In the first quarter of 2010, Selena Group posted sales of PLN 132 m, up 30% on the corresponding period of 2009. The higher sales led to a 21% increase in gross profit, which amounted to PLN 43 m. The Group’s gross profit margin was 32%. The Group posted an operating loss of PLN 3.4 m compared with the operating profit of PLN 1 m recorded in 2009. The net loss in the first quarter of 2010 was PLN 5.4 m. In the period from January to March 2010, Selena Group’s trading performance was affected by seasonality in the construction sector, the cost of geographic expansion and integration of new entities.
Selena Group operates in the construction business, which is subject to seasonal peaks and troughs. The results of the first and the second quarter are substantially lower than the results achieved in the latter part of the year. Selena’s financial results in Q1 2010 were also adversely affected by the exceptionally severe winter in the Central and Eastern Europe. Owing to the very low temperatures in the first three months of the year, many constructoin companies had to stop work, which directly impacted on the demand for construction materials and the production levels. As a result, in most countries of the Central and Eastern Europe the construction period started as late as in March and April.
The poorer financial health of many companies from the construction sector, still suffering from the economic slowdown, leads to delays in payments and reduces demand for professional products, which are often replaced with cheaper alternatives.
The Group’s sales increase in the first quarter of 2010 mainly results from the full consolidation of Quilosa, Kvadro, Matizol and the good sales performance in the emerging markets, including Turkey and Russia.
“In the first quarter of 2010 we implemented a number of changes in the Group structure to improve our position in the domestic market and in the Central Europe. We finalised acquisition of PMI Izolacja – Matizol SA – producer of roofing felt and shingles, which will allow Selena to offer a comprehensive proposal to roofing firms. Besides, we expanded our presence in the Finnish and Slovak markets by increasing our stake in FinSelena Oy to 100% and by establishing Selena Slovakia s.r.o.” – said Krzysztof Domarecki, the CEO of Selena FM SA, the Group’s managing company.
In the first quarter of 2010, Selena Group had to incur higher cost of geographical expansion and integration of new entities. The Q1 results were also affected by the cost structure of Quilosa with its ongoing cost restructuring and by the investments into development of Selena’s market potential in China. In China, Selena is currently expanding its sales network, and at the end of 2010 a manufacturing plant of foams is expected to be launched in the Nantong economic zone. The Group’s plans for the nearest future also include further integration of Matizol of Gorlice, with an upgrade of the company’s manufacturing facilities. Selena Group will also continue its strategy of growth through acquisitions in Europe and Asia.
Furthermore, the first quarter also saw some research and development efforts and preparations for implementation of new products under the Tytan brand, in line with the Group’s product growth strategy. As the first company in Russia, Selena launched angle applicators that make it easier to apply joint in hard-to-reach places, thus increasing attractiveness of the sealants.
“Even though the European Commission projects a GDP growth in the Central Europe, we conservatively assess the outlook for improvement in the sector of building chemistry products. A notable fall in the demand for professional products will continue as a result of the lower number of large commercial construction projects. However, as credit availability has improved, we expect a gradual improvement in the residential construction sector and an increase in demand from retail customers engaged in small repairs and renovations. We also believe that sales will increase as a result of expansion of our product range with new products that will be launched in the second and third quarter of 2010” – Krzysztof Domarecki added.