adidas-Salomon 2004 First Half Year Results: Net Income Rises 39%
HERZOGENAURACH, Germany, Aug. 4 /PRNewswire-FirstCall/ -- Strong
second quarter performance Second quarter sales for the Group
increased 7% on a currency-neutral basis with improvements coming
from all brands and regions. Currency-neutral sales in North
America grew 4%, marking the first positive performance in four
quarters. Total Group sales improved by 5% in euro terms to euro
1.468 billion in 2004 from euro 1.392 billion in the second quarter
of 2003. Gross margin increased 3.7 percentage points to 48.4% of
sales from 44.8% in the prior year. Second quarter operating profit
increased 49% to euro 92 million in 2004 from euro 62 million in
the prior year. Net income was up 36% reaching euro 44 million
versus euro 32 million in 2003. This equates to basic earnings per
share of euro 0.96 and represents an increase of 36% versus the
prior year (2003: euro 0.71 per share). First half year Group sales
up 5% on a currency-neutral basis Currency-neutral sales for the
Group increased 5% in the first half of 2004. In euro terms,
revenues increased 1% to euro 3.091 billion in 2004 from euro 3.061
billion in the first half of 2003. "adidas-Salomon has delivered
outstanding operational and financial performance in the first half
of 2004," commented adidas-Salomon Chairman and CEO Herbert Hainer.
"We have strong momentum, with quarter-on-quarter sales
improvements for all brands, a record gross margin and earnings
growth of almost 40%. This is the strongest first half year
performance in the Group's history." Top-line currency-neutral
growth driven by all brands From a brand perspective, sales growth
at adidas set the pace for Group performance in the first half of
2004. Currency-neutral revenues increased 5%. The success of the
football category as well as the "Apparel Breakthrough" initiative
were the main contributors to this development. At Salomon,
revenues increased by 4% on a currency-neutral basis in the first
half of 2004, driven by positive developments in the apparel,
cycling and nordic categories. Revenues at TaylorMade-adidas Golf
increased 3% on a currency- neutral basis driven by the success of
the new r7 Quad metalwood which was launched halfway through the
second quarter. The putter and apparel categories also reported
solid growth. Currency effects from a strong euro, especially
versus the US dollar, negatively impacted sales at all brands in
euro terms. As a result, adidas sales in euro terms increased 2% to
euro 2.584 billion in the first half of 2004 from euro 2.542
billion in 2003. Salomon sales in euros were up 2% to euro 194
million in the first six months of 2004 from euro 191 million in
the prior year. TaylorMade-adidas Golf sales in euro terms declined
3% to euro 302 million in 2004 from euro 311 million in 2003. 1st
Half 1st Half Change y-o-y Change y-o-y 2003 2004 in euro currency-
terms neutral euro in euro in in in millions millions % % adidas
2,542 2,584 2 5 Salomon 191 194 2 4 TaylorMade-adidas Golf 311 302
(3) 3 Total 3,061 3,091 1 5 adidas-Salomon sales by brand in 2004,
"Total" includes HQ/Consolidation Positive regional sales
development From a regional perspective, Group sales in Europe grew
3% on a currency- neutral basis, driven in particular by solid
increases in France, Iberia, the UK and the emerging markets. In
North America, Group sales during the first half declined 1% on a
currency-neutral basis due to a decrease in footwear sales in the
adidas Sport Performance division. However, this figure hides
strong second quarter developments. In Asia, currency-neutral sales
increased 15% driven by double-digit growth in Japan, China and
Australia. In Latin America, currency-neutral sales increased 34%
in the first half, making it the fastest growing region within the
Group. Higher sales in Argentina, Brazil and Mexico were the main
drivers of this improvement. In euro terms, currency translation
