SOLA International expects the global lens market to grow by only 2-3 percent this year, with relatively constant volumes in mature markets of North America, Europe, Japan and Australia. Emerging markets like China and India should provide double-digit growth in units but average selling prices will probably decline, resulting in a similar growth of 2-3 percent in value.
In general, Jeremy Bishop, CEO of the group, sees a polarization in the market between the low-value commodity segment and the kinds of high-value range of products and services that are offered by its own prescription laboratories.
In this context, SOLA is anticipating an increase in revenues of between 4 and 6 percent in its overall sales during the 12-month financial year that began on May 1, not including possible acquisitions. Sales should increase by that range in North America and Europe on a currency-neutral basis and by 3-5 percent in the rest of the world. The management is predicting a gross margin of 40-42 percent and an operating margin (Ebit) of about 14 percent, excluding anticipated restructuring costs of $3 million, leading to a net profit of $45-47 million for the 2004/05 financial year.
For the financial year ended last March 31, SOLA reports a net loss of $13.48 million against earnings of $3.97 million in the previous one. However, the company's ?adjusted? results, which exclude restructuring and asset impairment costs of $16.7 million in 2003/04, show net profit up to $37.0 million from $30.1 million and an improvement in the Ebit margin from 11.9 to 13.9 percent of sales. The gross margin declined from 41.4 to 40.6 percent. Sales increased by 15.5 percent to $562.7 million, or by 6.6 percent in local currencies, rising by 9.1 percent in North America, 6.2 percent in Europe and 2.1 percent in the rest of the world.
In the 4th quarter, reported net income fell to $4.65 million from $8.03 million, but adjusted net income increased to $14.4 million from $12.8 million. The adjusted operating margin increased to 16.7 percent from 14.8 percent in the year-ago period, while the margin before amortization (Ebitda) rose to 19.9 percent from 18.1 percent. Net earnings would have been higher had it not been for a higher applicable tax rate of 42.8 percent due to increased profitability in high-tax countries such as Italy, France and Brazil.
Total sales rose by 15.8 percent to $178.2 million in the quarter. On a constant currency basis, they increased by 6.0 percent, scoring better than expected. North America was up 6.0 percent, Europe 5.8 percent and the rest of the world 6.5 percent. In Europe sales were particularly strong in France, Italy, Portugal, Germany and the UK. A modest recovery was recorded in Japan and Germany.
The growth drivers were progressive, high-index and photochromic lenses. Advanced lens coatings increased in every region of the world. SOLA has started to test out consumer-oriented advertising for its Teflon EasyCare coatings in Europe. The program may be extended to North America were production capacities have been expanded.