Mavic-owner grows its sales and will merge Mavic with adidas cycling - BikeBiz

Mavic-owner grows its sales and will merge Mavic with adidas cycling

adidas-Salomon, owner of Mavic and adidas Cycling, saw a 12 percent hike in year-on-year sales. And the company is to form Mavic-adidas Cycling to manage the group's road cycling and mountain biking activities in one operational unit.
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Mavic , with its wheels and rims. is the hard-goods side of the equation. adidas Cycling produces soft goods such as footwear and clothing.

adidas-Salomon is now merging the two into Mavic-adidas Cycling. This new entity will be responsible for the design, marketing, sales and distribution of all Mavic and adidas Cycling products.

"The new organization will help us take advantage of new growth opportunities worldwide," said adidas-Salomon CEO Herbert Hainer.

"The expected benefits will come from three main areas - expanded distribution, greater focus on product creation and sports marketing synergies - which will lead to higher quality standards and increased profitability."

The cycling market generates global sales of approximately EUR 5 billion, claims Hainer.

By creating Mavic-adidas Cycling, Hainer believes it will "become a key player in this industry."

Mavic-adidas Cycling will be based at the Salomon headquarters in Annecy, France and will be run by Bernard Millaud, currently Mavic's MD. The new unit will start operating in August 2003, with the first fully integrated Mavic-adidas Cycling soft goods product range to be launched in Spring/Summer 2005.




For the latest financials for adidas-Salomon see this press release:




HERZOGENAURACH, Germany, April 30: Strong top-line performance and high bottom-line improvement