effects negatively impacted sales in the first half year in all
regions. Sales in Europe increased 2% in euro terms to euro 1.691
billion in the first half of 2004 from euro 1.657 billion in the
prior year. In North America, sales in euros declined 11% to euro
707 million in 2004 from euro 790 million in 2003. In euro terms,
sales in Asia improved 11% to euro 566 million in 2004 from euro
509 million in 2003. In Latin America, sales in euros grew 27% to
euro 99 million in the first six months of 2004 from euro 78
million in 2003. 1st Half 1st Half Change y-o-y Change y-o-y 2003
2004 in euro currency- terms neutral euro in euro in in in millions
millions % % Europe 1,657 1,691 2 3 North America 790 707 (11) (1)
Asia 509 566 11 15 Latin America 78 99 27 34 Total 3,061 3,091 1 5
adidas-Salomon sales by region in 2004, "Total" includes
HQ/Consolidation Group gross margin up 3.6 percentage points
adidas-Salomon gross margin grew 3.6 percentage points to 47.1% in
the first six months of 2004 (2003: 43.5%). This represents the
highest first half gross margin in the history of the Group and
reflects favorable currency effects, an improving product mix and
increased adidas own-retail activities. As a result of the strong
gross margin expansion, gross profit for the Group rose 9% in the
first six months of 2004 to reach euro 1.456 billion versus euro
1.331 billion in 2003. Operating profit grows 33% Operating
expenses, including selling, general and administrative expenses
(SG&A) and depreciation and amortization (excluding goodwill),
increased by 6% to euro 1.220 billion in the first half of 2004
from euro 1.154 billion in 2003. As a percentage of sales, this
equates to 39.5%, which is 1.8 percentage points higher than the
2003 level of 37.7%. This development reflects increased marketing
expenditures for the UEFA EURO 2004(TM) European Football
Championships and the Athens 2004 Olympic Games(TM). Operating
expenses were also impacted by the continued expansion of adidas
own-retail activities as well as higher doubtful debt provisions at
TaylorMade-adidas Golf in the first quarter of this year. Group
operating profit increased 33% to euro 236 million in 2004 from
euro 178 million in the first half of 2003, reflecting the Group's
strong gross margin development in the period. Similarly, the
operating margin grew 1.8 percentage points to 7.6% in the first
six months of 2004 versus 5.8% in the same period in 2003. Income
before taxes up 36% As a result of the strong operational
improvements during the first half of 2004, the Group's income
before taxes grew 36% to euro 202 million from euro 148 million in
2003. Financial expenses grew 15% to euro 32 million in 2004 from
euro 28 million in the first six months of 2003. This reflects
difficult comparisons in exchange rate effects on balance sheet
items. Goodwill amortization was euro 23 million in the first half
of 2004 versus euro 22 million during the same period in 2003.
Royalty and commission income increased 3% to euro 21 million in
2004 from euro 20 million in 2003. Net income surges 39% Net income
for the Group increased 39% to euro 116 million in the first half
of 2004 from euro 83 million in 2003. Solid currency-neutral sales
increases, coupled with the strong gross and operating margins,
were the drivers of this improvement. Minority interests increased
9% to euro 6 million in 2004 (2003: euro 6 million). The Group tax
rate declined 0.2 percentage points to 39.6% in the first six
months of 2004 from 39.8% in 2003. As a result, basic earnings per
share increased 39% to euro 2.54 for the first six months of 2004
versus euro 1.83 in 2003. Net borrowings reduced by euro 616
million Net borrowings at June 30, 2004 were euro 967 million, down
39% or euro 616 million versus euro 1.583 billion in the prior
year. Strong bottom-line profitability and continued tight working
capital management were the drivers of this improvement. As a
