Safilo Profits Fall

Company saw an acceleration in the last quarter but was hurt by the phasing out of the Giorgio Armani group's licenses.

Eyewear from Safilo.

MILAN — While seeing an acceleration in the last quarter, global growth and the consolidation of the newly acquired Polaroid Eyewear business, yet hurt by the phasing out of the Giorgio Armani group’s licenses, Safilo Group SpA in 2012 posted a 7.2 percent drop in net profit to 25.9 million euros, or $ 33.1 million, from 27.9 million euros, or $38.8 million in the previous year.

In the 12 months ended Dec. 31, sales grew 6.7 percent to 1.17 billion euros, or $1.5 billion. Safilo chief executive officer Roberto Vedovotto said that, as it tackled a challenging economy, the firm’s “strategic priority was to focus on the top-line growth” of its portfolio and “on profitability, as well as to maintain a solid capital structure, despite the expected Armani phase-out negative effect.”

The Italian eyewear manufacturer produces and distributes eyewear for luxury labels including Dior, Gucci, Marc Jacobs, Bottega Veneta and Saint Laurent, in addition to its own Safilo and Carrera brands.

“In 2012, we adapted our industrial footprint, timely redefining the organization and costs of the group’s production capacity in Italy with a strong focus at appropriately managing the social framework. The performance of organic sales through go-forward brands, which consistently grew around 6 percent throughout the year, confirmed the competitive edge and diversification of our licensed brands, supporting the portfolio enhancement also via the anticipated renewal of the Hugo Boss Group and Max Mara licenses,” continued Vedovotto.

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The company also focused on its owned brands and reorganized Polaroid’s distribution in Europe, with an eye on expansion in the U.S. Sales rose in all geographic markets. Revenues in Europe gained 5.7 percent to 470.6 million euros, or $602.3 million. Sales in the U.S. were up 7.5 percent to 488.7 million euros, or $625.5 million. Asia grew 7.3 percent to 198.8 million euros, or $254.4 million.

Operating profit decreased 14.3 percent to 73.9 million euros, or $94.6 million. Earnings before interest, taxes, depreciation and amortization (EBITDA) dropped 6.1 percent to 115.1 million euros, or $147.3 million. Dollar amounts have been converted at average exchange for the periods to which they refer.

The company reduced its net debt, which, as of Dec. 31 2012, stood at 215.3 million euros, or $275.5 million, compared with 238.3 million euros, or $331.2 million, at the end of December 2011.

The phasing-out of the Armani brands, which passed on to rival Luxottica Group, meant the company in 2012 reduced “working hours in the Italian plants, on the basis of the solidarity contracts signed in July with Trade Unions, which will be effective until August 2014,” said Safilo.

During the first months of 2013, Safilo renewed the licensing agreements with Liz Claiborne and Banana Republic and signed a new deal for the design, production and distribution of prescription frames and sunglasses branded Bobbi Brown.

“These events demonstrate the group¹s intention to consolidate and strengthen its competitive positioning during a year which will nevertheless remain characterized by uncertain market scenarios and conflicting business components,” said the company.