Stahl

92% Stahl
High-performance coatings and leather-fi nishing

STAHL LEVERAGES ITS STRONG PRESENCE IN EMERGING MARKETS

STAHL IN BRIEF

Why did we invest in Stahl?

Stahl is the world leader in leather finishing products. The Group enjoys high barriers to entry on its market through its expertise, its long-term relations with its main clients, as well as the very high level of qualification of its “golden hands” technicians. With global market share over 20% on a fragmented market, Stahl has achieved high recurring profitability over the last 20 years. Beyond the cyclical fluctuations of 2009 and 2010, Stahl offers prospects for sustained
growth generated by Asian markets, China in particular, and the development of niche markets for high-performance coatings. A sector ripe for consolidation, rigorous financial discipline and significant financial flexibility should allow Stahl to further its expansion and strengthen its market leadership.

What were the highlights of 2010?

In 2010, Stahl recorded a sharp 30.2% rise in sales to €330 million, following a 14.2% slide in 2009. In the first half, organic growth soared 48%, driven by a strong surge in activity, notably in sales volumes in all divisions, which was accentuated by the effect of restocking across all business sectors (automobile, furnishing, shoes and leather goods), before returning to a more normal level in the second half. The exceptional firsthalf rise was all the more striking compared to the 33.2% fall in organic growth over the same period in 2009. Operating income for 2010 came in at €46.2 million, up 53%, representing a margin of 14% (versus 11.9% in 2009). The sharp margin growth was driven by robust sales which directly impacted the gross margin as well as the effect of reductions in fixed costs implemented during the downturn (selective streamlining of industrial capacity). With Wendel’s support in completing the Group’s financial restructuring, begun in the summer of 2009, which involved a €60 million injection in February 2010 and a €155 million reduction in gross debt, Stahl’s net financial debt contracted to €181 million at the end of 2010, down 46% from €335 million one year earlier
 

What is the outlook for development?

Amid a generally more stable global economy that nevertheless continues to be volatile, Stahl will continue to target growth and increased market share. To do so, it will focus on constant product innovation and step up marketing efforts in the Permuthane, Picassian and Pielcolor businesses, building on the positions it has acquired in highgrowth regions (63% of sales). Stahl also intends to develop its activities in the earlier stages of leather processing, in order to
expand its scope of business and gain greater market share. The Group continues to be driven by strong long-term trends, such as the gradual shift toward emerging markets, average annual growth of 2% to 3% in meat consumption, which supplies the market for hide processing, and the gradual disappearance of certain competitors, a trend that has been accentuated by the recession. For 2011, therefore, Stahl anticipates a return to organic growth of over 5%, despite the unfavorable base effect, driven by emerging markets and the emphasis
placed on selling prices. Margin improvement will hinge on sales growth and rigorous fixed cost management. It will also depend on raw material price trends. From a more long-term perspective, Stahl is on the right path to surpassing the 5% mark for average organic growth, driven by market share gains in leather finishing and a refocus on highgrowth divisions and regions