Corticeira Amorim profits fall 32% with losses on flooring and slippage in sales – Industry

After closing 2023 below one billion euros in sales, a record figure reached in the previous year, and 9.5 million euros less in profits, Corticeira Amorim began to skid in 2024.

The company led by António Rios Amorim ended the first three months of this year with profits of 16.1 million euros, 32.4% less than the net result obtained in 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 (four million euros), as well as the increase in financial charges as a result of the increase in interest rates and the higher level of debt”, explains Corticeira Amorim, this Thursday, May 9, in a statement sent to the Securities Market Commission (CMVM).

Sales registered a year-on-year decrease of 9.7%, to 234.7 million euros, “mainly due to the reduction in sales volume”, highlights the company based in Mozelos, Santa Maria da Feira.

“In a context marked by high uncertainty”, leader wishes for a “positive 2024”

Corticeira Amorim’s poor economic and financial performance until March even led the company’s president to leave a message to the market: “The first three months of the year were affected by unfavorable market conditions”, António Rios Amorim begins by justifying.

“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 concentrated on increasing industrial efficiency, improving the ‘mix’ and gaining market share market”, he details.

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’ which aims to reduce operational losses and increase the efficiency of Amorim Cork Flooring became inevitable “, reveals the leader of Corticeira Amorim.

Furthermore, “in a context marked by high uncertainty”, António Rios Amorim intends 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”, concludes Rios Amorim in the message that opens the statement published on the CMVM website.

Cork sales plummet, EBITDA drops and debt falls

All Corticeira Amorim business units registered “pressure on sales”, except Amorim Cork Composites, whose sales grew 0.6% to 27.5 million euros in the first three months of this year.

Amorim Cork’s sales – the corks unit -, which represented 77% of the company’s turnover, registered a year-on-year drop of 10.4%, having been “penalized by the reduction in volumes, across all segments, even though they have benefited from improvements in the product mix and the implementation of price increases”, notes Corticeira Amorim.

Earnings before interest, taxes, depreciation and amortization (EBITDA) totaled 43.7 million euros, compared to 47.9 million a year earlier. “The consumption of cork raw materials purchased at higher prices and the negative effects of operational deleveraging were decisive for this reduction”, notes the company.

The EBITDA/Sales ratio increased to 18.6%, compared to 18.4% a year earlier.

Amorim Cork and Amorim Cork Composites were the business units 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”.

At the end of last March, “despite the increase in working capital needs (25.7 million euros) and the increase in investment in fixed assets (12.4 million euros)”, Corticeira Amorim’s net interest-bearing debt fell to 236.7 million euros, 4.1 million euros less compared to the end of 2023.

“PREC” at Amorim Cork Flooring after accumulation of losses

A final note on another relevant fact in the life of the largest cork processing group in the world: the difficult situation in which Amorim Cork Flooring finds itself, known for the production of cork flooring and wall decor, which had already closed the year 2023 with a negative EBITDA of 7.9 million euros.

A record that led Corticeira Amorim to assume, in the 2023 report and accounts, that “the year 2024 will be decisive for the future of the business unit. Either the product is accepted in the market or more in-depth measures in terms of business strategy will have to be implemented.”

Regarding this matter, in the statement sent this Thursday to the CMVM, Corticeira Amorim states that, “influenced by the economic context affecting the construction sector and the intensification of competition from Asian producers, the flooring market in Europe faced reductions in sales of 14% in 2022 and around 20% in 2023, recording significant losses that have led the major players in the sector to implement measures to reduce costs”.

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”, emphasizes the company.

Considering “the demanding macroeconomic context, the lack of signs of recovery in the flooring industry and the current competitive weaknesses of Amorim Cork Flooring”, Corticeira Amorim decided to “initiate a process of restructuring this business unit which involves, 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”, he concludes.

(News updated at 17:12)