From the Sector

• Currency-neutral sales up 4%, despite more than € 300 million negative impact from macroeconomic constraints
• Markets representing more than 85% of the business grow 14% overall
• Gross margin down 1.5pp to 50.3% reflecting significantly higher supply chain costs
• Operating profit reaches € 392 million
• Net income from continuing operations amounts to € 360 million
• FY 2022 outlook reflects double-digit growth during the second half of the year

“Our Western markets continued to show strong momentum in the second quarter amid heightened macroeconomic uncertainty. With Asia-Pacific returning to growth, markets combined representing more than 85% of our business grew at a double-digit rate,” said adidas CEO Kasper Rorsted. “With sports back at center stage this summer, revenues in our strategic growth categories Football, Running and Outdoor all increased by double digits. However, the macroeconomic environment, particularly in China, remains challenging. The recovery in this market is – due to continued covid-19-related restrictions – slower than expected. And we have to take into account a potential slowdown in consumer spending in all other markets for the remainder of the year.”

Currency-neutral revenues increase 4% despite macroeconomic constraints
In the second quarter, currency-neutral revenues increased 4% as adidas continued to see strong momentum in Western markets. This growth was achieved despite continued challenges on both supply and demand. Supply chain constraints as a result of last year’s lockdowns in Vietnam reduced top-line growth by around € 200 million in Q2 2022. In addition, the company’s decision to suspend its operations in Russia reduced revenues by more than € 100 million during the quarter. Continued covid-19-related lockdowns in Greater China also weighed on the top-line development in Q2. From a channel perspective, the top-line increase was to a similar extent driven by the company’s own direct-to-consumer (DTC) activities as well as increases in wholesale. Within DTC, e-commerce, which now represents more than 20% of the company’s total business, showed double-digit growth reflecting strong product sell-through. From a category perspective, revenue development was strongest in the company’s strategic growth categories Football, Running and Outdoor, which all grew at strong double-digit rates. In euro terms, revenues grew 10% to € 5.596 billion in the second quarter (2021: € 5.077 billion).

Strong demand in Western markets
Revenue growth in the second quarter was driven by Western markets despite last year’s lockdowns in Vietnam still reducing sales, particularly in EMEA and North America, by
€ 200 million in total. In addition, the top-line development in EMEA was also impacted by the loss of revenue in Russia/CIS of more than € 100 million. Nevertheless, currency-neutral sales grew 7% in the region. Revenues in North America increased 21% during the quarter driven by growth of more than 20% in both DTC and wholesale. Revenues in Latin America increased 37%, while Asia-Pacific returned to growth. Currency-neutral revenues increased 3% in this market despite still being impacted by limited tourism activity in the region. In contrast, the company continued to face a challenging market environment in Greater China, mainly related to the continued broad-based covid-19-related restrictions. As a result, currency-neutral revenues in the market declined 35% during the three-months period, in line with previous expectations. Excluding Greater China, currency-neutral revenues in the company’s other markets combined grew 14% in Q2.

Operating profit of € 392 million reflects operating margin of 7.0%
The company’s gross margin declined 1.5 percentage points to 50.3% (2021: 51.8%). Significantly higher supply chain costs and a less favorable market mix due to the significant sales decline in Greater China weighed on the gross margin development. This could only be partly offset by a higher share of full price sales, first price increases and the benefits from currency fluctuations. Other operating expenses were up 19% to € 2.501 billion (2021: € 2.107 billion). As a percentage of sales, other operating expenses increased 3.2 percentage points to 44.7% (2021: 41.5%). Marketing and point-of-sale expenses grew 8% to € 663 million (2021: € 616 million). The company continued to prioritize investments into the launch of new products such as adidas’ new Sportswear collection, the next iteration of its successful Supernova running franchise and first drops related to the Gucci collaboration as well as campaigns around major events like ‘Run for the Oceans.’ As a percentage of sales, marketing and point-of-sale expenses were down 0.3 percentage points to 11.8% (2021: 12.1%). Operating overhead expenses increased by 23% to a level of € 1.838 billion (2021:
€ 1.492 billion). This increase was driven by adidas’ continuous investments into DTC, its digital capabilities and the company’s logistics infrastructure as well as by unfavorable currency fluctuations. As a percentage of sales, operating overhead expenses increased 3.5 percentage points to 32.8% (2021: 29.4%). The company’s operating profit reached a level of € 392 million (2021: € 543 million), resulting in an operating margin of 7.0% (2021: 10.7%).

