2008 Registration Document - Rexel

In the year 2008, sales in North America amounted to€4,404.8 million, an 8.3% decrease compared to 2007.This decrease mainly resulted from the €315.9 millionunfavorable evolution of the US and Canadian dollarsagainst the Euro. On a constant basis and same number ofworking days, sales decreased by 2.2% in 2008 comparedto 2007. In the fourth quarter of 2008, sales decreased by7.9% on a constant basis and same number of workingdays, impacted by the economic downturn.In the United States, sales amounted to €3,401.5 million inthe year 2008, a 3.9% decrease on a constant basis andsame number of working days. The downturn of residentialconstruction continued while commercial end-marketsweakened and some industrial segments continued slowingdown in the fourth quarter of 2008. Overall, the bankingand credit crisis led to cancellations or postponementsof projects. Despite the economic environment, Rexelimplemented initiatives which contributed to sales growthin some governmental/institutional projects, and alsospecific industrial end-markets, such as in wastewatertreatment plants. Sales decreased by 11.5% on a constantbasis and same number of working days in the fourthquarter of 2008, reflecting the increased slowdown of theoverall economics in the United States.In Canada, sales amounted to €1,003.3 million in theyear 2008, a 4.2% increase on a constant basis andsame number of working days. Sales were affected by asoftening economy, in particular in the industrial sector,notably in Ontario and Quebec, but also in the forestryoperations in British Columbia. Sales teams were ableto refocus on the growing sectors at regional level suchas oil sands projects in Alberta and institutional andcommercial projects in Eastern Canada and Ontario. Inthe fourth quarter of 2008, sales thus increased by 7.1%on a constant basis and same number of working days,confirming the trend observed in the third quarter and thesuccess of the initiatives implemented.In the year 2008, gross profit amounted to €946.8 million, a9.3% decrease compared to 2007, mainly due to changesin exchange rates against the Euro. On a constant basis,Adjusted gross margin decreased by 10 basis points at21.8% of sales compared to 2007. This evolution is notablythe result of the favorable non-recurring effect in the firstquarter of 2007. Excluding this effect, Adjusted grossmargin posted an estimated growth of 10 basis points.This improvement came from a better control in theimplementation of Group pricing policies and improvementin purchasing terms. In the fourth quarter of 2008, Adjustedgross margin decreased by 10 basis points compared tothe fourth quarter of 2007 on a constant basis, from 21.8%in the fourth quarter of 2007 to 21.7% in the fourth quarterof 2008, due to market pressure and increased direct salesmix but demonstrating the Rexel Group’s ability to protectits margin in a situation of significant sales downturn.Distribution and administrative expenses amountedto €735.8 million in the year 2008, i.e. 16.7% of sales,compared to 16.8% in 2007. On a constant basis, Adjusteddistribution and administrative expenses decreased by2.7%. Adjusted personnel costs decreased by 3.6% on aconstant basis due to staff reductions started in 2007 andcontinued in the year 2008 in order to adapt to currentsales trends. Headcount was reduced from 9,707 atDecember 31, 2007 to 8,817 at December 31, 2008 on aconstant basis, i.e. a 9.2% decrease. Adjusted distributionand administrative expenses in the fourth quarter of 2008were reduced by 6.7% on a constant basis compared tothe fourth quarter of 2007.Operating income before other income and other expenses(EBITA) thus amounted to €211.0 million in the year 2008,a 10.4% decrease compared to 2007, more than half of itdue to changes in foreign exchange rates. On a constantbasis and excluding the effect of non-recurring items inthe first quarter of 2007, Adjusted EBITA posted a 2.5%growth, i.e. a 30 basis improvement as a percentage ofsales, reflecting the Rexel Group’s ability to maintain itsgross margin in a declining environment and to reduceits distribution and administrative expenses. In the fourthquarter of 2008, Adjusted EBITA margin improved by20 basis points compared to the fourth quarter of 2007 ona constant basis to 5.1%.REXEL 2008 | PAGE 77