MAKING A DIFFERENCE
AROUND THE WORLD.
ANNUAL REPORT 2014
KEY FACTS AND FIGURES
Armacell is an undisputed leader with sustainable, competitive advantages in
the flexible equipment-insulation market. Its diversification across products,
end markets, and regions combines growth and resilience. Based on an assetlight and value-added business model, Armacell is highly profitable and
generates strong cash flows.
NET SALES BY SEGMENT
NET SALES
in EUR million
400.1
425.3
452.2
415.7
Engineered foams
21 %
Advanced insulation
79 %
2011
2012
2013
2014
ADVANCED INSULATION NET SALES BY REGION
APAC India
28 %
AMERICAS
23 %
NET SALES BY REGION
EMEA
49 %
APAC India
22 %
AMERICAS
35 %
EMEA
43 %
ADJUSTED EBITDA
ADJUSTED EBITDA BY SEGMENT
in EUR million
in EUR million
71.2
63.5
64.9
57.0
2011
2012
2013
Engineered foams
22.0
Advanced insulation
EMEA
30.5
Advanced insulation
APAC India
16.4
Advanced insulation
AMERICAS
17.7
2014
ADJUSTED EBITA
ADJUSTED EBITA BY SEGMENT
in EUR million
in EUR million
50.2
51.7
56.1
43.9
2011
2012
2013
Engineered foams
17.7
Advanced insulation
EMEA
23.7
Advanced insulation
APAC India
14.5
Advanced insulation
AMERICAS
15.8
2014
CAPEX
FTE AT YEAR’S END
in EUR million
in EUR million
20.6
2,284
2,250
2,231
2,313
2014
2011
2012
2013
2014
18.8
16.3
10.3
2011
2012
2013
CONTENT
02
04
LETTER FROM THE CEO
EXECUTIVE MANAGEMENT TEAM
01
CORPORATE STRATEGY
07
09
10
PORTFOLIO
MISSION AND VISION
GLOBAL PRESENCE
02
CORPORATE RESPONSIBILITY
13
14
15
16
UN GLOBAL COMPACT
ENVIRONMENT
SOCIAL
EMPLOYEES
03
FINANCIAL RESULTS
18
19
20
23
24
25
FINANCIALS
MACROECONOMIC CONDITIONS
OVERVIEW OF BUSINESS PERFORMANCE BY SEGMENT
GROUP FINANCIAL PERFORMANCE
OUTLOOK
ARMACELL OPPORTUNITIES AND CHALLENGES
26
IMPRINT
LETTER FROM THE CEO
2014 was another successful year for Armacell. We were able
to continue our growth as a global company and demonstrate
that we can really make a difference around the world.
Insulation is one of the most effective ways to improve energy
efficiency in industrial, commercial and residential infrastructure. Our products, mainly based on elastomeric and thermoplastic technologies, are designed for both new and existing
installations. Furthermore, they are used in diverse application
segments such as heating, and plumbing, ventilation, and airconditioning, refrigeration, and food processing, automotive,
light industry, transportation, wind energy, oil and gas, as well
as other industries. As a consequence, Armacell is broadly
positioned, well diversified, and not dependent on any trend
within a particular sector.
We are a world leader in flexible insulation foams for the
equipment-insulation market and a leading provider of engineered foams. Today we sell the products and solutions for
approximately every second insulation project in the world.
Our highly diversified product range is unique and always
tailor made to meet local requirements. In the period 2008
through 2013, Armacell grew approximately 5 % per year,
outpacing the general market. During 2014, we were able to
further strengthen our growth and achieved an increase in net
sales of 8.8 % and reached EUR 452.2 million. Our adjusted
EBITDA increased by 9.6 % and reached EUR 71.2 million.
One of Armacell’s major drivers is the increasing demand
for the substitution of existing insulation material globally.
Additionally, megatrends in energy efficiency, urbanization,
and noise protection are fostering and bolstering an increasing
demand for our products and solutions.
During the past few years, we have successfully tapped into
new fields of business. These include manufacturing and marketing thermoplastic insulation materials, covering systems,
fire protection, and noise-control solutions, as well as special
foams for a multitude of industrial applications. Simultaneously,
we have developed new insulation systems for the oil and gas
industry – a key growth market for Armacell.
With production plants in China, Thailand, India, Brazil, Saudi
Arabia, South Korea, and recently in Turkey and Canada,
Armacell has penetrated new geographic markets. Over the
next three years, we are targeting additional production locations in emerging markets and regions of economic growth.
Armacell enjoys significant regional market expertise. As local
trends determine the product offering, our products and
solutions are always oriented to local requirements in order
to ensure that customer expectations and requirements
are key drivers of our business.
We owe our continued success as a company to our highly
engaged, talented team of 2,400 employees worldwide.
Each of them makes a difference in our company every day.
We have entered 2015 with continued optimism. In the first
quarter of this year, we have concluded two strategic acquisitions.
The first is OneFlex, a leading Turkish insulation materials
manufacturer that strengthens our position in Turkey, where
we previously were represented by a domestic licensee. It also
expands our footprint in other countries across the regions of
the Middle East, Africa, and southeastern Europe. Additionally,
we acquired Industrial Thermo Polymers Limited (ITP), a leading Canadian manufacturer of extruded polyethylene insulation
products, making Armacell a leading manufacturer of polyethylene insulation foams on the North American continent.
On behalf of the Management Board, I would like to thank all
Armacell employees around the world for their contribution
to our successful business performance. I would also like to
extend a special thanks to our Supervisory Board members
for their valuable support. We also extend our appreciation
to our global customers for the confidence they have shown
in Armacell, our products, and our solutions.
We are fully committed to deliver on our targets. With a strong
focus on implementing our strategy around the world, we will
continue our business success. As a global leader in our industry, we can truly make a difference around the world.
Sincerely,
We provide our employees with an inspiring and rewarding
work environment, and we emphasize strengthening our leadership, attracting and developing talent, fostering a culture
of excellent performance, and promoting diversity in all of
our teams.
Patrick Mathieu
CEO Armacell Group
03 Armacell is a truly global company: today, we are operating
22 production sites in 15 countries on four continents.
