Stahl

91,5% Stahl
High-performance coatings and leather-finishing products

STAHL REINFORCES ITS LEADERSHIP POSITION

STAHL IN BRIEF

Why did we invest in Stahl?

Stahl is the world leader in leather finishing products and is developing large market shares in niche applications for high-performance chemical coatings on other substrates. It enjoys high barriers to entry as a result of its expertise, the long-term relationships it maintains with its principal customers, which include major luxury and high-end car brands, as well as the very high skill levels 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 has prospects for sustained growth generated by global leather consumption markets, in Asia in particular, and the development of niche markets for high-performance coatings. Potential consolidation in the sector, combined with rigorous financial discipline, should allow Stahl to expand further and strengthen its market leadership. It obtains more than 60% of its sales in emerging markets..

Highlights of 2010

In 2011, Stahl posted a 1.3% rise in sales to €334.5 million, even after a strong 30.2% advance in 2010. In the first half of the year, organic growth was weak, at 0.8%, owing in part to a high 2010 base of comparison in the second quarter, as sales in Q2 2010 had constituted a record high. Stahl returned to more normal organic growth rates in the second half (2.8%). Full-year growth seemed all the more modest compared with the 24.1% organic growth rate achieved in 2010. Specifically, the Leather Finishing Products division (55% of sales) suffered a slowdown
in the tanning business because of the high price of hides, in particular in China and Latin America. This division was also impacted by the slowdown in demand from the luggage, furniture and clothing markets, which was not fully offset by the healthy automotive market. High-Performance Coatings posted good performance, with organic growth of 5.1% over the full year. This business continued to see strong growth in India and China and consolidated its positions in mature markets owing to market share gains and new product launches.
2011 adjusted operating income came to €38 million, down 17.7%, with a margin of 11.4% (vs. 14% in 2010). Margins were affected by increases in the price of raw materials, which could not be fully passed on to customers. Since the third quarter of 2011, however, raw material prices have come down, which should have a favorable impact in 2012. Stahl’s net financial debt stood at €185 million as of the end of 2011

Outlook for development

Amid a still-uncertain global economy, Stahl will continue to target organic growth and increased market share. To do so, it will focus on ongoing product innovation, while stepping up marketing efforts and capitalizing on the positions it has established 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 will continue to capitalize on its strengths, which are emerging markets, innovation and active cost management. Specifically, in emergingmarkets Stahl will renew its distribution network, focus more on large account customers and offer high value-added services. On the innovation front, it will emphasize nonpolluting products and custom technologies. Finally, Stahl will concentrate on strict financial discipline and value-adding investments Stahl’s businesses continue to be driven by powerful long-term trends. Its markets aregradually shifting to the emerging market countries, average annual growth of 2-3% in meat consumption is supplying the market for hide processing, and certain competitors are gradually disappearing, a trend that has been accentuated by the recession. Stahl is now poised to achieve average organic growth in excess of 5% per year