Preliminary figures show 2011 growth at Delticom

Online tyre dealer Delticom reports that 2011 was “again a successful year.” The German-based company’s preliminary figures for the recently concluded financial year show a 14.4 per cent increase in revenues, to 380.0 million. During the 12 month period EBIT grew 9.6 per cent to 52.2 million and earnings per share were up 8.4 per cent to 2.99 euros.

Cast your mind back to the winter of 2010 and remember how finger-numbingly cold it was. The abundance of snow and ice across our entire region was reflected in what Delticom dryly calls “superior business performance for the European tyre trade.” In other words, winter tyres were a popular purchase. The end of 2011 has been comparatively mild and not very conducive to tyre distress purchases. Delticom notes that industry opinions believe winter tyre sales are “substantially below” prior-year levels. Despite this, the company’s new warehouse enabled it to offer customers “attractive prices” throughout the quarter, and therefore Delticom’s fourth quarter revenues increased 12.1 per cent to 182.3 million euros.

Prices for winter tyres shot up at the end of 2010, a reaction to widespread market scarcity. In contrast, in the fourth quarter of 2011 prices developed in what Delticom calls a “more orderly fashion” and along the lines expected by the online tyre dealer. Consequently, Delticom’s gross margin retracted from 30.6 per cent in Q4 2010 to 28.4 per cent in the final quarter of last year. The fourth quarter 2011 margin was 13.2 per cent, two per cent lower than a year earlier.

Fiscal year 2011 revenues

Delticom says selling prices developed favourably over the course of the year, while the mix was stable and volumes were fairly satisfactory. As expected, the company’s E-Commerce division accounted for most of the company’s 480 million euro revenues; 455.6 million revenues were earned in this sector, a 12.9 per cent year-on-year increase. Although Delticom’s Wholesale division still accounts for only a small proportion of revenues, these increased 53.4 per cent year-on-year to 24.4 million euros.

Although Delticom says it was able to “cushion” the effect of rising costs – the company reports the cost of goods sold increased 16.3 per cent in the reporting period to 349.1 million euros – to a good extent through price increases, full-year gross margin declined 1.2 per cent to 27.3 per cent, primarily due to the closing winter quarter.

Outlook

Quoting industry experts, Delticom shares that rising unemployment in Europe and austerity measures are expected to further depress consumer sentiment, an occurrence the experts believe will also affect the European tyre trade. Independent of such short-term developments, Delticom notes that the share of tyre market sales made on line “continues to be comparatively low”, although it concedes that increasing numbers of drivers are using the internet to source tyres. Therefore, assuming a scenario where the market and weather do not improve over 2011, Delticom management regards a revenue growth of 10 per cent as achievable. Assuming margins at prior-year levels, earnings should grow in line with revenues.

Delticom’s full 2011 fiscal year report will be published on 22 March 2012.