A steadily increasing global environmental awareness and
stricter energy-saving laws and regulations offer long-term
potential for our global insulation business. We are pursuing
organic growth, both through geographic expansion as well
as through product diversification and market enlargement
inside our core insulation business. These initiatives are
strengthened by selective external growth activities.
LETTER FROM THE CEO
We continue to invest in the development of safe and innovative thermal and acoustic insulation that offer our customers
sustainable added value. Our products and solutions contribute
to prolong the lifetime of the installations that they insulate.
Armacell has introduced almost all significant innovations in
the field of flexible technical insulation materials. “Armaflex”
is currently the world’s leading brand in the field of flexible
insulation. We operate one global research center and four
regional product development centers. We hold more than
200 active patents worldwide, of which 176 alone were
approved between 2010 and 2013.
In summary, 2014 was a very successful and important year
for Armacell.
EXECUTIVE MANAGEMENT TEAM
04 EXECUTIVE MANAGEMENT TEAM
Armacell’s Senior Executive Management Team consists of eight international
managers who have extensive experience working in the industry. They focus
on their responsibility towards more than 2,400 employees, our global customers, and all relevant stakeholders. Our leaders create a culture of innovation,
engagement, and accountability by reflecting Armacell’s core values and
Code of Conduct.
Patrick Mathieu
Chief Executive Officer
Denis Van Roey
Chief Financial Officer
Roberto Mengoli
Chief Technology Officer
Keith A. Norwood
Chief Human Resources
Officer
CEO Patrick Mathieu joined
Armacell on May 7, 2012.
He has over 25 years of experience, including 15 years
in the building and insulation
materials sectors. Previously,
he was President of Western
Europe and International
Flooring Division of the
Tarkett Group. He also held
various positions at the Saint
Gobain Group, including
General Director for Gypsum
(Gyproc), Insulation (Isover),
and Mortars (Weber &
Broutin).
Denis Van Roey has been
Armacell’s Chief Financial
Officer since November 1,
2011. He is responsible for
Group Finance, corporate
controlling, accounting, and
IT. He has over 25 years of
experience in finance and
controlling at several international industrial groups.
His previous positions
include being an auditor
at Deloitte and Finance &
Administration Director at
Inter-Beton group (HeidelbergCement Group), and
ImaG Group.
Roberto Mengoli has been
Armacell’s Chief Technology
Officer since January 15,
2013. He is in charge of
global technology as well
as operations policies and
programs. He has over
18 years of experience,
primarily in operations and
promoting and developing
manufacturing and lean programs. He gained previous
experience in manufacturing
at companies such as the
Saint-Gobain Group, Elica,
and SACMI Group.
Keith A. Norwood has been
Armacell’s Chief Human
Resources Officer since 2013
and is based in Mebane,
North Carolina, USA. Prior
to accepting his current
position, he was in charge
of Human Resources and
Information Technology for
Armacell’s Americas region.
He has over 25 years of
leadership experience in
HRM at companies such as
Armstrong World Industries
and National Spinning Co. Inc.
He also has extensive experience in organizational
development, public relations,
and mass communications.
Thomas W. Himmel
Vice President Americas
Andrew Stearns
Vice President
Asia Pacific/India
Dr. Karl Paetz-Lauter joined
Armstrong in 1987. He has
more than 30 years of professional experience – most
of it in managerial functions
in the insulation business of
Armstrong/Armacell. Before
joining Armstrong he was
Vice President of the Institute
for Research in Medical
Education, which was founded
by the German Ministry
of Research and the Federal
Committee for Educational
Planning.
Guillerme Huguen joined
Armacell as Vice President
EMEA on October 1, 2013.
With over 20 years of experience in managing international industrial businesses,
mostly in the construction
and building materials industry (including marketing
management at the SaintGobain Group), he is deeply
familiar with the nature
of the business, as well as
market trends, key players,
and customers.
Thomas W. Himmel has been
Vice President Americas
at Armacell LLC since 2009
and is based in Mebane,
North Carolina, USA. He has
over 20 years of experience
at several leading industrial
enterprises including
AkzoNobel Surface Chemistry
and Crompton Corporation.
Andrew Stearns has been
Vice President Asia Pacific/
India at Armacell since
June 1, 2013, and is based
in Singapore. He has over 25
years of business leadership
experience in the building
products industry. His previous positions include Group
Chief Supply Officer at Grohe
AG, Divisional Marketing-/
International Business
Director at Novar (Caradon),
President/CEO at Grohe
Americas, and Group Logistics Director at Novar plc.
05 Guillerme Huguen
Vice President
Europe/Middle East/Africa
EXECUTIVE MANAGEMENT TEAM
Dr. Karl Paetz-Lauter
Vice President
Research & Innovation
OUR DIVERSE SET OF
PRODUCTS AND MARKETS
MAKES A DIFFERENCE.
01
CORPORATE STRATEGY
PORTFOLIO
A wide product offering across multiple end markets and industries
BUSINESS
SEGMENTS
ADVANCED INSULATION
ENGINEERED FOAMS
Finished insulation products sold to distributors
Semifinished and finished noninsulation products
sold to converters or OEMs
21%
79 %
HVAC
Heating and Plumbing
OVERALL INDUSTRY
EXPOSURE
Construction
Commercial Construction
Sports and Leisure
Armacell is a world leader in flexible insulation foams for the
equipment insulation market and also a leading provider of
engineered foams. Although Armacell’s products and solutions
are mostly somewhat concealed, they nevertheless form an
important part of our daily lives: they are used, for example,
in many modern car models in the form of insulation and seals,
prevent noise emerging from water pipes, insulate the pipes in
your heating basement, and dampen impacts on sports mats.
Today, the company employs 2,400 individuals across the
entire world and operates 22 production sites in 15 countries
on four continents.
Armacell’s history dates back to the year 2000. In the millennium
year, Armacell was founded as the successor company to the
insulation division of Armstrong World Industries as part of
a leveraged management buyout.
Solar
Transportation
Windmill Blades
Others
Residential Construction
Energy
Oil and Gas
Transportation
Light Industrial
Oil and Gas
Industrial
Automotive
Others
In all important regions, Armacell has a leading market
position. Today, we sell the products and solutions for
approximately every second insulation project in the world.
