Company press releases
15 May 2008
Zapf Creation: Sales up by 7 percent in first quarter of 2008
- Satisfactory development of operations
- Market share in Germany expanded by 2.7 percentage points
- Earnings impacted by higher costs due to external procurement and exchange rate effects
- Equity ratio improved to 24.4 percent
- Outlook for full 2008 financial year confirmed
Roedental, May 15, 2008 - Zapf Creation AG, Europe's leading manufacturer of play and functional dolls, today announced that its operating business in the first quarter of 2008 developed satisfactorily and in line with expectations. Consolidated sales increased by 7.4% in the first quarter, which is the industry's weakest quarter of the year. Market share in Germany in the segment of play and functional doll rose to 59.5% in a market environment that displayed slight growth (Q1/2007: 56.8%; +2.7 percentage points).
Consolidated earnings were impacted both by positive effects of efficiency gains and numerous external factors which the Company could not influence and which resulted in increased costs overall. The continued decrease of operating costs such as administrative and marketing expenses was offset by a significant increase in procurement prices.
Nonetheless, the Management Board has confirmed its guidance for the 2008 financial year as a whole.
Development of sales and earnings Q1/2008
- Zapf Creation increased its consolidated sales to EUR 14.3 million in the first quarter of 2008 (Q1/2007: EUR 13.3 million; +7.4%). Net of currency effects, i.e. based on constant exchange rates compared to the previous year, the increase was 12.0%.
- At 40.5% of sales, the gross profit margin was below the figure recorded in the same quarter the previous year (45.0%). This figure was impacted by considerable price increases for procurement in China due to higher wages and commodity costs, among others. Rising transport and logistics expenses, especially as a result of high fuel costs and an increasing scarcity of transportation capacities also had a negative impact on margins.
- Earnings before interest and taxes (EBIT) were EUR -3.5 million, which is on par with the previous year. EBIT includes a non-cash currency loss of around EUR 0.9 million from the measurement of a euro-denominated loan extended by Zapf Creation AG to its English subsidiary as a result of the strong increase of the euro.
- Net finance income of EUR -2.0 million (previous year's period: EUR -0.7 million) was impacted by high interest costs for the subordinate shareholder loans that were granted in 2007. These loans were largely converted into equity in the first quarter of 2008, which will result in considerably reduced interest expense in the next quarters.
- The net result after taxes in the first three months was EUR -4.3 million after EUR -3.4 million in the same period of the previous year. This corresponds to (basic/diluted) earnings per share of EUR -0.32 based on an average of 13.3 million shares outstanding (Q1/2007: EUR -0.41 based on an average of 8.2 million shares outstanding).
Balance sheet development Q1/2008
- As of March 31, 2008, the total assets of the Zapf Creation Group amounted to EUR 96.0 million, down EUR 19.2 million compared to the end of the previous financial year (EUR 115.1 million). Equity as of March 31, 2008, totaled EUR 23.5 million (December 31, 2007: EUR 14.4 million). This corresponds to an equity ratio of 24.4% (December 31, 2007: EUR 12.5%). The marked improvement is due to the conversion into equity of some of the subordinate shareholder loans (EUR 12.9 million), which was carried out in the reporting period.
- The Group's net liabilities (including the remaining balance of the shareholder loans of approx. EUR 4 million) as of March 31, 2008, totaled EUR 12.4 million, which was significantly less than at the end of 2007 (EUR 32.9 million).
Outlook for 2008 overall
Regardless of the difficult environment both on the procurement side and in terms of currency effects, the Management Board confirms its previous guidance for the 2008 financial year as a whole. The Management Board continues to expect consolidated sales to turn around and rise again, consolidated EBIT to improve further, and consolidated earnings after taxes to return to the black.
Given the considerably increased procurements costs, Zapf Creation has decided to adjust prices effective June 1, 2008. This decision has already been communicated to the trade.
The Group also benefits from the increasing efficiency gains derived from the restructuring and from the effects of the strategic cooperation with US toy manufacturer MGA Entertainment, Inc. in sales, procurement and logistics.
Thomas Pfau, chief marketing and sales officer of Zapf Creation AG, said:
"The upward trend in Zapf Creation's operations, which began last year, is stabilizing. However, on the procurement and currency side we are facing unexpected headwinds, which we cannot influence. But our Group is now positioned in a way that enables it to overcome such obstacles. From an operational point of view, we see the first quarter as a confirmation of our ability to reach our targets for the year."
At a glance: Key figures for the Zapf Creation Group (IFRS)
| in € million | Q1/2008 | Q1/2007 |
Sales | 14.3 | 13.3 |
Gross profit (in % of sales) | 40.5 | 45.0 |
EBIT | -3.5 | -3.5 |
Net finance income/loss | -2.0 | -0.7 |
Net income/loss for the period | -4.3 | -3.4 |
Earnings per share (1) (in euros) | -0.32 | -0.41 |
Cash flow (2) | 10.6 | 14.5 |
| 31.3.2008 | 31.12.2007 |
Total assets | 96.0 | 115.1 |
Cash and cash equivalents | 30.9 | 23.3 |
Equity | 23.5 | 14.4 |
Equity ratio (in %) | 24.4 | 12.5 |
Net liabilities (3) | 12.4 | 32.9 |
Employees | 230 | 226 |
(1) diluted/basic: Q1/2008 based on 13.298 million shares, Q1/2007
based on 8.227 million shares
(2) from operating activities
(3) including subordinated shareholder loans
Further information:
Frank Elsner/Jens Heinen
Frank Elsner Kommunikation für Unternehmen GmbH
Tel.: +49 (0) 54 04 - 91 92 0
Fax: + 49 (0) 54 04 91 92 29
Zapf Creation AG is Europe's leading manufacturer of play and functional dolls with accessories. Among Zapf Creation's best known brands are Germany's best-selling functional doll BABY born®, 15 million of which have been sold worldwide since 1991, plus Baby Annabell® and CHOU CHOU. All these branded toys have in common the highest standards of design, quality, safety and play value. Headquartered in Rödental, Germany, Zapf Creation was founded by Max Zapf in 1932 and went public in April 1999 (ISIN 0007806002).
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