Net income from continuing operations reaches € 360 million
The company’s net income from continuing operations slightly declined to € 360 million (2021: € 387 million). This result was supported by a one-time tax benefit of more than € 100 million due to the reversal of a prior year provision. Consequently, basic EPS from continuing operations reached € 1.88 (2021: € 1.93) during the quarter.

Currency-neutral revenues on prior year level in the first half of 2022
In the first half of 2022, currency-neutral revenues were flat versus the prior year period. In euro terms, revenues grew 5% to € 10.897 billion in the first six months of 2022 (2021:
€ 10.345 billion). The company’s gross margin declined 1.7 percentage points to 50.1% (2021: 51.8%) during the first half of the year. While price increases as well as positive exchange rate effects benefited the gross margin, these developments were more than offset by the less favorable market mix and significantly higher supply chain costs. Other operating expenses increased to € 4.759 billion (2021: € 4.154 billion) in the first half of the year and were up 3.5 percentage points to 43.7% (2021: 40.2%) as a percentage of sales. adidas generated an operating profit of € 828 million (2021: € 1.248 billion) during the first six months of the year, resulting in an operating margin of 7.6% (2021: 12.1%). Net income from continuing operations reached € 671 million, reflecting a decline of € 219 million compared to the prior year level (2021: € 890 million). Accordingly, basic earnings per share from continuing operations declined to € 3.47 (2021: € 4.52).

Average operating working capital as a percentage of sales slightly decreases
Inventories increased 35% to € 5.483 billion (2021: € 4.054 billion) at June 30, 2022 in anticipation of strong revenue growth during the second half of the year. Longer lead times as well as the challenging market environment in Greater China also contributed to the increase. On a currency-neutral basis, inventories were up 28%. Operating working capital increased 23% to € 5.191 billion (2021: € 4.213 billion). On a currency-neutral basis, operating working capital was up 14%. Average operating working capital as a percentage of sales decreased 0.4 percentage points to 21.0% (2021: 21.4%), reflecting an overproportional increase in accounts payable due to higher sourcing volumes and product costs.

Adjusted net borrowings at € 5.301 billion
Adjusted net borrowings amounted to € 5.301 billion at June 30, 2022, representing a year-over-year increase of € 2.155 billion (June 30, 2021: € 3.146 billion). This development was mainly due to the significant decrease in cash and cash equivalents.

FY 2022 outlook reflects double-digit growth during the second half of the year
On July 26, adidas adjusted its guidance for FY 2022 due to the slower-than-expected recovery in Greater China since the start of the third quarter resulting from continued widespread covid-19-related restrictions. adidas now expects currency-neutral revenues for the total company to grow at a mid- to high-single-digit rate in 2022 (previously: at the lower end of the 11% to 13% range), reflecting a double-digit decline in Greater China (previously: significant decline). While so far the company did not experience a meaningful slowdown in the sell-through of its products or significant cancellations of wholesale orders in any market other than Greater China, the adjusted guidance also accounts for a potential slowdown of consumer spending in those markets during the second half of the year as a result of the more challenging macroeconomic conditions. Therefore, growth in EMEA is now expected to be in the low teens (previously: mid-teens growth), while revenues in Asia-Pacific are projected to grow at a high-single-digit rate (previously: mid-teens growth). Despite the more conservative view on the development of consumer spending in the second half of the year, adidas has increased its forecasts for North America and Latin America reflecting the strong momentum the brand is enjoying in these markets. In North America, currency-neutral revenues are now expected to increase in the high teens. Sales in Latin America are projected to grow between 30% and 40% (both previously: mid- to high-teens growth).   