As a consequence, the company is almost twice as large
as its nearest competitor.
In 1954, the pioneering company invented Armaflex, the first
flexible insulation product. In doing so, it established a new
branch of industry – flexible technical insulation – that it has
been shaping ever since. Armaflex is now the world’s bestknown brand for flexible technical insulation, and the brand
name has become a synonym for flexible foam insulation
in the building materials industry.
07 Sports and Leisure
Refrigeration
CORPORATE STRATEGY
END MARKETS
08 CORPORATE STRATEGY
Armacell’s global activities are bundled within two business
areas.
In its Advanced Insulation area, flexible foams for the insulation
of technical equipment are developed and marketed. Examples
of how these products are utilized include the insulation of
heating, cooling, and air-conditioning systems in commercial
and residential properties; on process pipelines in industrial
applications; in transportation; and in the oil and gas industry.
The Engineered Foams area develops and markets technical
foams for applications in various end markets such as wind
energy, the automotive industry, the leisure industry, transportation, and other industrial sectors.
MOSCOW AIRPORT TRAINS
Stadler Rail, Altenrhein (Switzerland)
Product: Armaflex Rail
The first flexible, closed-cell insulation material with integrated
fire protection for railway vehicles.
SKANDION CLINIC
Uppsala (Sweden)
Product: Armaflex Ultima
Maximum safety: Armaflex Ultima with extremely low smoke
density for greater safety in the event of a fire.
Armacell’s customers include operators of buildings and
industrial plants, specialist planners, installation technicians,
and craftsmen. They generally procure our products on
a wholesale basis.
Although Armacell’s products and solutions are not addressed
directly to end customers, you will nevertheless find them
installed in homes, such as in heating pipe insulation.
MISSION AND VISION
We owe our success to our highly engaged and talented employees,
who work according to a clear mission, a well-founded vision, and practized
values. These values form the foundation for the professional behavior of
each individual employee and for our employees’ relationships to Armacell’s
business partners.
MISSION – WHY WE EXIST
As inventors of flexible elastomeric foams for insulation, we
focus on developing safe, innovative thermal, acoustic and
mechanical solutions and systems that create value for our
customers in a sustainable way.
VISION – WHAT WE WANT TO BE
We grow our market by providing our customers with valuable
solutions that offer reliable and certified performance backed
by high-calibre people for targeted applications.
Certified performance means specified product properties
which are confirmed by an independent testing institute.
Applications include, for example, plumbing and HVAC-R solutions, solar equipment, components of industrial installations
and others. Valuable stands for a price based on innovative
value propositions that offer the best quality/cost ratio and
durability to the market. High-calibre people are dedicated,
passionate and competent individuals who operate with
integrity and strive to be the best.
VALUES – WHAT WE BELIEVE
CUSTOMER EXPERIENCE
We create a positive customer-focused culture. Customers
value the Armacell experience and continuous business
relationship.
INTEGRITY
Our employees must be aware of and comply with rules and
regulations, regardless of where in the world they are working.
Integrity goes deeper than that. It is about doing the right things
in the right way, as individuals and as a company. Ethical and
responsible behaviour is fundamental to the way we do business. Armacell is a company that can be trusted.
SUSTAINABILITY
We are focused on sustainable, profitable growth through the
development and manufacturing of our products to ensure a
positive impact on our community. We contribute to sustainable
growth by creating innovations in thermal and acoustical
efficiency.
ARMACELLS’ CORPORATE VALUES
Customer
Experience
Sustainability
Integrity
CORPORATE
VALUES
Accountability
Commitment
Empowerment
09 STRATEGY – HOW WE COMPETE
EMPOWERMENT AND ACCOUNTABILITY
We give our employees operational responsibility and expect
them to develop and perform to the best of their talents.
The basis for interaction between employees is mutual respect
and trust.
CORPORATE STRATEGY
To be the global leader for flexible technical foams by providing
value through continual product and system innovations in
order to improve thermal, acoustic and mechanical efficiency
in all targeted applications.
COMMITMENT
We are committed to developing and motivating our people,
nurturing their talents and developing new skills. We will
build strong teams to support our company’s performance.
The safety of our employees is the company’s first commitment.
GLOBAL PRESENCE
OLDHAM – GB
THIMISTER – BE
BRAMPTON – CAN
LUXEMBOURG – LU
MEBANE – US
SPENCER – US
ŚRODA ŚLĄSKA – PL
MÜNSTER (2) – DE
FRIESENHOFEN – DE
BEGUR – ES
BURSA – TR
SOUTH HOLLAND – US
10 CONOVER – US
CORPORATE STRATEGY
ATLANTA – US
SÃO PAULO – BR
Armacell is a global business and is continuously expanding
into new markets. Today, Armacell manufactures products in
22 plants in 15 countries on four continents and follows a
strategy of internationalization. With production plants in China,
Thailand, India, Brazil, Saudi Arabia, South Korea, Turkey, and
recently Canada, among other locations, Armacell has tapped
new markets at an early stage and is set to grow further in
emerging markets by proactively addressing the sustainable
energy revolution worldwide.
Our global presence and a diversified product range are
key differentiating factors that set us apart from smaller
competitors. In markets where Armacell does not have
its own factories, sales offices and distributers complete
a broad sales network that is unique in the industry.
CHEONAN – KR
SUZHOU – CN
PANYU – CN
ARMACELL MANUFACTURING FACILITIES
BANGKOK – TH
SALES AND ADMINISTRATION OFFICES
CORPORATE HEADQUARTERS
SINGAPORE – SGP
MELBOURNE – AU
Armacell’s headquarters is in Luxembourg with regional head
offices in Münster (Germany), Mebane (USA), and Singapore. In
each country where Armacell is located, we employ talented
people who are keenly aware of national and international
standards for their products to address different local requirements. As the portfolio is determined by local trends, Armacell
products are always guided by local needs in order to ensure
that the customers’ expectations and the requirements in the
specific regions are met. This local knowledge feeds directly
into the further development of the products and solutions.
