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Hunter Douglas (HDG-AE) |
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WIKI ANALYSIS
Hunter Douglas (AMS: HDG) is the world's largest publicly held manufacturer of window coverings by revenue, bringing in nearly $2.4 billion in sales in 2009.[1] In addition to its staple window blinds and shades, Netherlands-based Hunter Douglas makes architectural products used to improve ventilation, regulate sunlight, optimize room acoustics, and improve energy efficiency. The company operates in all the world's major markets, including higher-growth regions like Latin America and the Middle East.
Since Hunter Douglas products are used almost exclusively in the construction industry, poor conditions in the U.S. housing market and other housing markets around the world led to lower sales and a net loss of $35.5 million in 2008.[2]
Company Overview
Business and Financial Metrics
First Quarter 2010 Results[3]
Hunter Douglas reported sales for the first quarter of $535.5 million, an increase of 7.4% compared to the first quarter of 2009. Earnings before interest, tax, depreciation and amortization - EBITDA (before non-recurring restructuring expenses) were $32.7 million, compared with $2.8 million in Q1 2009. Income from operations (before non-recurring restructuring expenses) was $11.9 million compared with a loss of $18.5 million in Q1 2009.
North America accounted for 40% of sales, Europe 38%, Latin America 9%, Asia 8% and Australia 5%. Window Coverings were 83% and Architectural and Other Products were 17% of sales during the quarter.
| Annual Income Data, millions USD | 2005[4] | 2006[5] | 2007[6] | 2008[7] | 2009[8] |
|---|---|---|---|---|---|
| Window Coverings Sales | $2,134 | $2,308 | $2,598 | $2,412 | $1,937 |
| Architectural and Other Sales | $263 | $322 | $430 | $530 | $439 |
| Total Revenue | $2,937 | $2,630 | $3,028 | $2,942 | $2,376 |
| Investment Income | $24.0 | $66.0 | $62.0 | -$159.8 | $3 |
| Net Income | $223.0 | $327.0 | $309.0 | -$35.5 | $90 |
Product Segments
Window Coverings (82% of 2008 sales)
Hunter Douglas's primary product lines are its window coverings, which include blinds, shutters, and sheers made of either fabric, aluminum, manmade materials (like PVC or vinyl), or natural materials (such as wood, grasses, bamboo, or reeds). In addition to the coverings themselves, Hunter Douglas also sells motorization systems used to automate the opening and closing of its coverings. Some of the company's main product lines, primarily aimed at an upscale client base, include:
- HunterDouglas
- Luxaflex
- Duette
- Silhouette
- Vignette
- Pirouette
Architectural and Other Products (18% of 2008 sales)
Hunter Douglas's architectural products include:[9]
- Sun Control products, which manage the light and heat from natural sunlight to reduce the need for artificial lighting and climate control and improve energy efficiency
- Ventilated Façade Systems, which protect buildings from weather conditions such as rain, extreme heat, or bitter cold, are used to reduce climate control costs while improving exterior aesthetics
- In 2007, Hunter Douglas acquired NBK, a leading manufacturer of terracotta ventilated façades
- Suspended Ceilings, like the company's Luxalon and Techstyle brands, are used both to improve room acoustics and for their visual appeal
- 3form Translucent Materials, which makes translucent panels for use by architects and interior designers
- Hunter Douglas acquired 3form, a leading manufacturer of translucent panels, in 2007
Regional Sales
Due to global economic conditions and housing market contractions in many of Hunter Douglas's primary markets, sales were down in all but one of the company's geographic regions.[10]
- Europe (44% of 2008 revenue)
- Sales volume for Europe was down 6% in 2008, resulting in lower profits. In euros, the primary currency of the European region, sales were down 7% (from €940m in 2007 to €878m in 2008), though a beneficial exchange rate with the U.S. dollar kept sales reported in USD flat at $1.29 billion.
- North America (40% of 2008 revenue)
- North American sales volume was down 11% for the year, resulting in a 9% decrease in revenue from the region.
- Latin America (7% of 2008 revenue)
- Latin America was Hunter Douglas's only strong region in 2008, with revenue and sales volume growing by 20% and 16%, respectively. Most of the Latin American economies have been relatively less impacted by the 2008 financial crisis, with home construction in the region going strong.
- Asia (5% of 2008 revenue)
- Revenue from Asia decreased 4% in 2008 on a 9% decline in sales volume for the region.
