2019-04-18

Back in 2013, I was writing to you about a new investment we made in the Fund. Even though I used the above title, I was not intending to write about Saturday Night Fever or Riverdance, but rather about a company called Forbo.

“Forbo group operates 2 divisions: Flooring & Movement. Its Flooring division has over 65% global market share in linoleum and provides flooring solutions to public end-markets, commercial (transport & industry) and residential markets. The Movement systems provide belting solutions used in the supply chain of various industries, including food, paper & logistics. High quality linoleum, which represents a good third of Forbo revenues, is in use in many places, but especially in non-allergenic homes, hospitals and health-care facilities, because it is made of organic materials (97%!) and is purportedly non-allergenic in nature. Forbo has suffered from challenging market conditions due to lower demand & budget cuts from public end-markets in Europe, where it generates 2/3 of its sales. However, the stabilisation of demand in the Eurozone, the focus on new market segments outside the public sector and a focus on Asia, where the present CEO is located, will allow the Group to generate over 5% in annual sales growth and even more in operating cash flow, due to better capacity utilization. And I have not told you about the legendary & skilled CEO, This Schneider. I met him when he was at the helm of Selecta 15 years ago. He’s a very entrepreneurial boss indeed and left a great impression on me.”

What’s happened since? In 2018 the group generated CHF 1.3 bn turnover and a CHF 217 mn EBITDA. All in all, the market capitalization of Forbo comes out at CHF 2.8 bn. Now please read carefully! Back in 2013, turnover was CHF 1.2 bn, EBITDA was CHF 170 mn and the market capitalization was CHF 1.7 bn. An increase in value of 65%! Hunky dory.  But how come we bought the first shares in October 2013 at CHF 700, and at the end of March 2018 close they stood at CHF 1562! Yes, we more than doubled our money. Well, the last time I wrote I did not tell you much about that “legendary & skilled” CEO, This Schneider.

Under his helm as CEO of Forbo (he’s now the Executive Chairman of the Board of Directors), the company has been constantly buying back shares. As a matter of fact, since 2012, Forbo bought back 590’000 shares, so a bit more than a quarter of the share capital of the company. This smart move has created a hell of a lot of shareholder value.

Let’s flash back! 90 years ago, while Josephine Baker was dancing the Charleston in the Folies Bergères, 3 leading linoleum manufacturers from Germany, Sweden and Switzerland founded the “Continentale Linoleum Union”, which later evolved to become the Forbo group. In its latest annual report, Forbo “stands for 90 years of innovation and diversification. In our 91^st year we still feel a 100 percent commitment to values such as reliability, quality, innovation and customer satisfaction”.

We wish Forbo, its Employees, Managers & Board of Directors: Many Happy Returns. Please keep up the good work!

And let’s remember this wise Vietnamese proverb:

“When eating fruit, remember the one who planted the tree.”    

Signed: a happy (share)holder!