Annual report 2018
The Śnieżka Group ended 2018 with a net profit of PLN 63,389 thousand. PLN, which is 12% higher than in 2017. Net profit attributable to shareholders of the parent company amounted to PLN 61,632 thousand (an increase of 10.3% y/y).
In 2018 the Śnieżka Group generated consolidated sales revenues in the amount of PLN 586,777 thousand, i.e. 3.9% higher than in 2017.
The dominant share in the total sales revenues of the Group : Poland 77,8%
The dominant share in the total sales revenues of the Group (77.8%) in 2018 was on the Polish market, which in comparison to the previous year increased by 5.9%, to PLN 455,797 thousand. The increase in the value of sales in Poland resulted from the progressive migration of customers towards premium products, which are characterized by a higher margin, and higher demand for products of medium price range. The level of revenues achieved was influenced by a properly formed pricing policy, including the adjustment of FFiL Śnieżka SA's product prices in the first part of 2018, being a response to the growing prices of titanium white.
The Group's revenues generated on foreign markets accounted for 22.2% of total revenues. In Ukraine - which in 2018 was the Group's key export market with a share of 12.5% - the Group achieved sales revenues of PLN 73,453 thousand. A slight decrease in revenues from the Ukrainian market compared to 2017 (-0.3%) is primarily the result of a slight decrease in the consumption of paints and varnishes in Ukraine (with the exception of waterborne paints) and unfavourable weather conditions, which delayed the beginning of the renovation season. At the same time, the demand for higher quality paints and varnishes was observed, i.e. medium and premium price ranges, which had a positive impact on the Group's bottom line achieved in Ukraine.
In Belarus - which in 2018 was the third most important sales market for the Group, with a share of 4.8% - the Group generated sales revenues in the amount of PLN 28 374 thousand, i.e. by 5.2% less compared to 2017. Such a result of the Group on the Belarusian market is the result of the low purchasing power of local consumers, while at the same time increasing competition of manufacturers offering products featuring lower quality, but also low price.
The Group's sales results achieved on other foreign markets are strongly correlated with the results achieved by the parent company - FFiL Śnieżka SA.
In 2018, the Group’s sales revenues in the Moldovan market increased by 8.3% to PLN 8,984 thousand. The higher sales achieved in Moldova is a result of the long-term presence of the Group's brands on the local market, constant adaptation of the offer to the recipients' requirements as well as sales and marketing support from local distributors. In addition, in Moldova, as in Poland and Ukraine, an increase in consumer interest in premium products was observed.
On other export markets, the Group generated lower sales revenues than in 2017. In the case of Russia, this is the result of limiting the Group's operations on that market. In the case of other markets, the reason is an on-going process of optimizing the management of brands and products, as well as recognizing the chances of increasing sales.
Table 1.
Sales revenues of the Śnieżka Group by countries
Table 2.
Sales revenues of the Śnieżka Group by product categories
In 2018, the Group sold 64.2 million l/kg of decorative goods (-7% y/y), 56.6 million l/kg of construction chemicals (-7% y/y) and 0.5 million l/kg of other industrial products (-19% y/y). The sales of goods, materials and services in terms of volume are not given due to the variety of units of measurement applied (tonnes, litres, items) and it is not the main subject of the Group's activities.
In 2018 FFIL ŚNIEŻKA SA generated sales revenues in the amount of PLN 522,271 thousand, i.e. 2.3% higher than in 2017.
The dominant share in the total sales revenues of the Company (86.1%) in 2018 was on the Polish market, which in comparison to the previous year increased by 4.4%, to PLN 449,434 thousand. The increase in the value of sales in Poland resulted from the progressive migration of customers towards premium products, higher demand for products of medium price ranges and properly formed pricing policy.
The Company's revenues from exports accounted for 13.9% of its total revenues. On the Ukrainian market, the Company generated sales revenues in the amount of PLN 23,855 thousand, i.e. 16.4% lower than in 2017.
