• Sales and earnings in Germany up from last year
• International business still affected by cyclical and currency effects
• Group EBITA net of currency effects at the level of 2007

Kirkel – 22 October 2009. In a continued difficult international economic environment Praktiker Group firmly held its ground in the third quarter 2009 and, most of all, distinctly increased the profitability of the Praktiker brand in Germany. Operating earnings (EBITA) at group level came in at 34.3 million euro while sales declined by a total of 4.8 percent to 968.0 million euro. This is 15.8 million euro less than the quarterly result achieved in the record year 2008. Net of currency effects, i.e. if foreign exchange rates in the international markets had remained constant, EBITA would have reached around 40 million euro and thus the same level as in 2007. While the ongoing recession in the East and Southeast European markets continues to weigh heavily on the Group’s international business, domestic operations have for the first time in the crisis year 2009 improved their earnings contribution by a positive 8.8 percent. The Praktiker brand even raised its earnings by 11.7 percent over the same quarter one year earlier.

The Interim Report 3/2009 is available here.

The statement of CEO Wolfgang Werner regarding the interim report 3/2009 is available here.

Wolfgang Werner, CEO of Praktiker Bau- und Heimwerkermärkte Holding AG, called this “a good starting position for the final spurt in this financial year which was full of cyclical turbulences, drawbacks and challenges”. Particularly gratifying had been the improvement of sales and earnings in Germany and the fact that the Praktiker brand had materially contributed to this. Its profitability gain demonstrated “that it is constantly improving its ability to establish a balance between the pursuit of reasonable margins and an aggressive price policy“. With a view to the full year 2009 Werner continues to expect “a slight decrease in sales and reasonable, positive EBITA“. He was cautiously optimistic about the future. “An economic uptrend combined with a consistently low rate of inflation and, in the best case, a moderate increase in unemployment would provide the most favorable climate for the Praktiker Group for returning to the road of success and, hence, for further profitable growth”. This upturn could already be felt in Germany in 2010 whereas, in the international markets, it might take a little longer.

Third quarter group sales came in at 968.0 million euro which is 4.8 percent down from last year (1,017.3 million euro). This decline is exclusively attributable to the sluggish international business which continues to be characterized by a cyclical reluctance to spend and negative currency effects. Net of currency effects quarterly sales would have remained basically at the prior-year level with a minus of just 0.8 percent.

The Group’s EBITA generated in the third quarter amounted to 34.3 million euro. Compared against the prior-year record level (50.1 million euro), this corresponds to a 31.5 percent decline. This is attributable to the fact that the situation in the international markets where Praktiker is active continues to be difficult. Net of the negative currency effects, the EBITA generated in the International segment would have been a good five million euro higher. However, compared to the trend experienced in the first half of the year, the decline in earnings has become distinctly less pronounced because the earnings situation in the domestic business has improved and the measures initiated in early 2009 to control costs, raise efficiency and secure liquidity are increasingly showing effect.

Cash and cash equivalents of the Praktiker Group as per 30 September 2009 ran up to a good 294 million euro. This is around 60 million euro more than as per 31 December 2008. Good progress was also made with regard to reducing inventories which in addition resulted in an improvement of the working capital. The net debt position improved substantially over the beginning of the year. Werner: “We have always maintained that in addition to securing earnings another top priority this year is to also secure our liquidity position. Nothing has changed with respect to these priorities up until today. And this will not change for the time being“.

Germany: higher sales and earnings
In Germany, business of the Praktiker Group continued to recover appreciably. Third quarter operating earnings rose from 16.7 to 18.2 million euro year-on-year. This corresponds to a plus of 8.8 percent. This was in particular attributable to the Praktiker brand, whose contribution to EBITA rose by 11.7 percent from 11.7 to 13.0 million euro. With these earnings, the sales division did not only compensate for the losses incurred during the first six months but even managed to return to the profit zone. This was possible because Praktiker managed to successfully reduce its excessive inventories and therefore had to launch significantly fewer promotional campaigns to drive sales. This benefited the gross margin. Max Bahr, traditionally a premium brand with high margins, contributed EBITA in the amount of 5.0 million euro (2008: 4.6 million euro).

Overall domestic sales improved slightly in the third quarter coming in at 663.5 million euro which is 1.0 percent up from the same period last year (656.9 million euro). Both Max Bahr and Praktiker, which managed to continue the positive trend of the prior months despite distinctly fewer numbers of 20 percent promotional campaigns, managed to increase net sales by 1.3 percent. The segment “Others“, which mainly covers the sales division extra BAU+HOBBY as well as its franchise and marketing partnerships, generated slightly lower sales.

International: continued strong impact from currency effects
The economic situation for the international business activities of the Praktiker Group continues to be extremely difficult. At 16.1 million euro, third quarter EBITA from the International segment came in 51.7 percent below the prior-year figure (33.4 million euro) and sales declined by 15.5 percent from 360.4 to 304.5 million euro. Like-for-like, sales receded by 18.9 percent. Here, it must be considered that negative exchange rate effects accounted for around two thirds of the drop in sales and nearly 30 percent of the drop in operating earnings. Net of currency effects the EBITA generated in the international segment would have come in 5.1 million euro higher while sales would only have declined by 4.5 percent.

The impact of the recession in East and South East Europe was felt in all Praktiker countries, but at different degrees. Sales in Poland, Romania, Greece and Turkey – as in Luxembourg - have improved over the first half year even if they continue to range distinctly below the corresponding prior-year levels. However, such a trend reversal is not observable yet in Bulgaria, Hungary and the Ukraine.

Outlook: annual forecast remains unchanged
With regard to the forecast Werner stressed that the cyclical uncertainty remained very high despite some positive signals. This is why, also after the first nine months of the year, the management of the Praktiker Group continued to expect a slight decrease in sales and a “reasonable, positive operating result (EBITA)” for the full financial year 2009. In parallel, the target of securing liquidity remained a top priority. Therefore, all efforts to reduce costs, limit capital expenditure and curb inventories would continue to be pursued.

Quarterly Report Q 3 - 2009 / Nine-Months Financial Report 2009

* undiluted

Press release as pdf