Due to the less favorable market mix and the impacts from initiatives to clear excess inventories in Greater China until the end of the year, gross margin is now expected to reach a level of around 49.0% (previously: around 50.7%) in 2022. Consequently, the company’s operating margin is now forecast to be around 7.0% (previously: around 9.4%) and net income from continuing operations is expected to reach a level of around € 1.3 billion (previously: at the lower end of the € 1.8 billion to € 1.9 billion range).

adidas is adjusting its outlook for the financial year 2022. While second quarter results were somewhat ahead of expectations reflecting continued strong momentum in Western markets and a return to growth in Asia-Pacific, the company has been experiencing a slower-than-expected recovery in its business in Greater China since the start of the third quarter. Previously, the company had assumed that in absence of any major lockdowns as of Q3, currency-neutral revenues in the region would be flat during the second half of the year versus the prior year level. However, given the continued widespread covid-19-related restrictions, adidas now expects revenues in Greater China to decline at a double-digit rate during the remainder of the year.

As a result, adidas now expects currency-neutral revenues for the total company to grow at a mid- to high-single-digit rate in 2022 (previously: at the lower end of the 11% – 13% range). Because of the less favorable market mix due to lower-than-expected revenues in Greater China as well as the impact from initiatives to clear excess inventories in this market until the end of the year, the company’s gross margin is now expected to be around 49.0% in 2022 (previously: around 50.7%). Consequently, the company’s operating margin is now forecasted to be around 7.0% in 2022 (previously: around 9.4%) and net income from continuing operations is expected to reach a level of around € 1.3 billion (previously: at the lower end of the € 1.8 billion – € 1.9 billion range).

So far, the company did not experience a meaningful slowdown in the sell-through of its products or significant cancellations of wholesale orders in any other market. Nevertheless, the adjusted guidance also accounts for a potential slowdown of consumer spending in these markets during the second half of the year as a result of the more challenging macroeconomic conditions.

Despite these headwinds, adidas continues to expect double-digit revenue growth during the second half of the year for the total company. In addition to easier prior year comparables, the acceleration will be driven by adidas’ strong product pipeline, the restocking opportunity with its wholesale customers given unconstrained supply as well as the support from major sporting events.

Based on preliminary numbers, adidas’ currency-neutral revenues grew 4% during the second quarter. This increase was driven by strong double-digit growth in North America and Latin America, high-single-digit growth in EMEA (also double-digit growth excluding negative Russia/CIS impact) as well as a return to growth in Asia-Pacific. In euro terms, sales increased 10% to € 5.596 billion. The company’s gross margin declined 1.5 percentage points to a level of 50.3% and operating margin reached 7.0% during the second quarter (2021: 10.7%). Net income from continuing operations was € 360 million in Q2 (2021: € 387 million) supported by a one-time tax benefit of more than € 100 million due to the reversal of a prior year provision.

The partnership will aim at eliminating hazardous Potassium Permanganate Spray and most manual processes in denim finishing, while reducing Greenhouse Gas emissions, water and chemical use in the process

Hong Kong based Epic Group, a leading garment manufacturer for global brands today announced its strategic partnership with CleanKore, a denim innovation and patent licensing company. This partnership aims at scaling the CleanKore patented yarn dyeing technology that provides numerous sustainability benefits for both the denim mill and garment manufacturer.

CleanKore patented technology changes the chemistry and the process used to dyeing yarns at the denim mills by keeping intact the white core of the yarn and only dyeing the surface. This technology significantly reduces water, chemicals and process time in the denim garment finishing stage.

Denim garment finishing often involves onerous manual processes such as handsanding and hand whiskering, spraying of harmful Potassium Permanganate (PP) (done by heavily protective equipment donned personnel), and multiple washing cycles. CleanKore technology coupled with lasers enable elimination of the PP spray process, significantly improving health and wellbeing of apparel workers, as well as emissions of harmful chemicals. Manual processes are eliminated in most styles and significantly reduced in others.

CleanKore technology also enables the reduction of wash cycles – reducing water, chemical use and process time, adding to the sustainability credentials of the end products. The products currently tested by Epic Group and CleanKore demonstrate up to 44% of water savings in garment finishing and up to 60% of energy savings in the fabric dyeing stage, along with the elimination of PP spray.