The Group operates four product development centers –
in Münster (Germany), Mebane (USA), Thimister-Clermont
(Belgium) and Guangzhou (China).
11 ARMACELL REGIONAL HEADQUARTERS
(Americas, EMEA, Asia Pacific/India)
PUNE – IN
CORPORATE STRATEGY
DAMMAM – SA
OUR SENSITIVITY TO OUR
GLOBAL RESPONSIBILITY
MAKES A DIFFERENCE.
02
CORPORATE RESPONSIBILITY
UN GLOBAL COMPACT
The Armacell Group has been consciously supporting the
UN Global Compact initiative with our best efforts since joining
in 2006. Whether it concerns Armacells’ high-performance
systems that help to conserve energy and reduce CO2 emissions or the unique applications for oil and gas, wind energy,
transportation, hospitals, schools, and many other fields,
Armacell products are making a difference around the world.
Our primary focus is on creating innovative solutions for
complex challenges and improving performance for all targeted applications. In doing so, Armacell helps to protect and
improve the environment in which the products are used.
13 CORPORATE RESPONSIBILITY
In our business, the key issue is energy efficiency. We market
and sell products that target energy conservation worldwide.
We continually optimize our elastomeric insulation products
and, through effective associations, raise awareness for
energy-saving potential among industry and governments, thus
making an even greater contribution to building a sustainable
future. Our responsibility toward sustainable development
does not confine itself only to environmental issues. Environmental awareness is linked to occupational safety, product
stewardship, and corporate citizenship.
We clearly understand the importance of all ten fundamental
principles of the Global Compact and will strive to initiate
appropriate actions to achieve a sustainable and ethical
development of our business. Our annual Communication on
Progress Report shows a range of activities around the Armacell
globe with regard to human rights, labor standards, environmental protection, and anticorruption.
ENVIRONMENT
14 CORPORATE RESPONSIBILITY
A commitment to protect our environment has been an integral
part of Armacell’s business strategy and a key promise behind
our corporate philosophy since our foundation. Our business
activities worldwide comply with the applicable environmental
laws and regulations, in addition to the requirements of our
environmental permits. As a global leader in energy efficiency,
we are focused on sustainable, profitable growth through the
development and manufacturing of our products to ensure
a positive impact on our community and to protect both people
and the environment by contributing to energy conservation.
To demonstrate this, our company was the first manufacturer
of flexible technical insulation materials to carry out an ecobalance analysis – the life-cycle assessment.
INDEPENDENT ENVIRONMENTAL
ASSESSMENT
Armacell carried out environmental assessments at all its sites
throughout the world. The environmentally relevant areas of 20
Armacell plants were audited at the beginning of 2014. Armacell
was supported in this complex undertaking by ERM (Environmental Resources Management), one of the world’s leading
sustainability consultancies. The audits covered all environmentally relevant topics and examined whether the individual
sites comply with the legal requirements. Areas addressed
included environmental management, permits, air emissions,
water supply, and waste water, hazardous material storage
and handling, waste management, restricted substances,
environmental nuisances, housekeeping, explosion protection
provisions, and soil and groundwater conditions at the sites.
ERM confirmed that there are no material environmental
issues at any of the Armacell plants. Further improvements
recommended by the consultants have either already been
implemented or will be realized in the medium term.
ZERO-WASTE-GENERATION PRODUCTS
FOR HIGH-QUALITY NOISE CONTROL:
ARMASOUND
Product developments such as ArmaSound offer the effect of a
zero waste generation: trim material that cannot be reworked
back into the process may be reengineered into a high-performance acoustic foam, resulting in a win-win scenario for the
environment and our customers. Reusing waste materials
reduces the impact of disposal while at the same time offering
a solution for noise pollution. Acoustic insulation is an important attribute of comfortable living today. Effective acoustic
insulation measures such as Armacell’s noise-control products
minimize noise at the source, increasing both the living
comfort and the value of the property.
SOCIAL
As a company with a global footprint, we see it as our responsibility to support local good-citizenship projects, such as
child fostering in Sri Lanka, Habitat for Humanity in the US,
maintenance of community gardens, and regular donations
to and cooperations with nonprofit organizations. Armacell
emphasizes the social dimension of sustainability among its
management and employees with these projects – projects
that help the local communities in which Armacell operates.
• Access to clean drinking water
• Construction of an elementary school
• Reduction in the number of children suffering from malnutrition
• Improved health care
Armacell employees and their families participating in the annual Heart Walk.
In 2014, charity activities of Armacell at the UK facility included
raising money for Dr. Kershaw’s hospice charity in Royton,
Oldham, including a six-mile moonlight charity walk by Maggie
Hales and Heather Whittaker and advertisements in the annual planners and guidebooks. Colleagues also took part in
a sponsored 60-mile bike ride from Manchester to Blackpool for
Christie’s Hospital in Manchester and the five-kilometer Race
for Life fun run for cancer research in Heaton Park, Manchester,
where runners all wear pink. Through these activities Armacell
employees raised a total of around GBP 2,500.
Armacell employees planting trees in Thailand.
15 In Thailand, Armacell employees participate in their community activities, such as Children’s Day held by the district
community, tree-planting activities, and the Run & Ride Contests
in community public parks. The company is aware of its
responsibility toward society and the community in which
it operates and thus donated gifts for the Disabled People’s
Day activities in Ratchaburi. Moreover, the company supports
its community traffic police and drivers at checkpoints by
sponsoring food and beverages. This helps them relax from
their tiring work and driving and in turn contributes to reducing
traffic accidents during long holidays (New Year).
CORPORATE RESPONSIBILITY
Armacell LLC in the US has a unique partnership with the
HEARTS program – a nonprofit organization targeting children
from all over the world undergoing bone marrow transplants
at Duke University Children’s Hospital. In September 2014,
Armacell employees and their families and friends participated
in the annual Heart Walk. Over 20 participants walked in the
event. With Armacell’s assistance, over USD 3,000 was raised
and donated to the Heart Association.
