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LISI 2011 —
26
— financial report
Financial situation
timeframes andquality, while activity undergoes significant variations.
The significant deterioration of operating conditions at year end has
affected the level of annual EBITDA, which stood at 8.8% (12.4% in
2010) and operating margin (EBIT) which fell to 5.3 % (6.2% in 2010),
below the LISI AUTOMOTIVE standard. The contribution margin was a
victim of the rise in the prices of subcontracting, transport, and other
external costs, as well as the inflation in raw materials costs (-2.4%
impact on margin). Fixed costs were better controlled.
By type of costs, activity-related consumption totaled 42.6% of
production (39.4% in 2010), tools underwent a rise due to the
development of new products in almost all the sites. Moreover, it
was necessary to resort to subcontracting to overcome a number of
malfunctions: failure of heat treatment furnaces, heavy maintenance,
discontinuation of the surface treatment in Delle, overactivity.
Productivity was affected by the aforementioned exceptional
restructuring operations, as well as by overheating in Germany
(-€3.5 million impact on EBIT for the Kierspe site) and the sharp decline
in demand at year end.
The €20 million increase in payroll compared to 2010 for a production
of +€52 million caused the productivity ratio to drop to 126%.
Cash flow amounted to €28.7 million, or 6.4% of sales, compared
to €42.9 million in 2010. This sharp decline was due to the release
of provisions recorded for the Bonneuil-sur-Marne site and the
perturbations induced on the Puiseux site, which amounted to
-€7.3 million.
Capital expenditures were significant, with €29.6 million of
commitments and the accounting of €35.6 million. Among the major
projects, it is important to note the implementation of the hardware
plan (presses, rolling machines and heat treatment), the increased
capacity in Germany (press), the development of new products, and
the extension of Chinese units.
Inventories increased by +€10.1 million mainly in finished products
(+€8.1 million), reflecting the sharp slowdown of the last two months
of the year. The need for working capital was therefore reduced from
76 days to 68 days, but the variation is negative at -€6.8 million.
Accordingly, the Free Cash Flow for the year was negative at
-€11.5 million in 2011, while it had been definitely positive in 2010
(+€27.3 million).
OUTLOOK
The prospects for 2012 show no sign of collapse of automobile
markets for LISI AUTOMOTIVE's clients. However, the signals received
at the beginning of the period are difficult to interpret, which
reflects a general lack of visibility regarding the forecasts that
manufacturers could give LISI AUTOMOTIVE to help it establish its
budget assumptions.
The performance recovery of LISI AUTOMOTIVE will depend essentially
on the attitude of the main plant in Germany, the effect of the
consolidation of the Bonneuil-sur-Marne and Puiseux sites, and the
initial gains from the hardware plan. All measures have been taken
for these three areas for improvement to deliver their full effect
quickly. Finally, LISI AUTOMOTIVE must take advantage of its favorable
competitive positions to impose even more strongly to its major
customers the necessary price levels.
The significant capital expenditures incurred, as well as the LAPS (LISI
AUTOMOTIVE Production System) program which is currently being
deployed at all sites, will allow further progress and improve the
consistency of the sites, in order to find a level of operating margin in
line with the LISI Group's strategy.
2.4
LISI MEDICAL
Economic environment
Contrasted market growth depending on segments
In 2011, the global market for bone surgery grew by about 4% to $22.4
billion.
This increase is however variable and there are considerable differences
from one segment to another. The "reconstruction" market is the
most mature and displays a steady increase 1 to 2% per year in
value. Assimilated today to elective surgery, the "dental" segment is
stagnating because it is strongly related to the erosion of purchasing
power in times of crisis in Western countries.
The growth in value of the "spine" segment was less significant than
in previous years, due to strong pressure on prices following the policy
of health spending cuts in these same Western countries. This market
is less mature than the other, rather premium, ones, where one can
observe some form of technological standardization.
As for the extremities and traumatology segment, it confirms its
dynamism: its growth, at 7%, ismainly due to the reliability of implants
(survival rate or improvement of the implantology performances),
made possible thanks to the technical improvements offered by a large
number of players and now available to most people.
Markets of North America, Europe and Japan currently amount for
almost 80% of the total market value, while they represent less than
20% of the world population.
These proportions give ameasure of the considerable growth potential
of the worldmarket of orthopedics: it should remain one of the fastest
growing within the medical devices market, driven by the undeniably
positive effects of demographics related to the steady increase of the
aging population (over 60). The development of therapeutic solutions
with the marketing of more reliable devices that accept a higher level
of stress, now allows a widening of the potential target population:
the 40 to 60 year-olds. Although the growth of the world population
slowed slightly with a forecast rate of 1.1% growth up until 2015, that
of the 60+ year olds should be 3.2%, while that of the 40 to 60 year
olds should be 1.75%.