- Australia (4% of 2008 revenue)
- Sales in Australia were flat in 2008, though profits for the region fell. Sales volume declined by 6% from 2007 levels.
Trends and Forces
U.S. housing starts down 33% in 2008
With the sustained weakness in the U.S. housing market after fallout from the subprime crisis, housing starts (the number of new construction projects started) in 2008 were down over 33% from 2007 levels.[11] During the same year, Hunter Douglas's sales volume in the North American region declined by 11%, reflecting the this trend's impact on the company.[12] As the housing market contracts and new construction decreases, so does the demand for related products and services, including the window coverings sold by Hunter Douglas. Global economic conditions depressed the housing markets in all but one of Hunter Douglas's primary regions, with sales volume down in every region except Latin America. As a result, 2008 sales volume was down 7% for the year and 13% in the fourth quarter alone.[13]
Weak U.S. dollar boosts revenue
A weak U.S. dollar throughout the first half of 2008 boosted total revenue by 2%, helping to offset declines in sales volume.[14] Despite being based in the Netherlands and using the euro as its operating currency, Hunter Douglas reports its results in U.S. dollars. As such, sales in other currencies (like the euro, the British pound, and the Hong Kong dollar) translated to a larger number of USD, which reduced the impact of lower sales volumes. In the second half of 2008, however, this trend began to reverse itself as the USD strengthened against other currencies;[15][16] despite an overall positive currency exchange impact for the year, the stronger dollar actually decreased fourth-quarter revenue by 8% (on top of the 13% quarterly decline in sales volume).[17]
Investment losses erased 2008 profit
Hunter Douglas's losses on its investment holdings totaled $159.8 million in 2008, compared with a profit of $62 million in 2007.[18] Combined with declining sales, these losses were more than enough to wipe out the company's operating income and lead to a net loss for the year.[19] In fact, the losses in 2008 totaled more than the gains from 2005, 2006, and 2007 combined, prompting Hunter Douglas to reduce the size of its portfolio. Between year-end 2007 and year-end 2008, the company's investment portfolio decreased in value from $849 million to $265 million, including asset sales totaling $463 million and losses of $121 million; the company plans to further reduce the portfolio to about $160 million in 2009.[20] By decreasing the size of its portfolio, Hunter Douglas hopes to avoid the possibility of future losses substantially impacting net profit as they did in 2008.
Competition
Hunter Douglas is by far the largest publicly held firm specializing in window coverings. Most of the other companies in the industry are smaller, privately owned firms or subsidiaries of larger corporations. Some of Hunter Douglas's closest competitors are:
- Levolor, a subsidiary of Newell Rubbermaid, makes a line of window coverings comparable to that of Hunter Douglas, including blinds, shades, draperies, and associated mounting hardware[21]
- 3 Day Blinds, which makes custom window coverings under the Disney, Eddie Bauer, and Laura Ashley brands, filed for Chapter 11 bankruptcy protection in October 2008[22]
- MechoShade Systems, Inc. primarily makes motorized shades for windows, doors, and skylights[23]
- Springs Window Fashions makes blinds and shades under the Bali, Graber, and Nanik brands[24]
References
- ↑ Hunter Douglas Results 2008
- ↑ Hunter Douglas Results 2008
- ↑ "Hunter Douglas Results Q1 2010"
- ↑ Hunter Douglas Annual Report 2006
- ↑ Hunter Douglas Annual Report 2006
- ↑ Hunter Douglas Annual Report 2007
- ↑ Hunter Douglas Results 2008
- ↑ Hunter Douglas Results 2008
- ↑ Hunter Douglas Annual Report 2007, page 13
- ↑ Hunter Douglas Results 2008
- ↑ U.S. Census Bureau - New Residential Construction Index
- ↑ Hunter Douglas Annex 5
- ↑ Hunter Douglas Annex 5
- ↑ Hunter Douglas Annex 5
- ↑ 2008 Monthly Average Graph (American Dollar, Euro) | x-rates.com
- ↑ 2008 Monthly Average Graph (American Dollar, British Pound) | x-rates.com
- ↑ Hunter Douglas Annex 5
- ↑ Hunter Douglas Annex 1
- ↑ Substantial losses Hunter Douglas | Artikel - deOndernemer.nl (translation by Google)
- ↑ Hunter Douglas Results 2008
- ↑ About Levolor | www.levolor.com
- ↑ 3 Day Blinds, Inc. - Google Finance
- ↑ MechoShade Systems - About Us
- ↑ Springs Window Fashions
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