Armacell is supporting a World Vision program with financial
support and regular correspondence with six orphans/halforphans following the tsunami in 2005. In the past, Armacell
supported ten children of whom four have now reached an
age where they do not need further support. Thanks to
Armacell’s commitment and the excellent cooperation with
local project workers and the inhabitants themselves, a great
deal has been achieved over the past years. For example:
EMPLOYEES
16 CORPORATE RESPONSIBILITY
In all areas of the business, Armacell is committed to its
corporate responsibility towards its employees, the environment, and the communities in which the company operates.
Throughout 2014, the Armacell Group has been a solid foundation for the Group’s employees. Performance management,
succession management processes, the systematic development of people, and global leadership training programs are
the core of these efforts.
As an employer whose focus is the well-being of its employees,
Armacell supports a range of additional activities for motivating
and fostering the development of the company’s main asset:
its people. We take the requests of our people seriously and
do our best to create a positive working atmosphere. In return,
we expect them to perform to the best of their abilities, as
well as, represent an attitude of mutual respect, reliability, and
trust. In an effort to strengthen these values, we established
a Code of Conduct in 2011, which applies to every employee
worldwide.
Furthermore, we present awards to recognize the work of an
individual or a working team. Our philosophy is to encourage
and support each of our employees, as well as a strong team
approach as the basis for strong company performance. To
recognize the commitment of our employees, we launched the
A.R.M.A. Way Award System. Established in 2013, the aim is
to further support our philosophy of managing our activities
as an organization in the A.R.M.A. Way.
A.R.M.A. WAY Appreciate our customers
R aise our efficiency
M anage our cash
Act to empower our employees
Getting suitable talent from the market is becoming very
difficult, costly, and time consuming, and the talent available
directly from universities is also not directly utilizable.
The Graduate Engineer Trainees (GET) project for reducing
recruiting costs and increased bench strength is a different
approach: the Armacell India team has taken on eight fresh
graduate engineer trainees from different engineering institutes across India. During their first year at Armacell, these
individuals are trained in five phases in different functions:
manufacturing, technical and application support, product
development and marketing, sales, and a project as the fifth
and final phase. After appropriate assessment, they may be
placed in a suitable role if vacancies are available. This process
will be repeated every year. While the GETs gain experience
while being paid and have a good chance of finding their
dream job at Armacell, Armacell India saves substantially
on recruitment costs from hiring people from the outside
and avoids the time lag between a vacancy and a suitable
employee joining the company.
OUR SUCCESS IS CHARACTERIZED BY CONTINUOUS
GROWTH THAT MAKES
A DIFFERENCE.
03
FINANCIAL RESULTS
FINANCIALS
2011
2012
2013
2014
400.1
425.3
415.7
452. 2
57.0
63.5
64.9
71.2
Income statement items in EUR millions
Net sales
Adjusted EBITDA1
% of net sales
14.2 %
14.9 %
15.6 %
15.7 %
Adjusted EBITA2
43.9
50.2
51.7
56.1
% of net sales
11.0 %
11.8 %
12.4 %
12.4 %
5.7
7.0
*24.0
12.5
Non-recurring items
EBIT
14.9
26.3
10.6
21.7
Financial items
-27.5
-22.5
-30.4
-38.9
Net result
-12.3
5.0
-19.6
-11.5
18 FINANCIAL RESULTS
Balance sheet items in EUR millions
Current assets
164.0
163.0
124.1
159.1
Non-current assets
343.9
335.8
498.9
514.4
Current liabilities
109.9
71.4
81.4
115.9
Non-current liabilities
405.2
402.9
474.5
522.2
-7.3
24.4
67.2
35.3
Cash from adjusted operating activities
47.1
62.7
54.5
56.3
Investments and acquisitions
10.3
18.8
16.3
20.6
39
44.3
38.9
33.2
2,284
2,250
2,231
2,313
Equity
Other items in EUR millions
Adjusted free cash flow
Number of employees in FTE
Number of employees at year’s end
Due to a change of shareholders of the Armacell Group as of July 2, 2013, the financial data presented for 2011, 2012, the first half of 2013, and the second half of 2013
come from the Audited Combined Financial Statements for the respective periods reflecting the combined results of operations and financial position of the operational
Armacell Group and are comparable to the 2014 financial data from the Audited Consolidated Financial Statements of Armacell International S.A. Luxembourg.
The 2013 financial data presented here is the result of the sum of the Audited Combined Financial Statements for the first half 2013 and the Audited Combined Financial
Statements for the second half 2013.
*The increase in the amount of nonrecurring items in 2013 results from transaction costs associated with the change in shareholders and the related new
financing of the Armacell Group.
1
Adjusted EBITDA is the result before amortization, depreciation, interest and taxes adjusted by non-recurring items.
2
Adjusted EBITA is the result before amortization, interest and taxes adjusted by non-recurring items.
MACROECONOMIC CONDITIONS
The global economy continued its path of recovery in 2014,
albeit somewhat more moderately than originally anticipated.
Global GDP rose by 3.6 % (2013: 3.0 %), fueled by increasing
growth momentum in industrialized countries during the
second half of the year. Developments in individual regions,
however, were strongly divergent.
Economic growth in the eurozone returned to positive territory
of about 1.2 % despite ongoing weakness in the southern
countries and overly static slow growth in other regions, mainly
because of weak investments, exports and inflation. Decent
growth was again achieved in the United Kingdom.
In emerging countries, growth in Asia again achieved the
highest rates at an estimated 6.5 % on average, almost matching the previous years’ growth of 6.6 %. Increasing growth
momentum was observed in India. China still grew at a rate of
7.4 %, which compared decently with the previous years’ rate
of 7.8 %. GDP in Brazil was affected by low investments and
political uncertainties. The economy in Russia suffered heavily
from the slump in oil prices, the depreciation of the ruble and
the political tensions linked to the conflict in Ukraine. Finally,
in the Middle East & North Africa region, economic activity
picked up in 2014, but remained fragile due to political tensions
and transitions in many countries.
The economy in the United States rebounded in 2014 with
an expected annual growth of around 2.4 % following a decline
in unemployment as well as inflation due to the appreciation
of the U.S. dollar and the decline in oil prices.
19 FINANCIAL RESULTS
OVERVIEW OF BUSINESS PERFORMANCE BY SEGMENT
Armacell’s global activities are bundled within two business
areas: Advanced Insulation and Engineered Foams.