Company’s sales revenues generated on the Belarusian market, amounted to PLN 19,829 thousand, i.e. 5.8% lower than in 2017. Such a result of the Company on the Belarusian market can be explained as the result of the entire Group - low purchasing power of local consumers and increased competition of manufacturers offering products featuring lower quality and at the same time low price.
In 2018, the Company achieved better sales results in Moldova, and lower on other export markets, including Russia. These results were influenced by the factors described in the comment on the Group's revenues (in item 1.4.1 of the report). The results achieved on these foreign markets by the parent company, FFiL Śnieżka SA, strongly determine the results of the entire Group on these markets.
Table 3.
Sales revenues of the FFIL ŚNIEŻKA SA by countries
Table 4.
Sales revenues of the FFIL ŚNIEŻKA SA by product categories
In 2018, the Company sold 53.1 million l/kg of decorative goods (-7% y/y), 30.8 million l/kg of construction chemicals (-5% y/y) and 0.2 million l/kg of other industrial products (-66% y/y). The sales of goods, materials and services in terms of volume are not given due to the variety of units of measurement applied (tonnes, litres, items) and it is not the main subject of the Group's activities.
Revenues in the second and third quarter account for approx. 60-65%
The fourth and first quarter usually account for approx. 35-40% of annual revenues.
The Śnieżka Group’s activities are characterized by the phenomenon of seasonality. It is related to the intensity of renovation and construction works in particular periods of the year, which is higher in spring and summer. The Group usually generates higher revenues in the second and third quarters of each financial year. Revenues in these quarters constitute approximately 65% of the Group's annual revenues. In the winter months, sales fall even to about 50% compared to summer months.
The occurring phenomenon of seasonality affects the change in the need for working capital, which is much higher in the second and third quarters of the financial year compared to the end of December of the previous year.
The Śnieżka Group ended 2018 with a net profit of PLN 63,389 thousand. PLN, which is 12% higher than in 2017. Net profit attributable to shareholders of the parent company amounted to PLN 61,632 thousand (an increase of 10.3% y/y).
The main factors forming the Group's financial result in 2018 are as follows:
Table 5.
The basic elements of the profit and loss account of the Śnieżka Group
The Group's results for 2018 were not affected by any unusual factors and events.
The Management Board of FFiL Śnieżka SA did not publish forecasts of financial results for 2018, either on a consolidated or standalone basis.
Fabryka Farb i Lakierów Śnieżka SA
In 2018 FFIL ŚNIEŻKA SA, the parent company within the Group, generated very high net profit in the amount of PLN 60,588 thousand, i.e. 45.9% higher than in 2017.
The main factors forming the Company's financial result in 2018 are as follows:
Table 6.
The basic elements of the profit and loss account of FFIL ŚNIEŻKA SA
The Śnieżka Group
The condition of the Group's balance sheet items is affected by the seasonality phenomenon. It is described in detail in item 1.5 of the report.
While analysing the Group's balance sheet figures for 2018 (compared to the end of the previous year), the inclusion of Radomska Fabryka Farb i Lakierów SA into the Group ought to be additionally taken into consideration. Information regarding this is presented in item 3.1.2 of the report.
Table 7.
The Group’s assets
As at 31 December 2018, the value of assets of the Śnieżka Group amounted to PLN 404,481 thousand and was by 9.6% higher than at the end of 2017 - mainly due to the increase in the value of non-current assets.
At the end of 2018, the Group's fixed assets amounted to PLN 234,952 thousand. (which accounted for 58.1% of total assets). Their increase by 28.6% in 2018 results mainly from investments made in production facilities of the Group companies (mainly in FFiL Śnieżka SA), as well as the purchase of a new, larger real estate for the erection of a new Logistics Centre.
The value of the Group's current assets at the end of the reporting period decreased to PLN 169,529 thousand (-6.4% y/y). The main part of the Group's current assets were inventories valued at PLN 84,129 thousand (increase in inventories by 5.9% y/y), which in particular consisted of finished products and materials. The Group’s trade and other receivables as well as other receivables amounted to PLN 77,235 thousand and were close to the level as at the end of 2017.
A significant impact on the value of the Group's current assets was a decrease in the value of cash and cash equivalents resulting from from the allocation of part of the funds for investments in production facilities.