Through their partnership, Epic Group and CleanKore are planning to rapidly scale up the adoption of this technology in partnership with Epic Group’s customer base. In the first year, the partnership plans to reach over 4 million pairs of denim and working towards a scale of 15 - 20 million pairs of denim per annum in the next 3 years, converting a large portion of Epic Group’s denim production to CleanKore technology.

Fiery®, the digital front end (DFE) and workflow business of EFI, announced that it has acquired CADlink® Technology Corp., a software company that delivers solutions for the high growth areas of digital direct-to-garment (DTG) and direct-to-film (DTF) printing; digital cutting and engraving; digital wide-format print; and vehicle wraps. CADlink’s products address increasingly important customer needs for customization and personalization, and for reducing the time spent moving work from design to production.

CADlink is a global software company that serves markets that require unique workflows involving different types of production devices. CADlink’s products are recognized leaders in design, RIP and workflow technology, and are sold globally to customers through OEM partners and an extensive network of resellers. CADlink’s products, partners and channels are a natural complement to what the Fiery business delivers for its global commercial, display graphics and industrial printing customer base.  

The CADlink software portfolio includes proven, advanced solutions that support the development and growth of e-commerce for custom-manufactured products.

“Becoming part of the EFI Fiery business will extend the geographic reach for our products and enhance our ability to support and drive greater value to customers and partners worldwide,” said CADlink Co-founder and CEO Gordon Reynen.

Europe has a 7-7.5-million-ton waste problem, of which only 30-35% is collected today. The ReHubs initiative launched in 2020 has now completed a Techno Economic Master Study (TES) and it sheds light on key figures and options to collaborate to solve the European waste problem.

In two and a half year all EU member states are obliged to separately collect textile waste. Currently there are no large-scaled plans to use that waste.  The largest portion of the waste (around 85%) comes from households.

The ReHubs initiative brings together key European and world players to solve the textile waste problem by transforming “waste” into a resource and to boost textile circular business models at large scale. The completed TES has accessed critical information on solving the European waste problem. It is estimated that to reach a collection rate from 18 to 26 percent by 2030, 7 billion euro will be needed. Once matured and scaled, the textile recycling industry could become a profitable industry with a total market size of 6-8 billion € and around 15,000 direct new jobs by 2030. As a first step the ReHubs Initiative announces different actions forwards, including projects on this pathway, which one is to transform textile waste into feedstock.

TEXAID has been supporting ReHubs since the start and contributed significantly involved to the Business Council and the Steering Committee of the initiative. As strongly committed industry leader TEXAID is taking the lead on the project to transform textile waste into feedstock for recycling processes. In order to handle the increasing quantities of post-consumer textile waste a massive scale up of sorting and preparation for recycling of used textiles is needed. TEXAID is committed to lead the work on developing new technologies and building up additional capacities for the handling and preparing of textile waste for textile recycling in Europe. In a first phase this involves the built up of a new sorting and pre-processing facility with the capacity of 50’00 tons p.a. by 2024.

Due to the impact of the war in Ukraine on the automotive industry and vehicle production as well as of rising inflation, Autoneum is adjusting its corporate outlook for the 2022 financial year. The market recovery will be delayed by current developments.

Since the outbreak of war in Ukraine, new bottlenecks in global supply and logistics chains have been impacting vehicle manufacturer production volumes and thus slowing the revenue and earnings development of the automotive supply industry, especially in Europe. Current developments are accompanied by accelerated inflation and significant price increases on the commodities markets, which have been further exacerbated by the war. These are felt at Autoneum through rising material, energy and transport costs. With regard to the rising costs, automotive manufacturers and suppliers are now required to ensure a fair burden sharing as partners.

In addition, renewed coronavirus-related lockdowns in China are delaying growth in Asia. According to the revised market forecasts1), global automobile production is expected to reach 80.4 million units in 2022, which represents an increase of 4.1% compared to 2021. Growth will thus be significantly lower than was still expected in mid-February.