ADVANCED INSULATION EUROPE,
MIDDLE EAST AFRICA
The Advanced Insulation business offers flexible insulationfoam products for the insulation of mechanical equipment
in markets where energy distribution is required, such as in
commercial and residential construction, oil and gas applications and in other industrial applications.
On the back of continued mixed economic trends, 2014 was a
year of transition for the overall European construction sector,
which is now starting to recover slowly. Total construction is
expected to have increased by some 1 % in 2014, with positive
growth in the U.K., Ireland, the Eastern and Nordic countries
and Germany more than offsetting further weakness in France,
Italy and Spain. Both the residential and nonresidential subsectors saw similar development. It is important to note that
investments in construction have decreased in recent years.
As a result, the contribution of construction output to European
GDP is now at its lowest level (9.3 %) since 2006.
20 FINANCIAL RESULTS
The Engineered Foams business is a bespoke service to OEMs
designing and manufacturing specific light foam solutions
utilizing several product characteristics like lightness, noise
absorption, insulation in specific proportions for enhancing
end product specifications. The products are supplied to a
broad range of end markets, such as transportation/automotive,
industrial and wind energy, sports and leisure and the construction business.
Our brand name Armaflex is synonymous with elastomeric
insulation in the equipment industry.
ADVANCED INSULATION
In the Advanced Insulation business, revenues were up by
8.9 % to EUR 355.8 million, accounting for 79 % of revenues
in financial year 2014.
The main end markets and applications for the Advanced
Insulation businesses include:
• Equipment for commercial construction and refurbishment
is the Group’s largest sector and primarily comprises nonresidential buildings (such as hospitals, hotels and offices),
where the Group’s insulation products are primarily applied
to HVAC ducts and systems.
• Equipment for residential construction and refurbishment
includes residential buildings, where insulation products are
primarily applied to heating and plumbing equipment and
small HVAC ducts and systems.
• Light and heavy industry includes the use of insulation products in plants and technical engineering facilities, primarily
for refrigeration, HVAC ducts and systems, coolants distribution and steam transportation equipment.
• Transportation includes products that are mainly used for
duct systems in trains and ships.
In order to meet the wide range of national standards, different
products are offered in different market regions.
In this context, Armacell recorded revenues of EUR 175.0
million, equaling an increase of 4.2 % compared to 2013. The
positive performance was mainly driven by growth in the U.K.,
Ireland, Switzerland and Eastern countries as well as strong
project sales in Benelux. In France, Spain and Italy, business
development was held back by weak overall economic growth.
In mid-2014, we acquired the remaining 49 % stake in our Saudi
joint venture, Armacell Zamil Middle East Co. This increased
the opportunities for Armacell in the entire Gulf region, which
offers the insulation industry significant business potential
due to factors such as the ongoing construction boom. Armacell
products were specified and installed in a number of the
region’s major construction projects, such as the Burj al Arab
and the Atlantis Hotel. This company has been fully consolidated since June 2014 and is contributing to the growth trend
in the EMEA region.
KEY FIGURES FOR ADVANCED INSULATION EMEA
EUR million
2014
2013
Revenues
175.0
168.8
Adjusted EBITDA
30.5
28.5
% of revenues
17.4 %
16.9 %
23.7
22.6
13.5 %
13.4 %
Adjusted EBITA
% of revenues
ADVANCED INSULATION AMERICAS
ADVANCED INSULATION ASIA PACIFIC/INDIA
The U.S. economy showed signs of sustainable growth in
2014, with a rise in GDP of 2.4 % originating primarily from
personal consumption, nonresidential and residential investments and exports. This growth was only partly offset by a
reduction in public spending. The latest estimates indicate that
U.S. nonresidential building increased by roughly 4.2 % during
2014. Positive trends in the private commercial and industrial
sectors were offset by weakness in the institutional sector.
In overall terms, economic growth in Asia in 2014 slowed
somewhat due differing regional trends. Growth rates in
China ultimately almost matched the previous year (expected:
7.4 %, compared to 7.8 % in 2013), with the construction sector
exhibiting a shift from government-financed initiatives toward
privately funded commercial/industrial projects. Residential
sector growth focused on general urbanization slowed, and
vacant-property levels remained high. The anticorruption
initiative continued to impact volume in the project sector.
EUR million
2014
2013
Revenues
82.1
79.3
Adjusted EBITDA
17.7
17.8
% of revenues
21.5 %
22.4 %
15.8
15.8
19.3 %
20.0 %
Adjusted EBITA
% of revenues
Against this backdrop, Armacell Advanced Insulation Asia
Pacific/India grew by 24 %, driven by clear market share
gains in most markets on account of our distributor expansion
program, an advantageous level of industrial projects and
our focus on promoting sales in strategic business areas.
Growth was also supported by the acquisition of the assets of
Armatech Co. Ltd. in Korea, the long-time distribution partner
and leading provider of engineered foams for the heating,
sanitation and air conditioning industry.
New product launches and a renewed focus on specification
generation helped Armacell’s business in Australia, growing
in an essentially flat market.
In India, Armacell gained market share through a combination
of increased project generation and conversion, coupled with a
broader product offering that leveraged the strong distribution
network. This led to a double-digit increase in revenue and
visible market share growth.
In Japan, Armacell’s strong growth continued at around 40 %
in response to an expansion of the business in the elastomeric
market, broadened contractor conversion and loyalty and
trust with the brand and proposition.
21 Advanced Insulation Americas revenues increased by 3.5 %,
reaching EUR 82 million. This was driven by a very strong year
in the U.S. retail segment due to the unusually cold winter
in 2014, appreciable growth in the U.S. contractor distributor
segments and the successful implementation of demandfueling initiatives in both North and South America. Notably,
Armacell products were the insulation of choice for the refrigeration and air conditioning systems at the majority of the
World Cup stadiums in Brazil this summer. The elastomeric
insulation material made by Armacell was installed in eight
of twelve venues.
