of restructuring this BU which implies, in a first phase, the adjustment of its production and support structure to the current size of sales, in order to reduce operational losses and increase efficiency through industrial optimization”.