adidas-Salomon today reported first quarter 2003 financial results. For the first quarter ending March 31, 2003, net sales increased 2% from euro 1,638 million in 2002 to euro 1,669 million in 2003. On a currency-neutral basis, sales grew 12%. Gross margin grew 0.7 percentage points to 42.5% in 2003 from 41.8% in 2002. This was achieved despite difficult retail conditions in all major markets. The Group's net income increased 19% from euro 43 million in 2002 to euro 51 million in 2003. This represents basic earnings per share of euro 1.13 versus euro 0.95 in the prior year. adidas brand leads Group growth adidas revenues increased by 6% from euro 1,330 million in the first three months of 2002 to euro 1,405 million in 2003. On a currency-neutral basis, this increase was 16% and represents the brand's highest gain in more than four years. Drivers of this growth were strong developments in running, football and basketball. Salomon sales grew 1% (+7% currency-neutral) from euro 123 million to euro 124 million. This improvement reflects solid double-digit growth in apparel, bicycle components and alpine skis in the otherwise challenging winter market sector. TaylorMade-adidas Golf figures were affected by the change in the timing of product introductions and the non-renewal of the Slazenger Golf license. This was reflected in a decline of 24% (-11% currency-neutral) from euro 176 million to euro 134 million for TaylorMade-adidas Golf in the first quarter. Strong growth in Europe and Asia drives net sales improvement Sales for adidas-Salomon in Europe increased 10% from euro 851 million in the first quarter of 2002 to euro 933 million in 2003. On a currency-neutral basis, this increase was 12%, representing the strongest growth in the region in seven quarters. Asia was again the fastest growing region for the Group in the first quarter. Sales increased 8% to reach euro 281 million in 2003 (2002: euro 260 million). On a currency-neutral basis, this increase was 21%. In North America, 2003 first quarter sales for the Group declined 15% to euro 405 million versus euro 475 million in the prior year. On a currency-neutral basis, however, sales increased 4%. In Latin America, sales declined 8% in the first quarter of 2003 to euro 36 million (2002: euro 39 million). On a currency-neutral basis, sales grew 45%. Currency-neutral adidas backlogs up 9% Despite an increasingly difficult marketplace, underlying backlog growth for brand adidas represents the seventh consecutive quarter of positive development. At the end of the first quarter of 2003, order backlogs for brand adidas declined 2%. On a currency-neutral basis, this equates to an increase of 9%. Footwear backlogs declined 1% but were up 11% on a currency-neutral basis. Apparel orders were down 3%, however in currency-neutral terms this represents an increase of 6%. In Europe, orders increased 8% (+12% currency- neutral) supported by strong footwear which increased 14% (+19% currency- neutral). Apparel backlogs grew 3%. On a currency-neutral basis, this is a 7% increase. In Asia, backlogs grew 7% (+22% currency-neutral). Footwear backlogs declined 2% (+12% currency-neutral), while apparel orders grew 21% (+38% currency-neutral). In North America, order backlogs decreased 22% (-3% currency-neutral). Footwear backlogs declined 20% (+0% currency-neutral). Apparel orders declined 27% (-9% currency-neutral). However, this reduction reflects improvements in the Group's global supply chain, which have shortened the order window for customers by one full month starting in the first quarter of 2003. On a like-for-like basis, currency-neutral apparel orders increased at mid-single-digit rates. Gross margin improves adidas-Salomon gross profit grew 4% in the first three months of 2003 to reach euro 708 million versus euro 684 million in 2002. In addition to positive top-line development, this increase was driven by a 0.7 percentage point gross margin improvement to 42.5% (2002: 41.8%). Operating profit up 18% Operating expenses, including selling, general and administrative expenses (SG&A) and depreciation and amortization (excluding goodwill), grew 1% from euro 585 million in the first quarter of 2002 to euro 592 million in 2003. As a percentage of net sales this equates to 35.5% which is 0.3 percentage points lower than the 2002 level of 35.8%. Operating profit for the Group increased 18% from euro 98 million in 2002 to euro 116 million in 2003. Earnings grow 19% Financial expenses declined 5% from euro 19 million in the first quarter of 2002 to euro 18 million in 2003. The reduction was positively impacted by the Group's lower average borrowings. Income before taxes increased 23% from euro 79 million to euro 98 million in 2003. The Group tax rate improved by 0.9 percentage points from 41.9% in the first quarter of 2002 to 41.0% in 2003. Minority interests doubled to euro 6 million (2002: euro 3 million) due to strong results from adidas South Korea. As a result of the Group's strong operational performance, net income increased 19% from euro 43 million in the first quarter of 2002 to euro 51 million in 2003, and EPS was euro 1.13 in 2003 versus euro 0.95 in 2002. Herbert Hainer, Chairman and CEO of adidas-Salomon, stated, "adidas-Salomon has started 2003 strongly, with sales for the Group up 12% on a currency-neutral basis. All of our operating measurements moved visibly in the right direction. Our 19% earnings increase is the highest first quarter improvement in six years. But we still have work ahead of us for the remainder of the year, in particular when we look at our adidas order backlog development in North America. Our North American organization is already moving on several initiatives to re-ignite the success of the previous quarters." Solid working capital improvement and debt reduction At the end of March, inventories were reduced by 8% from euro 1.2 billion in 2002 to euro 1.1 billion in 2003. On a currency-neutral basis, inventories increased 2%, which is considerably below sales growth expectations for the second quarter. Receivables decreased by 3% year-over-year to euro 1.4 billion in 2003 versus euro 1.4 billion in 2002. On a currency-neutral basis, receivables increased by 9%. This rate is below the Group's first quarter currency-neutral sales growth and reflects strict discipline in the Group's trade terms management. Net borrowings at March 31, 2003 were euro 1.6 billion, down 15% or euro 285 million versus euro 1.9 billion in the prior year. Group sales and earnings growth targets confirmed As a result of adidas backlogs, retailer feedback and the anticipated macroeconomic environment, adidas-Salomon is maintaining its 2003 sales growth target of around 5% on a currency-neutral basis. The net income growth target for the Group also remains unchanged with earnings expected to grow between 10 and 15%. Herbert Hainer continued, "I am pleased to confirm that our Group's financial and operational targets for 2003 remain unchanged, with further sales increases, a stable high gross margin and an improving operating margin. Regional market developments are subject to rapid changes, but we have proven over the last three years that we are strong enough and fast enough to deliver, despite the ever-changing conditions on the fields on which we compete." http://www.adidas-salomon.com/ adidas-Salomon

CONSOLIDATED INCOME STATEMENT (IFRS)