Table 8.
The Group’s liabilities
At the end of 2018, the Group financed 66.5% (ratio of equity to total assets) from its own resources. It indicates an improvement of this ratio by 4.6% compared to the end of 2017. The Group's equity amounted to PLN 268,912 thousand and was by 17.7% higher than at the end of December 2017, which results from the increase in retained earnings and net income from hedging instruments.
As at 31 December 2018, the Group's long-term liabilities amounted to PLN 5,159 thousand (an increase of 45.9% compared to the end of 2017), which resulted from including provisions for employee benefits and deferred income tax provisions in this item.
At the end of December 2018 the Group's short-term liabilities decreased (accounting for 32.2% of the balance sheet total). Their value decreased by 4.8% to PLN 130,410 thousand.
The main component of the Group's short-term liabilities (50.2%) were liabilities on loans and borrowings in the amount of PLN 65,492 thousand, which as a result of partial repayment of debt decreased by 13% compared to the end of 2017. The second largest component (43.9%) were the Group's liabilities on deliveries and services and other liabilities, the value of which amounted to PLN 57,226 thousand. (+5.2% y/y).
The financial plan of the Group for 2019 envisages an increase in the balance sheet total. In 2019, the Group intends to implement a financing strategy consisting in financing fixed assets, primarily with equity. The Group intends to finance current assets with liabilities towards suppliers and interest debt.
In 2018 and as at the date of publication of the Report, the Group continued to meet its obligations on an on-going basis and there are no significant threats for the Group to meet their liabilities in the future.
The Śnieżka Group
In 2018, the Group recorded negative cash flows in the amount of PLN -15,953 thousand (against positive cash flows of PLN 12,827 thousand in 2017).They were a result of:
The Śnieżka Group
In 2018 the Śnieżka Group improved nearly all profitability ratios in relation to the values achieved in 2017. The Group recorded the largest growth at the level of gross margin on sales, which was 2.4% higher than a year earlier - mainly due to the increase in the sales structure of products featuring higher price ranges and price increases of products implemented in response to the increasing prices of raw materials used for production.
1. EBIT/Sales revenues x 100%
2. EBITDA/Sales revenues x 100%
3. Gross profit ze sprzedaży/Sales revenues x 100%
4. Zysk netto/Sales revenues x 100%
5. Zysk netto/Aktywa ogółem* x 100%
6. Zysk netto/Kapitał własny – przypadające akcjonariuszom jednostki dominującej x 100%
* Suma zysku netto Grupy za ostatnie 4 kwartały podzielona przez średnią̨ wartość aktywów ogółem Grupy ze stanów na koniec ostatnich 5 kwartałów.
** Suma zysku netto przypadającego akcjonariuszom jednostki dominującej (AJD) za ostatnie 4 kwartały podzielona przez średnią̨ wartość kapitału własnego przypadającego AJD ze stanów na koniec ostatnich 5 kwartałów.
At the end of 2018, the Group's current liquidity ratio remained at the same level as in the previous year, and the Group had no problems with timely settlement of its liabilities. At the same time, the level of financing the Group's operations with debt decreased, which resulted from the repayment of some loans and borrowings. The general debt ratio of the Group amounted to 33.5% and was 4.6 % lower than the year before.
At the end of 2018, the fixed-assets-to-equity ratio decreased by 10.6 %, which resulted from significant Group’s investments made over the year, as a result of which non-current assets increased by 28.6% (equity increased by 17.7%).
In addition, in 2018 the Group's cash liquidity ratio decreased, which resulted from significant expenditures incurred by the Group companies (mainly FFiL Śnieżka SA) for investments in production facilities.
Table 12.
The Group’s liquidity and debt ratios
In 2018, the cash conversion cycle in the Group was less than 76 days, similar to the previous year. In the reporting period, the period of inflow of receivables on trade and other receivables decreased. The stock rotation cycle increased for a few days. In comparison with 2017, the cycle of settling the current liabilities of the Group companies also increased, which means that the merchant's credit was managed efficiently.
Table 13.