consequence, the Group's financial leverage improved 77 percentage
points to 66% in 2004 versus 143% in 2003. Successful working
capital management continues Group inventories grew 1% to euro
1.304 billion at the end of the first half of 2004 from euro 1.285
billion in 2003. On a currency-neutral basis, this represents an
increase of 4%. Due to continued tight inventory management,
however, the increase in inventories is below the adidas backlogs
growth and the Group's sales increase expectations for the third
quarter of 2004. Receivables at adidas-Salomon were reduced by 8%
to euro 1.122 billion at the end of the first half versus euro
1.217 billion in the prior year. On a currency-neutral basis, this
represents a decline of 6%. Currency-neutral order backlogs grow at
double-digit rates Currency-neutral order backlogs for adidas grew
10% (+8% in euros) at the end of the second quarter of 2004,
reflecting sequential improvement in all regions. Overall apparel
orders increased 18% on a currency-neutral basis, or 17% in euro
terms, reflecting the successful "Apparel Breakthrough" initiative
to grow sales in this product category. Footwear backlogs grew 2%
on a currency-neutral basis and were stable in euros, driven
primarily by growth in Asia. Footwear Apparel Total Change y-o-y in
% in euro currency- in euro currency- in euro currency- neutral
neutral neutral Europe 0 0 11 10 6 5 North America (7) (2) 6 13 (2)
5 Asia 12 14 56 57 34 35 Total 0 2 17 18 8 10 adidas order backlogs
by product category and region as at June 30, 2004 Full year net
earnings target again increased As a result of the Group's
performance during the first half of the year and business
expectations for the rest of 2004, adidas-Salomon is increasing the
sales guidance provided earlier this year and again raising the
Group's earnings target. Group revenues are expected to increase by
around 5% on a currency-neutral basis, with double-digit
currency-neutral growth in Asia and Latin America and
mid-single-digit sales growth in Europe. Positive sales development
is also expected in North America on a full year basis. Group gross
margin is projected to clearly exceed 45% for the first time ever
and operating margin will improve by at least one percentage point
versus the prior year's level of 7.8%. As a result of the strong
first half year performance, Group earnings for the full year are
now expected to grow by around 20%. Herbert Hainer stated, "I have
never felt more confident in our Group's capacity to deliver
sustained strong performance than I do today. With our great
results in the first half year and double-digit order backlog
growth, I am confident of our ability to perform significantly
better than we'd originally anticipated at the beginning of the
year." Please visit our corporate website:
http://www.adidas-salomon.com/ adidas-Salomon CONSOLIDATED INCOME
STATEMENT (IFRS) 2nd QUARTER euro in millions 2004 2003 Change
2004/2003 NET SALES 1,468 1,392 5.5 % COST OF SALES 757 769 (1.5) %
GROSS PROFIT 711 623 14.2 % (% OF NET SALES) 48.4 % 44.8 % 3.7 PP
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 595 539 10.5 % (% OF
NET SALES) 40.6 % 38.7 % 1.8 PP DEPRECIATION AND AMORTIZATION
(EXCL. GOODWILL) 24 23 6.7 % OPERATING PROFIT 92 62 49.1 % (% OF
NET SALES) 6.3 % 4.4 % 1.8 PP GOODWILL AMORTIZATION 12 11 5.1 %
ROYALTY AND COMMISSION INCOME 12 10 20.3 % FINANCIAL EXPENSES, NET
20 10 102.3 % INCOME BEFORE TAXES AND MINORITY INTERESTS 72 50 43.0
% (% OF NET SALES) 4.9 % 3.6 % 1.3 PP INCOME TAXES 27 19 43.4 % (%
OF INCOME BEFORE TAXES AND MINORITY INTERESTS) 37.5 % 37.4 % 0.1 PP
MINORITY INTERESTS (1) 1 n/a NET INCOME 44 32 35.8 % (% OF NET
SALES) 3.0 % 2.3 % 0.7 PP BASIC EARNINGS PER SHARE (IN euro) 0.96
0.71 35.5 % DILUTED EARNINGS PER SHARE (IN euro) 0.96 0.71 35.4 %
NET SALES euro in millions 2004 2003 Change 2004/2003 adidas 1,207
1,137 6.2 % Salomon 72 67 6.7 % TaylorMade-adidas Golf 185 177 4.9
