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Safilo seeks €300 million refinancing package amidst increasing cash flow, debt problems

Safilo executives have been actively pursuing discussions with its primary shareholder HAL Holding and bank creditors in an effort to arrange a €300 million (AU$473 m) refinancing package.

Declining sales and higher debt has left the company searching for refinancing options to address its cash flow and debt servicing issues, while its €150 million (AU$236.6 m) revolving credit facility is set to expire in November, having already been extended from its original expiration date of July 29.

“We are evaluating all options, on the debt side, equity side, with an aim to find the right solution or a combination of solutions,” CFO Mr Gerg Graehsler reported during the company’s latest financial call.

The company reported a negative free cash flow of €37.3 million (AU$58.85 m) for the first half of the year ending June, compared to the same period in 2017 which was at €57.2 million (AU$90.24 m).

"We need to return to grow our top line, exploiting more and better the core strengths of the group."
Angelo Trocchia, Safilo

As a result, Safilo’s net debt at the end of June 2018 sat at €171.1 million (AU$269.93 m), up from €166 million (AU$261.89 m) at the end of March this year and €112.7 million (AU$177.8 m) for the same period last year.

Safilo’s negative financial position could be further complicated with its licence to manufacture luxury eyewear brands such as Celine, Dior, Givenchy, Fendi and Marc Jacobs set to expire in coming years, as LVMH and Kering pursue a strategy of increased in-house production. Its licence to manufacture Gucci has already expired.

However, Safilo’s board recently released a five-year business plan with a view to targeting moderate sales growth compared to 2018, and a return to strong profitability recovery, by adjusting the company’s cost structure.

“Our objective is to improve the performance of our company, focusing on a few, very clear, priorities,” recently appointed Safilo CEO Mr Angelo Trocchia said.

“First and foremost, we need to return to grow our top line, exploiting more and better the core strengths of the group: our product creation and development capabilities.

“We need to focus on our go-to market execution, combining commercial capabilities, brand execution and customer service, and leveraging our strong portfolio of brands.”

The company recorded double digit percentage decreases for sales in the first half of 2018 compared to the equivalent period in 2017, and the new strategy for 2019-2020 will focus on achieving a balanced business across different consumer and product segments.

Face A Face

A company release stated Safilo would be leveraging its product and manufacturing skills, and its distribution capabilities to capture increasing business opportunities in the premium, contemporary and lifestyle segments.

Geographically, Safilo hopes to increase its presence in emerging markets, and is aiming for year on year high single-digit growth rates, particularly in China.

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