BUSINESS: Financial Safilo Board Approves 2022 Financial Results and Group's Medium-Term Targets By Staff Friday, March 10, 2023 12:24 AM PADUA, Italy—The Board of Directors of Safilo Group S.p.A. (SFLG.MI) approved the company’s consolidated financial statements for the year ended Dec. 31, 2022 and examined the separate financial statements for the year ended Dec. 31, 2022, which will be submitted for approval by the shareholders at the annual general meeting to be held in a single call on April 27. The board of directors has decided not to propose the payment of a dividend to the next annual general meeting.The board also approved the group’s medium-term economic and financial targets.Angelo Trocchia, Safilo CEO, commented, “Starting from 2019, Safilo has embarked on an ambitious strategic turnaround journey to reestablish the group as a healthy and competitive player in the attractive eyewear sector. We are proud of the effective progress made so far by Safilo, notwithstanding challenging years of global health and economic crises which have required us to face reality with great pragmatism, often making difficult choices."We look to 2022 as the year in which we completed our first, fundamental turning point, fully overcoming important portfolio challenges thanks to a particularly strong organic growth, especially of our main home brands, the acquisition of two American brands in 2020, which have also allowed us to strengthen our digital business and capabilities at a crucial time in the market, and thanks to the entry of new license partnerships."Trocchia continued, "The strong top line recovery recorded in the last two years has seen us close 2022 with a business growth of 4.2 percent at constant exchange rates compared to 2021 and of 12 percent compared to 2019. Sales performance was even stronger at the organic business level—net of the effects of new and exiting brands—equal to a growth of 7.7 percent versus the year before and to an impressive almost +22 percent compared to the pre-pandemic year."In 2022 our revenues reached €1,076.7 million, exceeding the goal of our previous plan to return the group to around €1 billion in sales by 2024, and allowing us to improve margins more rapidly. Our gross margin significantly increased in 2022, reaching 55.5 percent of sales from 51.7 percent in 2021 and 50.8 percent in 2019. A very meaningful improvement for us, to which the early completion of the cost of goods sold saving plan gave a great contribution. Together with the overheads saving program, already concluded in 2021, the group thus achieved its €45 million cost reduction program by 2022, two years ahead of plan. All of this allowed us to reach an adjusted EBITDA of €101.2 million, up 24.2 percent compared to 2021 and around 56 percent compared to 2019, also in this case reaching the target range we had set for ourselves for 2024."Trocchia noted that Safilo's operating performance improved "despite the high inflationary context—which we managed to counter through effective pricing strategies and a richer sales mix—and notwithstanding the significant acceleration of investments to support the growth of our brands, modernization of our business intelligence processes, and digital transformation projects."He stated, "We closed the year with an adjusted net profit of €58.3 million, also thanks to a lighter financial structure, which benefited from the significant debt reduction following the capital increase that we successfully concluded in November 2021. Furthermore, in September 2022, we refinanced the group debt, extending its duration and providing us with ample financial resources to support our growth in the years to come."While we maintain a cautious approach to the current year, which began in the wake of concerns regarding consumption trends in an uncertain and potentially volatile macroeconomic environment, we are, on the other hand, confident of the group’s medium-term growth prospects. A new chapter in our story has begun, a new phase of development that will continue to leverage the multiple drivers underpinning the long-term growth of the eyewear sector, and build on the main strategic choices we initiated four years ago." He said, "Our medium-term ambitions remain focused on our strong brand portfolio to effectively reach a broad audience of target consumers, powered by the sustained growth of our home brands, to be achieved organically but also via new acquisitions, and complemented by a diversified set of licensed brands."Trocchia said, "It will be essential to continue to maintain a balanced business, aiming for a home brands portfolio that by 2027 accounts for more than 50 percent of our revenues and that decisively shapes the development of our geographical and distribution channel mix."For this reason, in the coming years, we expect more significant growth in North America and emerging markets, just as we expect our business to grow more in the sports channel dedicated to outdoor products, and in all the online channels that we have successfully developed in recent years, from B2C to revenue through internet pure players, to our innovative B2B platforms which will continue to put our customer first."Our portfolio strategies will keep leveraging two main enablers