The Group’s rotation ratios
Fabryka Farb i Lakierów Śnieżka SA
In 2018, the Company generated a higher net profit margin (+3.5% y/y) and a gross margin on sales (+ 1.7% y/y) - mainly due to the increase in the sales structure of products featuring higher price ranges and price increases of products.
The company also significantly improved ROA (reflecting the level of net profit generated in relation to its assets) and ROE (showing return on equity). In comparison with 2017, ROA increased by 4.8% and ROE by 8.9%.
In 2018, the total capital expenditure in the Śnieżka Group amounted to PLN 69,681 thousand and were by 122.6% (PLN 38,372 thousand) higher than in the previous year. The Group used its own funds to finance the investments.
The total expenditure on investments in FFiL Śnieżka SA amounted to PLN 66,336 thousand and were by 121.3% (PLN 36,360 thousand) higher than a year earlier. As far as the source of financing the investments is concerned, the Company used both its own funds as well as loans and borrowings.
The investment policy pursued in the Śnieżka Group in 2018 was a follow-up of the policy from previous years. The implementation of individual tasks was carried out in accordance with the approved schedule of works and expenditures, with some adjustments resulting from the Group's current needs or changing conditions of the external environment.
The investments performed by the Group in 2018 focused primarily on improving the quality of products, increasing production capacity (extension and modernization of production lines) and optimizing the manufacturing costs. The Group also put great emphasis on streamlining logistics processes and on increasing work efficiency.
The majority of the Group's investment expenditures were outlays on the purposes of FFiL Śnieżka SA. In 2018 in the Company:
The Śnieżka Group does not anticipate problems with financing the investment plans for 2019, including capital investments. The Group's own funds and signed loan agreements with banks allow to finance the investment plans safely scheduled for 2019. The total value of investments in the Group in 2019, including capital investments, may amount to approx. PLN 200 million.
| Year 2018 | Structure |
Year 2017 converted data* |
Change | |
|---|---|---|---|---|
| Poland | 455 797 | 77,8% | 430 255 | 5,9% |
| Ukraine | 73 453 | 12,5% | 73 655 | -0,3% |
| Belarus | 28 374 | 4,8% | 29 945 | -5,2% |
| Moldova | 8 984 | 1,5% | 8 299 | 8,3% |
| Russia | 7 823 | 1,3% | 8 460 | -7,5% |
| Other countries | 12 346 | 2,1% | 13 867 | -11,0% |
| Total sales | 586 777 | 100,0% | 564 481 | 3,9% |
* Informacje na temat danych przekształconych znajdują się w Skonsolidowanym sprawozdaniu finansowym, w nocie nr 7.
In terms of value, the sales structure of the Group was dominated by decorative products, whose share in the consolidated sales revenues amounted to 77.8%. In 2018, the Group generated PLN 456,590 thousand from the sales of decorative products- i.e. PLN 18,693 thousand and 4.3% more than in the same period of 2017. The second highest share in the Group's sales structure, at the level of 12.1%, was construction chemicals. The Group's sales revenues from this segment amounted to PLN 70,936 thousand and were 3.8% higher than a year earlier.
| Year 2018 | Structure |
Year 2017 converted data* |
Change | |
|---|---|---|---|---|
| Decorative products | 456 590 | 77,8% | 437 897 | 4,3% |
| Construction chemicals | 70 936 | 12,1% | 68 352 | 3,8% |
| Industrial products | 6 646 | 1,1% | 4 024 | 65,2% |
| Goods | 42 032 | 7,2% | 42 576 | -1,3% |
| Other revenues | 5 111 | 0,9% | 4 943 | 3,4% |
| Materials | 5 462 | 0,9% | 6 689 | -18,3% |
| Total sales | 586 777 | 100,0% | 564 481 | 3,9% |
* Information on converted data has been provided in the consolidated financial statements in note 7.