Autoneum will do its utmost to minimize the impact on the Group. Despite the present challenges, the strategy will continue to be consistently implemented with a focus on innovative and sustainable technologies for growing markets of the future.

Based on current developments and knowledge, Autoneum has updated the forecasts that it presented at the Media Conference, which had not yet included the impacts of the war as outlined above. Autoneum continues to expect revenue to develop in line with the market. For the first half of the year, the Company expects an EBIT margin at break-even level. On the basis of the ongoing collaborative discussions with customers to participate in the sharing of the sharply increased energy and material costs, Autoneum anticipates an improvement in the EBIT margin to 2.0 to 3.0% (previously: 4.0 to 5.0%) for the full year 2022. Free cash flow for 2022 is expected to be in the mid to high double-digit million range.

Autoneum is very well positioned for the transformation of the automotive industry towards e-mobility and sustainability. Our product portfolio is suitable for all drive types, whether internal combustion, hybrid or pure electric vehicles. The medium-term forecasts that Autoneum published in November 2021 remain unchanged positive. The timing of the market recovery will be delayed by current events and will also depend on further geopolitical developments.

adidas drops an all-new sportswear capsule. The collection is inspired by the way the next generation continues to turn tradition on its head with how they move through the world, opting for a fresh comfort-first mindset and rejecting old-world pressures.

To get closer to this mindset, adidas reached out to uncover more about the rise of the cosy fit. Nine in ten believe the clothes they wear impact how mentally comfortable they feel, and over three quarters say they are more likely to thrive in multiple aspects of life when rooted in a true feeling of comfort. With this in mind, adidas’ sportswear capsule is built for next-level comfort both at home and on the streets with a full collection of casual, stylish fits for both men and women.

Fronted by a raft of next generation trailblazers, including global award-winning actress Hoyeon, US gymnast sensation Nia Dennis, American football superstar Tua Tagavailoa, and Chinese national sprinting champion Xie Zhenye, the campaign reveals how choosing comfort in mind and body has given them confidence, more internal headspace, and the ability to embrace any challenges within their journey of progress.

Key looks include:

• Women’s Rib Dress: A straight minimalist silhouette in block-colour black, which can be worn individually or layered for a more expressive look. Features a twister racerback detail, crew neck cut, and side split hem for an added edge
• Men’s Classic Tee paired with Woven Pants and Coach Jacket: Paying homage to sport heritage, the woven pants and coach jacket offer an oversized and relaxed fit, in a neutral but bold colour pairing. The ribbed crewneck tee complements the look with a stylish mixture of textures
• Women’s Oversized Hoodie with Rib Crop Top and Biker Shorts: A muted pastel toned top designed with a cropped hem and matching shorts in soft rib knit material, creating an effortless fresh but cosy look which can be easily layered with a slouchy oversized hoodie
• Men’s Fleece Hoodie layered over Oversized Tee and Fleece Shorts: Relaxed fit basic tee with a vibrant red block logo paired with a boxy hooded jumper which boasts an oversized aesthetic. Complemented by baggy fleece-lined shorts ensures comfort through every move and moment

Baldwin Technology Company Inc. has announced the installation of its TexCoat G4 finishing system at Graniteville Specialty Fabrics, a recognized leader in the production of specialty coatings and coated fabrics. With Baldwin’s cost-efficient and highly sustainable spray finishing technology, Graniteville Specialty Fabrics has been able to increase production efficiency, and minimize chemical and water waste.

Based in Graniteville, South Carolina, Graniteville Specialty Fabrics produces coatings and coated fabrics that are resistant to water, fire, UV and weather for the military, marine and tent markets, and others. The company excels in developing and sourcing custom coatings, and creating specialized technical solutions to meet specific, and often unique, end-user requirements. The installation of Baldwin’s TexCoat G4 is part of a major facility upgrade to maximize production efficiency and capacity in the durable water-repellent finishing and coating line to meet growing customer demand for advanced engineered products.

