• Q2 EBITA reached 68.1 million euro, adjusted for currency effects at 72.6 million euro
• Group sales declined by 2.8 %, adjusted for currency effects plus 0.5 %
• Domestic sales increased by 2.9 % , Praktiker brand plus 4.6 %
• Liquidity reaches 271.5 million euro in first half of the year

Kirkel – July 22, 2009. In a difficult economic environment, Praktiker Group stood its ground in the second quarter 2009 – supported by a distinct pick-up of business in Germany. At 68.1 million euro, second quarter EBITA came in some 12 million euro below the record earnings of the year earlier (80,0 million euro). Adjusted for currency effects, i.e. at unchanged exchange rates, EBITA would have reached 72.6 million euro. Wolfgang Werner, CEO of Praktiker Bau- und Heimwerkermärkte Holding AG, called this “a good basis for a further, adequate and positive development of the earnings situation in the second half of the year“. Following a difficult first quarter the company “was back on a reasonable track”. Werner: “Praktiker is well on its way and on the right track”.

The Interim Report H1/2009 is available here.

The statement of CEO Wolfgang Werner regarding the interim report H1/2009 is available here.

Despite substantial negative currency effects, group sales in the second quarter came in at around 1.101 billion euro which is just 2.8 percent below the year earlier value (1.132 billion euro). In Germany, sales even improved by 2.9 percent. “With this result we have performed distinctly better than the industry and won additional market share“, said Werner. And if the Eastern European currencies had not devalued so strongly, also group sales would have increased by 0.5 percent in the second quarter.

What is important, however, is that Praktiker has not only been able to achieve an appealing earnings performance but that also the financial position has improved further. Werner: “We have always maintained that this year we would give top priority to securing earnings and liquidity. We have lived up to this self-set target“. At 271.5 million euro, also the cash and cash equivalents position at mid-year was at a comfortable level, as planned. Overall, the group's financial leeway including unused credit lines totals around 500 million euro. In addition, good progress in inventory reduction resulted in a sustained improvement of the working capital, and net debt remained nearly unchanged as compared to the end of 2008.

Germany: better than the competition
Following a difficult start into the new financial year, especially the German business of the Praktiker Group recovered appreciably. Domestic sales in the second quarter rose from 792.5 to 815.2 million euro year-on-year. This corresponds to a 2.9 percent growth. The sales driver proved to be the Praktiker brand which was able to gain market share with a price-aggressive marketing offensive and a completely revised concept for its gardening assortment. During the period from April to June it increased sales by 4.6 percent thereby more than compensating the first quarter decline in sales. Max Bahr, the second strong brand in the group, generated sales of 213.3 million euro in the second quarter and thereby only narrowly missed the very high prior-year value (214.3 million euro).

During the first half of 2009, the Praktiker Group in Germany generated sales of 1.405 billion euro and only fell short of the prior-year value (1.419 billion euro) only by 1.0 percent; the Praktiker brand improved slightly during this period, i.e. from 987.4 to 988.1 million euro (+0.1 percent). With this trend, the group’s domestic sales, but in particular also sales of the Praktiker brand, have developed better than the industry average which, according to information provided by BHB, the association of DIY retailers, probably declined by 1.5 to 2.0 percent during the first half of the year.

The sales-promoting marketing strategy of the Praktiker brand weighed on margins. This is why operating earnings, which reached 32.7 million euro in the second quarter, came in below the prior-year value (40.1 million euro). However, these losses were deliberately accepted because this way the comparably high inventory level still existing at the end of the first quarter could be quickly and distinctly reduced. The brand Max Bahr, by contrast, raised its EBITA during the period from April to June despite stagnating sales from 15.8 million euro last year to now 18.9 million euro. Overall, the Praktiker Group in Germany thus generated operating earnings during the second quarter of 53.7 million euro, i.e. 5.7 percent less than during the same period in 2008 (57.0 million euro). In the first half of the year, domestic operations of the Praktiker Group contributed 14.5 million euro to consolidated earnings (in 2008: 34.9 million euro).

International: No upturn in economic activities in second quarter
Just like in the fourth quarter 2008 and in the first quarter 2009, the international operations of the Praktiker Group also massively came under pressure during the second quarter due to the effects of the global recession which in some markets outside the European Currency Union additionally resulted in sometimes material currency devaluations. As a consequence, quarterly sales of this segment declined by 16 percent to 285.5 million euro (2008: 339.7 million euro). Like-for-like, i.e. excluding the new stores, sales slumped 19.5 percent. Adjusted for currency effects, the decrease only came in at 5.8 percent. Around two thirds of the decline in sales is thus solely attributable to currency fluctuations. This phenomenon also characterized the complete first half of the year: Translated into euro, international sales during the first six months declined by 15 percent to 491.6 million euro (2008: 578.3 million euro); in local currency sales came down by 4.9 percent.

Also the less favorable earnings reported by the International segment were affected by the unfavorable cyclical development and, additionally, by the devaluation of the foreign currencies in the international Praktiker markets. Compared with the same period last year EBITA generated during the second quarter 2009 declined from 23.0 to 14.4 million euro. If exchange rates had remained unchanged, the net profit for the quarter would have been 4.5 million euro higher. When looking at the whole period from January to June, EBITA from international operations after compensation of the first quarter losses came in at 4.4 million euro (2008: 24.3 million euro). Adjusted for exchange rate changes, earnings would have been more than double this amount.

Even if the general economic settings for the international business activities of the Praktiker Group continue to be extremely difficult there was also “some light at the end of the tunnel”, according to Werner. The Eastern European currencies had stabilized in the meantime, on the one hand, and the decline in sales in two of Praktiker’s oldest international markets, i.e. Greece and Turkey, had slowed down appreciably. Greece, the most important country in terms of sales and earnings, had already reached positive territory in terms of sales in the second quarter and came in only slightly below the prior-year value for the full first half of 2009. Werner: “This should be seen as a sign of hope. And it shows that, in times of crisis, Praktiker is able to stand its ground also in those countries where it has established itself as the leading DIY chain with a recognized brand and a nation-wide store network”.

Outlook: guidance remains unchanged
Regarding the outlook Werner stressed that uncertainty regarding the economic development remained high despite some positive signals. “Our business sector – just like the rest of the retail sector – remains dependent on macroeconomic developments“, he stressed. A fundamental improvement of the situation in the remaining months of the current financial year could probably not be expected, “but there are also no clear indications for a further deterioration either“. This is why the management anticipates a moderate decline in sales for the Praktiker Group also in the second half and thus for the whole year. But it also continues to expect to be able to generate “reasonable, positive operating earnings“. In addition, the target of securing the liquidity position continued to be a top priority. For this reason all efforts to curb costs, limit capital expenditure and reduce inventory levels would continue to be pursued unchanged.

Interim report Q 2 – 2009 / Half year financial results 2009

* undiluted

** Excluding the store in Zabrze (Poland) which burnt down on December 26, 2008.