BB Societe BIC SA

BIC Group - Press Release
Clichy - 24 October 2018
              

Third quarter and nine months 2018 Results

Solid Q3 despite challenging trading environment - Outlook unchanged

• 9M Net Sales up 0.3% on a comparative basis; 3Q Net Sales up 5.2% on a comparative basis, with a robust sell-out during Back-to-School season as well as continued solid performance in all three categories in Mexico.

• 9M Normalized Income From Operation margin at 18.4%, down 1.1 points; Q3 Normalized Income From Operation margin at 16.1%, down 1.5 points.

"In the third quarter, we delivered strong performance across our three categories as we navigated through a challenging trading environment and currency volatility.

In line with our expectations for this quarter, Stationery delivered solid growth notably thanks to strong e-commerce performance in the US and Europe, and the successful launch of Cello One pen in India. We outperformed our markets during Back-to-School season in the Northern Hemisphere. All three categories performed well in Mexico, particularly in Lighters where we expanded distribution.  Despite overall market softness in the Shaver category, we continued to post growth in Eastern Europe and see positive impacts from our new product launches in Europe.

We remain committed to our outlook for the full year as we continue to invest in growth opportunities and drive operational effectiveness."

Gonzalve Bich, Chief Executive Officer

As of January 1, 2018, the BIC Group has applied the following IFRS standards:

• IFRS15 "Revenue from Contracts with Customers." 2017 financial data has been restated
• IFRS 9 "Financial instruments"
• IFRS 16 "Leases" has been early adopted.
  

9M 2018 Net Sales totaled 1,436.8 million euros, down 6.9% as reported and up 0.3% on a comparative basis. The unfavorable impact of currency fluctuations of (6.3)% was mainly due to the depreciation of the U.S. dollar and Brazilian real against the euro. Europe grew by 1.5% while North America grew by 1.4%, both on a comparative basis. Developing Markets declined by 2.2% on a comparable basis.

9M 2018 Gross Profit margin was 52.3%, compared to 51.9% in 9M 2017.

9M 2018 Normalized IFO was 265.0 million euros compared to 301.4 million euros in 9M 2017, with Normalized IFO margin of 18.4% vs. 19.5% in 9M 2017.

Income before tax was at 204.3 million euros, compared to 275.9 million euros in 9M 2017. Net finance revenue was 8.0 million euros compared to negative 0.8 million euros in 9M 2017. 9M 2018 was positively impacted by fair value adjustments to financial assets denominated in USD when compared to 31 December 2017.

9M 2018 Net income Group Share was 127.6 million euros, a 31.5% drop as reported (196.3 million euros, increasing 5.4%, before the Cello goodwill impairment). The effective tax rate was 37.5% and 28.1% excluding the impact of Cello goodwill impairment. Q3 2018 Net Income Group Share was 56.8 million euros versus 57.6 million euros last year.

EPS Group share was 2.79 euros, compared to 3.99 euros in 9M 2017, i.e., down by 30.1%. Normalized 9M EPS Group share decreased 3.4% to 4.30 euros, compared to 4.45 euros in 9M 2017. EPS Group Share in Q3 2018 was 1.24 euros compared to 1.23 euros in Q3 2017, up 0.8%. Normalized EPS Group share was flat at 1.24 euros.

Net cash position
At the end of September 2018, the Group's net cash position stood at 144.8 million euros.

Net cash from operating activities was 237.5 million euros, including 284.1 million euros in operating cash flow. The negative 46.6 million euros change in working capital, and others was mainly driven by accounts receivables and inventory increased when compared to December 2017 mainly due to seasonality. Net cash was also negatively impacted by investments in CAPEX as well as the dividend payments and share buybacks.

• Ordinary dividend of 3.45 euros per share paid in May 2018.
• 54.0 million euros in share buy-backs by Société BIC at the end of September 2018 (687,396 shares purchased at an average price of 78.59 euros). BIC Corporation had share buy-backs for 0.1 million euros.

Stationery 9M 2018 Net Sales decreased by 4.4% as reported and increased by 2.0% on a comparative basis. Q3 2018 Net Sales were up 2.3% as reported and 6.8% on a comparative basis.