1ST QUARTER 2003 EUROS IN MILLIONS 2003 2002 Change

2003/2002 NET SALES 1,669 1,638 1.9%

COST OF SALES 960 954 0.7%

GROSS PROFIT 708 684 3.6%

(% OF NET SALES) 42.5% 41.8% 0.7 PP

SELLING, GENERAL AND

ADMINISTRATIVE EXPENSES 567 563 0.8%

(% OF NET SALES) 34.0% 34.4% (0.4) PP

DEPRECIATION AND

AMORTIZATION

(EXCL. GOODWILL) 25 23 10.3%

OPERATING PROFIT 116 98 17.9%

(% OF NET SALES) 7.0% 6.0% 0.9 PP

GOODWILL AMORTIZATION 11 11 1.4%

ROYALTY AND COMMISSION

INCOME 11 11 (1.2)%

FINANCIAL EXPENSES, NET 18 19 (5.3)%

INCOME BEFORE TAXES AND

MINORITY INTERESTS 98 79 23.2%

(% OF NET SALES) 5.8% 4.8% 1.0 PP

INCOME TAXES 40 33 20.5%

(% OF INCOME BEFORE TAXES

AND MINORITY INTERESTS) 41.0% 41.9% (0.9) PP

MINORITY INTERESTS (6) (3) 109.1%

NET INCOME 51 43 19.1%

(% OF NET SALES) 3.1% 2.6% 0.4 PP

BASIC EARNINGS PER SHARE

(IN EUROS) 1.13 0.95 18.9%

DILUTED EARNINGS PER SHARE

(IN EUROS) 1.13 --
NET SALES

(EUROS IN MILLIONS) 2003 2002 Change

2003/2002 adidas 1,405 1,330 5.6%

Salomon 124 123 0.8%

TaylorMade-adidas Golf 134 176 (23.9)% EUROPE 933 851 9.6%

NORTH AMERICA 405 475 (14.7)%

ASIA 281 260 7.9%

LATIN AMERICA 36 39 (7.5)% ROUNDING DIFFERENCES MAY ARISE IN PERCENTAGES AND TOTALS FOR FIGURES

PRESENTED IN MILLIONS AS CALCULATION IS ALWAYS BASED ON THE FIGURES STATED

IN THOUSANDS.
adidas-Salomon

CONSOLIDATED BALANCE SHEET (IFRS) (EUROS IN MILLIONS) Mar. 31 Mar. 31 Change Dec. 31

2003 2002 2002 CASH AND CASH EQUIVALENTS 68 80 (14.9)% 76

ACCOUNTS RECEIVABLE 1,410 1,450 (2.7)% 1,293

INVENTORIES 1,119 1,220 (8.3)% 1,190

OTHER CURRENT ASSETS 331 285 16.1% 267

TOTAL CURRENT ASSETS 2,929 3,036 (3.5)% 2,826 PROPERTY, PLANT AND EQUIPMENT,

NET 341 380 (10.2)% 366

GOODWILL, NET 627 654 (4.1)% 639

OTHER INTANGIBLE ASSETS, NET 113 88 28.8% 115

DEFERRED TAX ASSETS 171 168 2.0% 170

OTHER NON-CURRENT ASSETS 160 95 68.6% 145

TOTAL NON-CURRENT ASSETS 1,413 1,384 2.0% 1,435 TOTAL ASSETS 4,341 4,420 (1.8)% 4,261 SHORT-TERM BORROWINGS 0 458 (100.0)% 0

ACCOUNTS PAYABLE 524 564 (7.0)% 668

INCOME TAXES 137 114 20.8% 112

ACCRUED LIABILITIES AND

PROVISIONS 468 376 24.7% 451

OTHER CURRENT LIABILITIES 157 131 20.3% 149

TOTAL CURRENT LIABILITIES 1,287 1,642 (21.6)% 1,381 LONG-TERM BORROWINGS 1,693 1,532 10.5% 1,574

PENSIONS AND SIMILAR

OBLIGATIONS 99 92 7.2% 99

DEFERRED TAX LIABILITIES 53 44 20.0% 51

OTHER NON-CURRENT LIABILITIES 22 11 96.2% 19

TOTAL NON-CURRENT LIABILITIES 1,867 1,679 11.2% 1,743 MINORITY INTERESTS 58 50 15.7% 56

SHAREHOLDERS' EQUITY 1,130 1,049 7.7% 1,081 TOTAL LIABILITIES, MINORITY

INTERESTS AND SHAREHOLDERS'

EQUITY 4,341 4,420 (1.8)% 4,261 ADDITIONAL BALANCE SHEET

INFORMATION

OPERATING WORKING CAPITAL 2,005 2,106 (4.8)% 1,814

WORKING CAPITAL 1,641 1,394 17.7% 1,445

NET TOTAL BORROWINGS 1,624 1,909 (14.9)% 1,498

FINANCIAL LEVERAGE 143.8% 182.0% 138.5% ROUNDING DIFFERENCES MAY ARISE IN PERCENTAGES AND TOTALS FOR FIGURES

PRESENTED IN MILLIONS AS CALCULATION IS ALWAYS BASED ON THE FIGURES STATED

IN THOUSANDS.

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