In terms of volume, the sales of the Group’s products amounted to 121,3 million l/kg and was by 7% lower compared to 2017. The lower number of products sold did not have a negative impact on the Group's revenues, as the sales structure was increased by the share of products of higher price ranges.
| Year 2018 | Structure |
Year 2017 converted data* |
Change | |
|---|---|---|---|---|
| Poland | 449 434 | 86% | 430 326 | 4,4% |
| Ukraine | 23 855 | 4,6% | 28 520 | -16,4% |
| Belarus | 19 829 | 3,8% | 21 052 | -5,8% |
| Moldova | 8 984 | 1,7% | 8 299 | 8,3% |
| Russia | 7 823 | 1,5% | 8 460 | -7,5% |
| Other countries | 12 346 | 2,4% | 13 866 | -11,0% |
| Total sales | 522 271 | 100,0% | 510 523 | 2,3% |
* Information on converted data has been provided in the financial statements in note 8.
In terms of value, the sales structure of the Company - as the entire Group - was dominated by decorative products, whose share in the sales revenues amounted to 78.1%. In 2018, the Company generated PLN 408,091 thousand from the sales of decorative products- i.e. PLN 10,337 thousand and 2.6% more than in the same period of 2017. The second highest share in the Company's sales structure, at the level of 9.0%, was construction chemicals. The Group's sales revenues from this segment amounted to PLN 46,914 thousand and were 4.9% higher than a year earlier.
| Year 2018 | Structure |
Year 2017 converted data* |
Change | |
|---|---|---|---|---|
| Decorative products | 408 091 | 78,1% | 397 754 | 2,6% |
| Construction chemicals | 46 914 | 9,0% | 44 718 | 4,9% |
| Industrial products | 1 051 | 0,2% | 3 828 | -72,5% |
| Goods | 44 350 | 8,5% | 41 058 | 8,0% |
| Other revenues | 5 736 | 1,1% | 5 462 | 5,0% |
| Materials | 16 129 | 3,1% | 17 703 | -8,9% |
| Total sales | 522 271 | 100,0% | 510 523 | 2,3% |
* Information on converted data has been provided in the financial statements in note 8.
In terms of volume, the sales of the Company’s products amounted to 84,1 million l/kg and was by 6,4% lower compared to 2017. Similarly to the results of the entire Group, the lower number of products sold did not have a negative impact on the Company's revenues, as the sales structure was increased by the share of products of higher price ranges.
| Year 2018 |
Year 2017 converted data* |
Change (r/r) | |
|---|---|---|---|
| Sales revenues | 586 777 | 564 481 | 3,9% |
| Cost of sales | 341 059 | 341 583 | -0,2% |
| Selling costs | 104 928 | 105 306 | -0,4% |
| General administrative expenses | 57 799 | 44 391 | 30,2% |
| Profit on other operating activities | (3 344) | 699 | - |
| Profit on financial activities | (1 432) | (3 910) | - |
| Share in associate’s profit | 226 | 296 | -23,6% |
| Gross profit | 78 441 | 70 286 | 11,6% |
| Profit on operating activities (EBIT) | 79 647 | 73 900 | 7,8% |
| Profit on operating activities + depreciation (EBITDA) | 79 647 | 73 900 | 7,8% |
| Income tax | 15 052 | 13 594 | 10,7% |
| Net profit, including: | 63 389 | 56 692 | 12% |
| profit attributable to shareholders of the parent company | 61 632 | 55 892 | 10,3% |
| Year 2018 |
Year 2017 converted data* |
Change (r/r) | |
|---|---|---|---|
| Sales revenues | 522 271 | 510 523 | 2,3% |
| Cost of sales | 310 402 | 311 984 | -0,5% |
| Selling costs | 105 744 | 106 421 | -0,6% |
| General administrative expenses | 46 582 | 38 465 | 21,1% |
| Profit on other operating activities | (5 806) | 513 | - |
| Profit on financial activities | 19 772 | (3 095) | - |
| Gross profit | 73 509 | 51 071 | 43,9% |
| Profit on operating activities (EBIT) | 53 737 | 54 166 | -0,8% |
| Profit on operating activities + depreciation (EBITDA) | 70 625 | 68 962 | 2,4% |
| Income tax | 12 921 | 9 536 | 35,5% |
| Net profit | 60 588 | 41 535 | 45,9% |
* Information on converted data has been provided in the financial statements in note 8.