• In Europe, 9M Net Sales were up low single-digit. While markets remained soft, BIC's Back-to-School results (sell-out) were robust across European countries. In France, BIC gained share for the 15th consecutive year in a row, performance notably driven by the successful launch of BIC® Gelocity Illusion pen, reaching 4.6% in value share of the Gel segment. We also gained significant share in the UK driven by continuous success of the BIC® 4-Color(TM). Southern Europe grew notably thanks to distribution gains and a great Back-to-School performance in Spain.

• In North America, 9M Net Sales increased low-single digit. Performance was driven by continued strong growth in e-commerce (+39% sales growth year-on-year), with market share growing 1.1 points in value YTD. Back-to-School season was robust, as we grew +2.3% in value, with the on-going success of the BIC® Gelocity Quick Dry pen.
• In Latin America, 9M Net Sales increased mid-single digit. In Mexico, we outperformed the market during Back-to-School season, in spite of a highly competitive environment, thanks to good performance in both Ball Pen and in Coloring segments.
• Cello Pens 9M Domestic Sales increased low single-digit on a comparable basis. Cello's portfolio streamlining strategy was offset by new product launches in Q3, such as Cello One.

9M 2018 Normalized IFO margin for Stationery was 9.5%, compared to 8.7% in 9M 2017 with cost efficiency and lower Brand Support, offsetting increasing Raw Material costs. Q3 2018 Normalized IFO margin was 5.2%, compared to 3.5% in Q3 2017.

9M 2018 Net Sales of Lighters decreased by 7.1% as reported and were flat on a comparative basis. Q3 2018 Net Sales were up 2.6 % as reported and up 5.8% on a comparative basis.

• Europe 9M Net Sales were up low-single digit mainly due to Eastern Europe where we continued to gain distribution notably in Russia and Ukraine. In Western Europe, performance continued to be impacted by the adjustment in route-to-market with some distributors in France.
• North American 9M Net Sales increased slightly. During Q3 more specifically, we benefited from the impact of the April price increase. BIC outperformed a declining non-refillable pocket lighter market in the US (down by 0.3% in value)^[5], gaining 0.3 points in value, notably thanks to additional distribution gains.
• In Latin America, 9M Net Sales decreased low-single digit. In Brazil, year-to-date performance was impacted by inventory adjustments by customers, as well as by the transportation strike in May, however in Q3 we registered low double-digit growth. Mexico performance was solid, thanks to on-going distribution gains, particularly in Q3 in convenience stores.

9M 2018 Normalized IFO margin for Lighters was 36.6%, compared to 39.7% in 9M 2017, reflecting an increase in Raw Materials and Brand Support, as well as unfavorable fixed cost absorption. Q3 2018 Normalized IFO margin was 35.7%, compared to 40.7% in Q3 2017.

9M 2018 Net Sales of Shaver's decreased by 8.3% as reported, and by 0.9% on a constant currency basis. Q3 2018 Net Sales decreased by 0.3% as reported and increased by 4.1% on a constant currency basis.

• In Europe, 9M Net Sales increased low-single digit, mainly driven by Eastern Europe and specifically in Russia where BIC outperformed the total wet shave market, gaining 0.9 points in value^[6], thanks to on-going distribution gains and continued momentum from the BIC® Flex 3 Hybrid. This was partly offset by Western Europe and Southern Europe where BIC performance was in line with the market dynamic, but in a negative environment, with a one-piece market declining by 2.6% in value⁶.
• In North America, 9M Net Sales were relatively flat. The US one-piece market was down 4.0% in value^[7] in a continued competitive environment. BIC lost 0.8 points, with 26.1% market share in value⁷, this was primarily driven by less promotional displays. Quarter-to-date net sales (sell-in) were positively impacted by change in brand support strategy, as well as the continued success or our new products BIC® Soleil® Balance, BIC® Flex 3 Hybrid and BIC® Soleil® Bella Click.
• In Latin America, 9M Net Sales were stable. In Brazil, despite a declining one-piece market (down 3.3% in value YTD AUG 2018)^[8], BIC gained 2.4 points in value to reach 21.2% market share in value, driven by distribution expansion and product mix with trade up to 2 & 3 blades both on male with BIC® Comfort 3 and BIC® Flex 3, and on female with the Soleil Franchise. In Mexico, the one-piece market grew 5.8% in value and BIC outperformed the market gaining +0.3 points in value⁸.
• In the Middle-East and Africa, 9M Net Sales decreased double-digit with performance still negatively impacted by unfavorable importation legislation in North Africa.