of growth. On the one hand, the 360° digital transformation, which we accelerated already last year to equip the company with the latest technologies in terms of business intelligence and data analytics, and which will see us further investing in particular in the coming two years. On the other hand, our growing commitment to developing a sustainable business."Trocchia pointed to 2022 where there was a reduction of around 46 percent in scope 1 and 2 CO2 emissions compared to 2021 and of around 57 percent compared to 2019, and new investments in photovoltaics and renewable energy. "Starting from these achievements, today we want to set our medium-long term sustainability goals and objectives.”Overall, in 2022, Safilo's net sales were €1,076.7 million, up 11.1 percent at current exchange rates and 4.2 percent at constant exchange rates compared to € 969.6 million recorded in 2021.The company cited the performance of its home brands, "in particular Smith, which with another strong increase in sales confirmed its position as one of the leading brands in the rapidly growing segment and distribution channel of outdoor eyewear and sports products. Carrera and Polaroid also posted yet another year of double-digit growth, broad based by distribution channel and product category, with Carrera far exceeding pre-pandemic levels. At the end of the year, the sales of home brands accounted for around 42 percent of Safilo Group’s business.Safilo’s licensed business saw positive development achieved by the eyewear collections of its leading licensed brands, and the inclusion of new licenses in the portfolio which effectively contributed to offset the sales recorded in 2021 with the discontinued business.Management said that 2022 "confirmed the good recovery of the sunglass business, the equally good resilience of prescription frames sales, growing respectively by 9.0 percent and 2.0 percent at an organic level, and the further acceleration of Smith’s snow goggles and snow and bike helmets, which led the annual growth of the so called ‘other’ product category to a +22.0 percent."During the year, Safilo's online sales, consisting of the direct to consumer (D2C) business and sales made through internet pure players (IPPs), accounted for 15 percent of the Group's business, up approximately 4 percent compared to the previous year.By geographical area, Europe remained the key growth driver in 2022, with the main markets of the area and the surging business in Turkey and Poland, contributing to the upside in revenues of 12.3 percent at current exchange rates, +12.0 percent at constant exchange rates and +16.1 percent at the organic sales level.During the year, the North American market benefited from the strengthening of the dollar against the euro, closing up 6.8 percent at current exchange rates. The performance at constant exchange rates, in total down by 4.7 percent, was instead flattish versus 2021 at the organic sales level (-0.3 percent), reflecting a challenging basis of comparison, especially in the second half of the year. Safilo sales in North America reached €497.7 million.Safilo reported positive sales trends also in the Rest of the World, composed of the business in the IMEA and Latin American countries, as well as in Asia and Pacific, with the two areas respectively up 33.1 percent and 9.8 percent at current exchange rates, +21.1 percent and +3.4 percent at constant exchange rates, and +17.0 percent and +13.1 percent at the organic sales level.As of Dec. 31 2022, the group's net debt stood at €113.4 million, slightly better than the position of €115.4 million reported at the end of Sept. 2022 and slightly above €94.0 million recorded at the end of 2021.Within Safilo Gorup's medium term targets, the company said strategies will continue to leverage two main enablers: The end-to-end digitalization of its business model, with the aim of transversally enhancing data analytics, optimizing processes, operations and time to market, and a sustainability roadmap in support of the group’s business targets, driven through an agenda of clear and shared objectives.Safilo said its group net sales are expected to reach approximately €1.3 billion in 2027, with a 5-year CAGR of around 4 percent driven by a sustained growth of home brands, which are expected to exceed 50 percent of group revenues by the end of the plan. Smith, Carrera, Blenders and Polaroid will represent the main drivers of future growth. The Group will also maintain a great focus on the dynamic development of the licensed portfolio through a careful balancing and accurate diversification of brands.With regard to the company's Longarone plant, following management’s analysis of possible alternative solutions for the site, the group is now in the process of evaluating a potential transfer of the facility to potential third parties with a view to preserving the know-how of the site and minimizing the social impact."While further updates will be provided as the project progresses, Safilo continues to reiterate the importance of its Italian roots, of the Santa Maria di Sala and Bergamo production sites, of the Padua logistic center, and of the company's creative capabilities, which represent a competitive advantage for the group," the company said.