| Group's assets | 31.12.2018 | 31.12.2017 | Change (r/r) |
|---|---|---|---|
| Fixed assets, including: | 234 952 | 182 680 | 28,6% |
| - Tangible fixed assets | 218 433 | 166 034 | 31,6% |
| - Other fixed assets | 16 519 | 16 646 | -0,8% |
| Current assets, including: | 169 529 | 181 057 | -6,4% |
| - Inventory | 84 129 | 79 468 | 5,9% |
| - Trade and other receivables | 77 235 | 77 711 | -0,6% |
| - Cash and cash equivalents | 5 563 | 21 444 | -74,1% |
| - Other current assets | 2 602 | 2 434 | 6,9% |
| Non-current assets classified as held for sale | - | 5 373 | - |
| Total | 404 481 | 369 110 | 9,6% |
* Information on converted data has been provided in the financial statements in note 8.
| Group’s liabilities | 31.12.2018 | 31.12.2017 | Change (r/r) |
|---|---|---|---|
| Total equity, including: | 268 912 | 228 538 | 17,7% |
| - Equity (attributable to the shareholders of the parent company) | 262 484 | 224 620 | 16,9% |
| - Equity of non-controlling interests | 6 428 | 3 918 | 64,1% |
| Total liabilities | 135 569 | 140 572 | -3,6% |
| Long-term liabilities | 5 159 | 3 537 | 45,9% |
| Short-term liabilities, including: | 130 410 | 137 035 | -4,8% |
| - Trade and other liabilities | 57 226 | 54 377 | 5,2% |
| - Short-term liabilities on loans and borrowings | 65 492 | 75 241 | -13,0% |
| - Other short-term liabilities | 7 692 | 7 417 | 3,7% |
| Total | 404 481 | 369 110 | 9,6% |
* Information on converted data has been provided in the financial statements in note 8.
| Year 2018 | Year 2017 | |
|---|---|---|
| EBIT margin in % (EBIT / Sales revenues) x 100% | 13,6% | 13,1% |
| EBITDA margin in % (EBITDA / Sales revenues) x 100% | 16,8% | 15,9% |
| Gross margin on sales in % (Gross profit on sales / Sales revenues) x 100% | 41,9% | 39,5% |
| Net profit (loss) in % (Net profit / Sales revenues) x 100% | 10,8% | 10,0% |
| Return on assets (ROA) * (Net profit / Total assets *) x 100% | 14,5% | 14,0% |
| Return on equity (ROE) ** (Net profit / equity - attributable to the shareholders of the parent company) x 100% | 25,2% | 25,4% |
* Total net profit of the Group for the last four quarters divided by the average value of total assets of the Group at the end of the last 5 quarters.
** Total net profit attributable to the shareholders of the parent company (AJD) for the last 4 quarters divided by the average value of equity attributable to AJD at the end of the last 5 quarters.
| 31.12.2018 | 31.12.2017 | |
|---|---|---|
| Current liquidity ratio (Current assets / Short-term liabilities) | 1,3 | 1,3 |
| Quick liquidity ratio (Current assets - inventories)/Short-term liabilities | 0,7 | 0,7 |
| Cash liquidity ratio (Cash and cash equivalents / Short-term liabilities) x 100% | 4,3% | 15,6% |
| Total debt ratio (Total liabilities / Total assets) x 100% | 33,5% | 38,1% |
| Fixed-assets-to-equity ratio (Equity/Fixed assets) x 100% | 114,5% | 125,1% |
| Year 2018 | Year 2017 | |
|---|---|---|
| Inventory cycle (Inventory x360 / Cost of sales) in days | 88,8 | 83,8 |
| Receivables cycle (Trade and other receivables x 360 / Sales revenues) in days | 47,4 | 49,6 |
| Current liabilities cycle (Trade and other liabilities x 360 / Cost of sales) in days | 60,4 | 57,3 |
| Cash conversion cycle (Inventory cycle + receivable cycle - liability cycle) in days | 75,8 | 76,0 |