9M 2018 Normalized IFO margin for Shaver's was 11.1% compared to 13.2% in 9M 2017, driven by lower sales performance and increase in Production costs, partially offset by lower Brand Support compared to last year.
 Q3 2018 Normalized IFO margin was 10.0%, compared to 13.4% in Q3 2017.

9M 2018 Net Sales of Other Products decreased by 26.2% as reported and by 11.6% on a comparative basis. Q3 2018 Net Sales decreased by 19.2% as reported and by 14.7% on a comparative basis.

BIC Sport posted a low double-digit decrease in its Net Sales on a comparative basis.

9M 2018 Normalized IFO for Other Products was a negative 3.2 million euros, compared to a negative 4.0 million euros in 9M 2017. Q3 2018 Normalized IFO for Other Products was a negative 2.2 million euros, flat vs. last year.

We expect 2018 Group Net Sales to increase between +1 and +3% on a comparative basis, with all categories contributing to the growth. Major factors affecting sales performance could include continued competitive pressures in Shaver, further inventory reductions from retailers, and continued softness in the Brazilian economy.
Gross Profit will be impacted by an increase in raw material costs, higher depreciation, while we will continue to invest in targeted Brand Support and Operating Expenses.
2018 Normalized Income from Operations will also be impacted by sales performance. Based on these factors we expect Normalized Income from Operations margin to be between 17% and 18%.

As of September 30, 2018, the total number of issued shares of SOCIÉTÉ BIC was 46,650,783 shares, representing:

• 67,994,195 voting rights,
• 66,652,584 voting rights excluding shares without voting rights.

Total number of treasury shares held at the end of September 2018: 1,341,611.

• Constant currency basis: constant currency figures are calculated by translating the current year figures at prior year monthly average exchange rates.
• Organic growth or Comparative basis: at constant currencies and constant perimeter. Figures at constant perimeter exclude the impacts of acquisitions and/or disposals that occurred during the current year and/or during the previous year, until their anniversary date. All Net Sales category comments are made on a comparative basis.
• Gross profit is the margin that the Group realizes after deducting its manufacturing costs.

• Normalized IFO: normalized means excluding non-recurring items as detailed on page 3.
• Normalized IFO margin: Normalized IFO as a percentage of Net Sales.
• Net cash from operating activities: principal revenue-generating activities of the entity and other activities that are not investing or financing activities.
• Net cash position: Cash and cash equivalents + Other current financial assets - Current borrowings - Non-current borrowings (except financial liabilities following IFRS 16 implementation).

SOCIETE BIC consolidated financial statements as of September 30, 2018 were approved by the Board of Directors on October 23, 2018. A presentation related to this announcement is also available on the BIC website (at www.bicworld.com).
This document contains forward-looking statements. Although BIC believes its expectations are based on reasonable assumptions, these statements are subject to numerous risks and uncertainties. A description of the risks borne by BIC appears in the section, "Risk Factors" in BIC's 2017 Registration Document filed with the French financial markets authority (AMF) on March 21, 2018.

For more information, please consult the corporate website: www.bicworld.com

BIC is a world leader in stationery, lighters and shavers. For more than 70 years, BIC has honored the tradition of providing high-quality, affordable products to consumers everywhere. Through this unwavering dedication BIC has become one of the most recognized brands and is a trademark registered worldwide for identifying BIC products which are sold in more than 160 countries around the world. In 2017, BIC Net Sales were 2,041.4 million euros. The Company is listed on "Euronext Paris" and is part of the SBF120 and CAC Mid 60 indexes. BIC is also part of the following Socially Responsible Investment indexes: CDP's "Leadership Level" (A-) and "Leadership Level" for the additional "Supplier" module, Euronext Vigeo - Eurozone 120, Euronext Vigeo - Europe 120, FTSE4Good indexes, Ethibel Pioneer and Ethibel Excellence Investment Registers, Ethibel Sustainability Index (ESI) Excellence Europe, Stoxx Global ESG Leaders Index..

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