KEY FIGURES ADVANCED INSULATION AMERICAS
ASEAN markets faced turbulence in 2014 due to political instability and government change in Thailand as well as natural
disasters in the Philippines. On the other hand, Indonesia and
Singapore showed steady growth. The Japanese economy
benefited from the deflated yen, but saw its fortunes vary
throughout the year. India faced instability in early 2014 due
to the general elections and a change in leadership. Following the changes in government, the market stabilized with
a strengthened rupee and more optimism regarding future
growth rates.
FINANCIAL RESULTS
In Brazil, construction was essentially flat during 2014
compared to 2013. Activity was stronger leading up to the
FIFA World Cup and the presidential elections late in the year.
However, there was a drop in activity during the fourth quarter
of the year, resulting from industry’s reluctance to invest prior
to the governmental elections as well as delayed investments
in oil, gas and other petrochemical projects due to ongoing
corruption scandals.
U.S. COMPONENT FOAMS
KEY FIGURES ADVANCED INSULATION APAC INDIA
EUR million
2014
2013
Revenues
98.7
78.7
Adjusted EBITDA
16.4
10.3
% of revenues
16.7 %
13.1 %
14.5
8.5
14.7 %
10.8 %
Adjusted EBITA
% of revenues
22 FINANCIAL RESULTS
ENGINEERED FOAMS
In the Engineered Foams business segment, revenues increased
by 8.9 % to EUR 94.6 million, thereby accounting for 21 % of
revenues in 2014. Both U.S. component foams and PET foams
contributed to this positive performance.
The Engineered Foams business addresses the needs of a
number of markets and applications where weight and robustness are of critical importance. For example:
• Within the energy sector, the Group primarily sells its
products for use in wind turbine equipment and applications
related to the production or transformation of energy.
• In the automotive industry, Armacell’s products are primarily
used for water shields or gaskets for water proofing and
shock absorption.
• In the sports and leisure market, applications are primarily
used in connection with parts or components that require
impact cushioning, flotation properties or lightness (such
as flotation devices, wrestling mats and helmet paddings).
• In the building and construction market, the Group offers
solutions that are primarily used in lightweight construction,
such as prefabricated light structures for terraces or pedestrian bridges.
• For transportation end markets, products primarily include
light insulating materials with thermal and acoustic properties used in composite panels in trains, trucks and trailers.
• In addition, the Group supplies products for other applications
and end markets, such as turfs and floor underlayment.
Overall, revenues in the component foams segment grew by
5 % despite a demanding economic and competitive environment, beating the growth rate seen in 2013. Military spending
in the U.S. remained severely constrained. On a positive note,
the automotive market exceeded projections, helping to offset
certain negative factors. In 2014, Armacell successfully
combined its polyolefins and elastomers activities into one
sales function and started presenting itself as a one-faceto-the-customer solutions provider.
PET
Armacell is currently the key supplier to leading wind-turbine
builders. In 2014, the wind market recovered with an increase
of 22 % after a 20 % reduction in installed capacity from
2012 to 2013. In terms of regions, the U.S. market recovered
completely after a major drop in 2013 due to non-renewal
of the production tax credit (PTC). Onshore growth in Europe
stagnated, while China clearly stayed the leading region with
close to 50 % of globally installed volume. The global offshore
and emerging markets will both grow continually, yet remain
a fraction of the onshore markets in Europe, the U.S. and
China. Strict cost control will also continue to be an important
factor for the wind market on the path to achieving grid parity
as compared to more traditional energy sources (coal and
nuclear power).
Revenues in the PET foams segment increased strongly
by 21.8 % in 2014 compared to 2013, with new developments
in the light truck industry as well as in some construction
projects. To counter continuing price pressure, Armacell is
currently introducing its green foam, produced as part of
a 100 % recycled PET stream.
KEY FIGURES ENGINEERED FOAMS
EUR million
2014
2013
Revenues
94.6
86.9
Adjusted EBITDA
22.0
19.3
% of revenues
23.3 %
22.2 %
Adjusted EBITA
% of revenues
17.7
15.7
18.7 %
18.1 %
GROUP FINANCIAL PERFORMANCE
The year 2014 was a successful one for Armacell. The profitable growth in both business segments and across all regions
underlines the significance of the consistent international
growth strategy. As a world leader in flexible insulation foams
for the equipment insulation market and a leading provider
of engineered foams, Armacell is well positioned to capture
the growth potential in each of its markets.
REVENUE AND PROFIT
INVESTMENTS AND CASH FLOW
Armacell continued to generate strong cash flow in 2014.
In the reporting period, the company’s cash flow from recurring operating activities amounted to EUR 56.3 million. The cash
flow from investing activities amounted to EUR -23.1 million
and was primarily related to investment in property, plant and
equipment of EUR 19 million, focusing on capacity extension.
Furthermore, process and cost improvement, acquisitions and
development of intangibles amounted to EUR 1.6 million, while
acquisition of subsidiaries required EUR 3.2 million.
Armacell’s recurring cash-flow conversion ratio reached
37.2 % in 2014.
Net indebtedness of Armacell Group was EUR -322 million
as of December 31, 2014, an increase of EUR 26 million
compared to the previous year. The increase is mainly due
to U.S. dollar currency translation.
23 In 2014, adjusted EBITDA increased by 9.6 % to EUR 71.2 million,
or 15.7 % of revenues. Adjusted EBITA improved by 8.7 % to
EUR 56.1 million. Despite a competitive environment, Armacell
maintained an EBITA ratio relative to revenues of 12.4 % due
to continued efforts to improve cost performance.
At the end of 2014, total assets amounted to EUR 673 million,
an increase of EUR 50 million compared to 2013. This figure
reflects an increase in intangible and tangible assets resulting
from capital expenditure focusing on process and cost improvements. Furthermore, total assets and liabilities increased
due to the acquisition of the remaining 49 % shares in Armacell
Zamil Middle East Company (Saudi Arabia) in June 2014. Trade
receivables increased as a result of higher business activity
in the fourth quarter 2014 as compared to the fourth quarter
2013.
FINANCIAL RESULTS
Against the backdrop of a global economic environment that
remained challenging, Armacell increased its revenue by
8.8 % year on year to EUR 452.2 million in financial year 2014.