With extensive sustainability benefits, unprecedented tracking and process control, and Industry 4.0 integration, the TexCoat G4 provides consistently high-quality fabric finishing, with no chemistry waste, as well as minimal water and energy consumption. This system utilizes non-contact precision-spray technology, ensuring precise finishing coverage with the exact amount of chemistry for reaching the optimal performance of the fabric. Changeovers (pad bath emptying, cleaning and refilling) are significantly reduced, resulting in substantial chemical conservation and increased productivity.

• Continued focus on sizeable investments in innovation and sustainability.
• Underway in India, the acquisition of the Engineering Plastics business of Ester Industries Ltd. with the objective of keeping up the Group’s global growth trend

With total sales of EUR 1.508 million generated by over 30 production and sales units in Europe, Asia and America, RadiciGroup closed its 2021 financial year with positive results, despite the difficulties due to the lingering effects of the pandemic and the steep increase in the cost of raw materials and energy, especially during the latter part of the year.

The Group – led by brothers Angelo, Maurizio and Paolo Radici – continued to pursue its strategy of focusing on the core businesses considered to be strategic and synergistic, such as nylon chemicals, engineering polymers and advanced textile solutions, while, at the same time,  introducing new products, such as a line of personal protective equipment for medical and industrial use.

EBITDA reached EUR 268 million, and net income for the year was EUR 150 million.

Despite this situation, RadiciGroup considers it essential to continue making investments.

“In 2021, the Group invested EUR 53 million financed from cash flow,” Alessandro Manzoni, CFO of RadiciGroup, emphasized. “There was no impact on net financial position, which registered an improvement over 2020, as did all our balance sheet ratios."

Furthermore, in spite of the complexity of the period, in 2022 the Group shareholders have kept on with their significant investment plan aimed at strengthening RadiciGroup’s presence in global markets and improving its competitiveness.

Indeed, the Group has moved forward, according to plan, with the acquisition of the Engineering Plastics business of Ester Industries Ltd., an India-based company engaged for decades in the production of engineering polymers and listed on the Bombay Stock Exchange. RadiciGroup’s EUR 35 million investment in this transaction furthers the internationalization strategy of its High Performance Polymers business area.

• adidas x Parley’s global impact initiative, Run for the Oceans, returns for its fifth year, uniting sporting communities across the planet
• More activities than ever will be eligible for Run for the Oceans, with the introduction of tennis, wheelchair movement, football and more
• People across the world can take part by signing-up to the challenge from today and logging activity between May 23 – June 8

As we approach World Oceans Day on June 8, adidas and its longstanding partner Parley for the Oceans are once again encouraging the global sporting community to turn activity into action and Run for the Oceans in 2022.

For the first time, new activities have been introduced to the challenge, making this the most inclusive Run for the Oceans yet. People from all parts of the global sporting community are invited to hit the streets, the tennis court and the football field, and unite to help protect the oceans from plastic waste. For every 10 minutes of running from select activities, such as running, tennis or football*, recorded by participants via the adidas Runtastic app, Joyrun, Codoon, Yeudongquan or Strava, Parley will clean up the equivalent weight of one plastic bottle from beaches, remote islands, and coastlines before it reaches the ocean (up to a maximum of 250,000kg).

Launching between May 23 – June 8, the event returns for its fifth year, with the ambition of mobilising a generation to help end plastic waste. Research shows that the world is at a tipping point, with it predicted that oceans will contain more plastic than fish by 2050.

Since the beginning of the partnership in 2015, adidas has made more than 50 million pairs of shoes with Parley Ocean Plastic and close to 18 million pairs in 2021 alone - this includes plastic waste intercepted from beaches and coastal communities, preventing it from polluting the oceans.

For 2022, adidas x Parley have announced the launch of Adizero X Parley and Ultraboost 22 X Parley . With a carbon footprint of just 3.5kg per pair, the Adizero X Parley is the first time adidas and Parley have combined to launch a lower footprint concept, a milestone for the partnership delivered through innovation and with no compromise on shoe performance.  

From raw material interception, processing, packaging, all the way to the end of product life, adidas calculate and communicate its carbon footprint, conforming to an internationally recognized standard: ISO 14067. The footprint results made available provide full transparency on the complete lifecycle of the product.