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Zumtobel profits fall

Harold Sommerer

Harald Sommerer, Zumtobel Group CEO

Zumtobel’s latest nine-month report shows revenues at the group rose 6.1 per cent in the first nine months to EUR 964.2 million (£807.7m) but overall profits have fallen by 3.2 per cent to EUR 310.9 million (£260.4m), with a sharp fall of 13.2 per cent in the third quarter.

The lighting sector performed well, recording the highest increase in revenue of 10.3 per cent to EUR 712.4 million (£597.5m) in the first nine months. As a result the Zumtobel brand met its European growth targets and measures taken to strengthen profitability and growth at Thorn are beginning to take effect, according to the company.

The overall fall in profits at the group has been attributed in part to its failing components business and mixed regional performance. The components segment reported poor performance particularly in Asia. Revenues fell by 3.2 per cent to EUR 310.9 million (£260.4m), with a sharp fall of 13.2 per cent in the third quarter.

“Overall we are less than satisfied with developments in the first nine months. While we can see that our growth strategy is beginning to take hold, above all in the lighting segment in Europe, we are currently facing some major challenges in the components segment in particular. Here we are going to be focusing our resources firmly on our core business in the general lighting sector and in the near future will be expanding our portfolio in terms of both conventional electronic ballasts and LED products. We will be paying special attention to improving the development process, streamlining our inventory management and a gradual reduction of our magnetic ballast activities,” said Zumtobel Group CEO Harald Sommerer.

In its LED luminaire sector, the group reported higher than expected growth with revenues from the sale of LED products rising 92.3 per cent to EUR 129.4 million (£108.5m). The share of the group’s revenues generated by LED products rose from 7.4 per cent in the previous year to 13.4 per cent.

While Zumtobel said the technology shift from conventional to LED products represented a major growth driver for the company, it was currently having a negative influence on profitability due to higher costs in the areas of R&D, marketing and sales necessary to protect its current position in the market.

Adjusted earnings before interest and taxes amounted to EUR 34.1 million (£28.6m) for the first three quarters of 2011/12, which amounts to almost half the prior-year value of EUR 64.4 million (£54.1m). This decline was attributed to planned and on-going investments in growth, in particular the expansion of sales structures, as well as from the effects of the technology shift.

In a company statement, the group explained that it is to continue to focus on business development and will continue on its chosen course for Zumtobel and Thorn in Europe over the coming months.

The board assumed that the group will be unable to reach its growth targets in Asia and the USA in the course of the current financial year. “In the components segment, visibility is still very limited and the challenges are significant, so a fast return to growth is not to be expected. The board is expecting only slight year-on-year growth in revenues and a significant decline in the EBIT margin for the Zumtobel Group in 2011/12, above all due to the negative impact of developments in the component segment. In spite of this less favourable outlook, the board still believes in the strategic importance of the investments in the technology shift and in the global growth strategy.”

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