Organic growth contributed 7.3 %, and an additional 1.5 % of
growth was derived from the acquisition of the remaining 49 %
share in Armacell Zamil Middle East Company (Saudi Arabia)
in June 2014. Considering the impact of currency translation,
which marginally reduced figures by 0.4 %, our organic growth
at constant currency reached 9.2 %. The Group achieved a
gross margin of 29.2 %.
BALANCE SHEET
OUTLOOK
The basis for the long-term success of Armacell Group is its
strong market position and the company’s global footprint.
The global brand Armaflex and its product portfolio in particular safeguard the Group’s technology leadership and underline
its status as a supplier of premium insulation solutions by
maintaining high levels of R&D spending.
Global GDP is expected to continue growing by 3.5 % in 2015
and 3.7 % in 2016. Three main factors characterize the overall
development: oil prices remaining low, modest growth in
demand and huge divergences between the regions.
24 FINANCIAL RESULTS
Among advanced economies, the U.S. and U.K. are forecast
to achieve growth of between 2 % and 3 %, while growth in the
eurozone is expected to increase further in 2015 and 2016
to between 1.2 % and 1.4 %.
Growth in emerging countries will vary from region to region,
with sustained high growth in China, ongoing strong recovery in
India and uncertainties in South America, Russia and Ukraine
due to the economic crisis as well as the unstable geopolitical
situation in Eastern Europe.
Although the environment remains challenging in Europe,
Armacell forecasts a continued increase in revenue and EBITDA
in the coming years due to the increasing diversification of
sales, the enlargement of addressable markets and continued
cost-improvement initiatives. For 2015, we expect revenues
and EBITDA to rise further. The Management Board has initiated
suitable measures to achieve these targets.
We anticipate raw-material prices to remain fairly stable in
2015. The further development of our global continuous-improvement approach throughout the entire Group in the form
of detailed productivity action plans will further enhance
manufacturing performance. Overhead costs are expected to
increase moderately due to the reinforcement and professionalization of structures necessary to sustain growth, especially
in emerging countries.
The strengthening of most of the currencies against the euro,
if continued, should further support Armacell’s positive growth.
ARMACELL OPPORTUNITIES AND CHALLENGES
Armacell’s core competency is its know how and technology
in working with flexible foam products. In its core insulation
business it continues to displace traditional glass fiblre because
it is able to provide a superior product at a lower total installed
cost. The product differentiation comes from the flexibility of
the material which makes it more convenient to install around
equipment and yet maintains its insulation, absorption and
safety characteristics at the highest standard.
Environmental concerns are also driving CO2 emission regulation for the transportation industry pushing OEMs to increasingly reduce the weight of the vehicles, creating need for bespoke substitution of materials within immediate components.
Armacell products can offer lighter materials with similar
shock and noise absorption characteristics to other materials.
Armacell continues to work with OEMs to build bespoke solutions for their needs. This has been a strong growth driver
for the business and is likely to further pick up.
Combination of light weight and absorption characteristics
is also driving growth in energy markets where Armacell is
a supplier of choice for Wind blades.
Besides growth opportunities driven by environmental issues,
further growth potential for Armacell’s insulation business
has been identified in specific industries, especially in emerging
countries. The Engineered Systems business unit – which is
Armacell will further strengthen measures aimed at pursuing
organic growth, both through geographical expansion and
product diversification as well as market enlargement inside
the core insulation business. As a result, Armacell continued
to pursue its international growth strategy in early 2015. With
the acquisition of the Turkish insulation materials manufacturer Das Yalıtım Sanayi ve Ticaret Anonim Şirketi (OneFlex),
Armacell significantly strengthened its market position in
Turkey and expanded its geographic footprint into other countries across the Middle East, Africa and Southeastern Europe.
The acquisition of the business of Industrial Thermo Polymers
Limited (ITP) in Canada, combined with existing operations
in U.S., positions Armacell as a leading manufacturer of polyethylene insulation foam on the North American continent.
In the field of research and development, Armacell intends
to strengthen its position as a technology leader and identify
cross-regional opportunities for innovative products and technologies. Armacell’s research and development capabilities
plus its long-standing industry experience ensure complex
formula composition, high-quality products and a steadily
growing product portfolio for specific demands in both established markets and in new business fields. The Group seeks to
improve its cost position by developing new recipes, reducing
price dependence and improving processes.
These efforts will be accompanied by reinforcing our position
as the best in class for manufacturing costs. Armacell will
achieve higher efficiency by reducing complexity and leveraging the current fixed cost base. The opportunities outlined
above are associated with the same uncertainties that are
generally inherent to the estimates forming the basis of
corporate strategic planning. However, all described actions
together should have a positive influence on the earnings
situation and financial position of Armacell.
25 Insulation is an effective and cost-efficient way to improve
energy efficiency in industrial, commercial and residential
infrastructure. Armacell’s insulation materials are designed
for both new and existing installations. As a result, Armacell
was able to grow faster than the market in recent years and
is expecting to further benefit from this trend. With changing
energy and regulatory policies, there are opportunities to
increase market share across the entire insulation market.
Armaflex is now the world’s best-known brand for flexible
technical insulation, and the brand name has become synonymous with the building materials industry.
The Group also plans to further expand the business with
thermoplastic polymer applications. In addition to ongoing
measures aimed at exploring and enlarging its customer base
in the wind-turbine market, Armacell will focus in particular
on the development of its other customer base, most notably
in the automotive, transportation and construction sectors.
Expansion will also continue with new applications.
FINANCIAL RESULTS
Growing public awareness of climate change has triggered
far-reaching political decisions in favor of increasing the use
of renewable energies and the avoidance of energy waste in
the OECD countries and a number of emerging markets. For
example, the European Union has committed itself to reducing
CO2 emissions by 80 % to 95 % by 2050, as compared to 1990
levels. Our management views the increasing environmental
awareness as a long-lasting trend with a strong positive
impact on Armacell’s business.
more specifically dedicated to the oil and gas sector, a key
growth market for the Group – was extremely successful in
2014. This development, combined with our products’ ability to
set new standards in the industry, will capitalize on reference
projects to strongly position Armacell in the industry.
IMPRINT
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