% EUROPE 740 724 2.2 % NORTH AMERICA 379 385 (1.6) % ASIA 289 229
26.7 % LATIN AMERICA 50 42 19.1 % ROUNDING DIFFERENCES MAY ARISE IN
PERCENTAGES AND TOTALS FOR FIGURES PRESENTED IN MILLIONS AS
CALCULATION IS ALWAYS BASED ON THE FIGURES STATED IN THOUSANDS.
adidas-Salomon CONSOLIDATED INCOME STATEMENT (IFRS) 1st HALF YEAR
ENDING JUNE 30 euro in millions 2004 2003 Change 2004/2003 NET
SALES 3,091 3,061 1.0 % COST OF SALES 1,635 1,729 (5.4) % GROSS
PROFIT 1,456 1,331 9.3 % (% OF NET SALES) 47.1 % 43.5 % 3.6 PP
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,173 1,106 6.1 % (%
OF NET SALES) 38.0 % 36.1 % 1.8 PP DEPRECIATION AND AMORTIZATION
(EXCL. GOODWILL) 47 48 (1.5) % OPERATING PROFIT 236 178 32.6 % (%
OF NET SALES) 7.6 % 5.8 % 1.8 PP GOODWILL AMORTIZATION 23 22 2.0 %
ROYALTY AND COMMISSION INCOME 21 20 2.9 % FINANCIAL EXPENSES, NET
32 28 15.0 % INCOME BEFORE TAXES AND MINORITY INTERESTS 202 148
36.4 % (% OF NET SALES) 6.5 % 4.8 % 1.7 PP INCOME TAXES 80 59 35.7
% (% OF INCOME BEFORE TAXES AND MINORITY INTERESTS) 39.6 % 39.8 %
(0.2) PP MINORITY INTERESTS (6) (6) 8.6 % NET INCOME 116 83 38.9 %
(% OF NET SALES) 3.7 % 2.7 % 1.0 PP BASIC EARNINGS PER SHARE (IN
euro) 2.54 1.83 38.6 % DILUTED EARNINGS PER SHARE (IN euro) 2.54
1.83 38.6 % NET SALES euro in millions 2004 2003 Change 2004/2003
adidas 2,584 2,542 1.7 % Salomon 194 191 1.7 % TaylorMade-adidas
Golf 302 311 (2.8) % EUROPE 1,691 1,657 2.0 % NORTH AMERICA 707 790
(10.5) % ASIA 566 509 11.0 % LATIN AMERICA 99 78 26.6 % ROUNDING
DIFFERENCES MAY ARISE IN PERCENTAGES AND TOTALS FOR FIGURES
PRESENTED IN MILLIONS AS CALCULATION IS ALWAYS BASED ON THE FIGURES
STATED IN THOUSANDS. adidas-Salomon CONSOLIDATED BALANCE SHEET
(IFRS) euro in millions June 30 June 30 Change Dec. 31 2004 2003
2003 CASH AND CASH EQUIVALENTS 200 56 256.6% 190 SHORT-TERM
FINANCIAL ASSETS 228 8 n/a 89 ACCOUNTS RECEIVABLE 1,122 1,217
(7.8)% 1,075 INVENTORIES 1,304 1,285 1.5% 1,164 OTHER CURRENT
ASSETS 346 320 7.9% 259 TOTAL CURRENT ASSETS 3,199 2,886 10.9%
2,777 PROPERTY, PLANT AND EQUIPMENT, NET 355 335 6.2% 345 GOODWILL,
NET 583 615 (5.1)% 591 OTHER INTANGIBLE ASSETS, NET 103 111 (7.l)%
104 LONG-TERM FINANCIAL ASSETS 94 88 6.5% 88 DEFERRED TAX ASSETS
193 197 (1.8)% 178 OTHER NON-CURRENT ASSETS 122 103 18.5% 105 TOTAL
NON-CURRENT ASSETS 1,451 1,449 0.2% 1,411 TOTAL ASSETS 4,651 4,335
7.3% 4,188 ACCOUNTS PAYABLE 638 548 16.5% 592 INCOME TAXES 174 161
8.0% 158 ACCRUED LIABILITIES AND PROVISIONS 557 476 17.1% 455 OTHER
CURRENT LIABILITIES 182 160 14.2% 139 TOTAL CURRENT LIABILITIES
1,552 1,344 15.4% 1,344 LONG-TERM BORROWINGS 1,395 1,647 (15.3)%
1,225 PENSIONS AND SIMILAR OBLIGATIONS 109 102 7.3% 105 DEFERRED
TAX LIABILITIES 60 52 14.8% 66 OTHER NON-CURRENT LIABILITIES 34 27
29.6% 35 TOTAL NON-CURRENT LIABILITIES 1,599 1,828 (12.5)% 1,432
MINORITY INTERESTS 30 53 (42.9)% 57 SHAREHOLDERS' EQUITY 1,470
1,110 32.4% 1,356 TOTAL LIABILITIES, MINORITY INTERESTS AND
SHAREHOLDERS' EQUITY 4,651 4,335 7.3% 4,188 ADDITIONAL BALANCE
SHEET INFORMATION OPERATING WORKING CAPITAL 1,788 1,954 (8.5)%
1,646 WORKING CAPITAL 1,648 1,542 6.9% 1,433 NET TOTAL BORROWINGS
967 1,583 (38.9)% 946 FINANCIAL LEVERAGE 65.8% 142.6% 69.8%
ROUNDING DIFFERENCES MAY ARISE IN PERCENTAGES AND TOTALS FOR
FIGURES PRESENTED IN MILLIONS AS CALCULATION IS ALWAYS BASED ON THE
FIGURES STATED IN THOUSANDS. DATASOURCE: adidas-Salomon CONTACT:
Media Relations, Jan Runau Head of Corporate PR, +49-9132-84-3830,
or Investor Relations, Natalie M. Knight, Head of Investor
Relations, +49-9132-84-3584, or Anne Putz, Corporate PR Manager,
+49-9132-84-2964, or Dr. Charlotte Brigitte Loos, Investor
Relations Manager, +49-9132-84-2187, or U.S. Media Relations, Doug
Donsky, Edelman Financial, +1-212-704-4473, or Hendric Junker,
Investor Relations Manager, +49-9132-84-4989, all of adidas-Salomon
Web site: http://www.adidas-salomon.com/
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