Value Creation Awards 2020: #1 Picanol

Value Square |Posted 16 July 2020 by Pascal Cornelis

The years 2008 and 2009 were one of the most difficult years in history for the textile industry and perhaps even more so for the manufacturers of looms. At both Picanol and Michel Van de Wiele, turnover fell by no less than 40% between 2007 and 2009. Van de Wiele even remained profitable in operational terms during that period and had a gearing ratio (net debt to equity) of only 21.6% in 2008.  Picanol, on the other hand, made operational losses in both 2008 and 2009. In addition, the gearing ratio in 2008 was 66%, making the net loss even greater. In 2008, consumer confidence dropped worldwide, causing the demand for clothing and other textiles to drop sharply. As a result, weaving mills bought fewer looms, causing demand to drop to an all-time low.

2009 also began laboriously, but gradually demand picked up again, mainly thanks to stimulus measures taken by the Chinese government. Picanol's weak balance sheet structure and the extreme impact of the crisis necessitated restructuring (20% of the workforce was laid off) and a capital increase. After the internal struggles between various branches of the Steverlynck family - which we ourselves witnessed many times at general meetings - Luc Tack came more and more to the fore. Because the family could not follow the 15 million euro capital increase, Luc Tack saw the opportunity to take control of Picanol. The subscription price was 1.27 euro per share. An executive recently confided to us: "Luc has a nose for bats". Today, the Picanol share is quoted at 55.40 euros. 

This capital increase was the start of a spectacular recovery for this world leader in high technology looms. By focusing on innovation and digitization in this division, but also in the Proferro foundry and PsiControl (machine controls), it is increasingly supplying external customers in various sectors. Picanol's cash flows became so large that Luc Tack sought to diversify Picanol into other sectors that showed a different cycle than the looms and also offered geographic diversification. This was to better arm Picanol against the cyclical weaving machine business and secure the Picanol group in the long term. Since Tack is a big supporter of the manufacturing industry in Flanders, Tessenderlo came to his study table as an interesting opportunity.

In 2013, he took over the controlling interest of the French state of 27.52% in the chemical company Tessenderlo. This investment in Tessenderlo was a conscious choice. The starting point was to expand Picanol's business radius with an industrial project, with a decision center in Belgium and with global activities in a basic industry. Here, too, Tack proceeded in a similar way, i.e. cutting unnecessary costs, investing in the most promising activities, refurbishing the production apparatus, all this financed with a capital increase, which also strengthened the balance sheet. 

In recent years, he has increased his importance through systematic purchases on the stock exchange. In 2016, Tack Picanol tried to merge with Tessenderlo, but that plan failed due to a lack of support from the minority shareholders. Afterwards, the "buy" button was pressed even harder, so that today Picanol's stake in Tessenderlo has grown to almost 62% of the voting rights.

Today, the Picanol group is a company active in five different sectors: Machinery & Technology (Picanol), Agro, Bio-valorization, Industrial Applications and Energy via T-Power (steam and gas turbine power plant). Sooner or later, the merger project will undoubtedly return to the drawing board. Funny detail: Tessenderlo is almost at the bottom of our list (place 83), but will undoubtedly be catapulted up in our annual study within two years.

One of the most important explanations of the management why Picanol has been so successful in recent years has to do with building a long-term industrial project, with sustainable projects that contribute to a more sustainable society and this with a focus on maximum return. At Picanol, this sustainability is reflected primarily in its products and processes, including the use of simulations for the design of more energy-efficient weaving machines, the conversion of scrap iron into high-tech castings, advanced electronics and durable mechanical components that ensure optimal fabric quality and less waste. At Tessenderlo Group, management wants to ensure that everything that lives on earth can thrive by making optimal use of available resources: "Every molecule counts". This vision includes greater food production than ever before, using water in the smartest way possible, and creating value from bio-residuals.

Picanol realized a fundamental value increase of 1187% over the last 10 years or 29.11% per year in the period 2009-2019. Congratulations to CEO Luc Tack and Chairman Stefaan Haspeslagh and all other employees of Picanol and Tessenderlo ! But you too could have benefited from Picanol's resurgence by buying shares of Picanol at the end of 2009. Had you kept these until the end of last year, you would have achieved a spectacular return of 2884% or 40,44% per year !

Pascal Cornelis, CEO Luc Tack and Chairman Stefaan Haspeslagh
Pascal Cornelis, CEO Luc Tack and Chairman Stefaan Haspeslagh

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