EANS-Adhoc: ElringKlinger AG
ElringKlinger gears up for weak automotive
markets after fiscal
2008
Disclosure announcement transmitted by euro adhoc. The issuer is responsible for the content of this announcement.
annual report
30.03.2009
Dettingen/Erms, March 30, 2009 +++ Consolidated sales generated by the ElringKlinger Group in fiscal 2008 rose by 8.2% to EUR 657.8 (607.8) million as a result of contributions from the acquisition of the Swiss SEVEX Group and the expansion of the interest held in ElringKlinger Marusan Corporation, Japan. In the fourth quarter, business performance was impacted by the severe slump in demand recorded in automobile markets in North America and Europe. The operating result fell by 38.3% in 2008. By contrast, cash flow from operating activities was close to the record level posted a year ago.
Within the Original Equipment segment, which encompasses OEM business with vehicle producers, sales rose by 9.4% to EUR 476.5 (435.5) million. Buoyed in particular by growth in Eastern Europe and the domestic market, the Aftermarket segment managed to expand by 3.5% to EUR 98.1 (94.8) million. The ElringKlinger Group achieved its most visible growth in the Asian markets. In this region, sales were propelled by 21.0% to EUR 73.7 (60.9) million.
Compared to the previous year, the ElringKlinger Group invested EUR 6.6 million more in the development of new products and technologies, among them fuel cells and battery components. Research and development costs increased by 22.3% to EUR 36.5 (29.9) million. Capital expenditure on property, plant and equipment was raised by EUR 41.3 million to EUR 132.2 (90.9) million. The emphasis was on replacement and expansion investments at the Group's sites in Germany and Asia, in addition to preparations for new product ramp-ups at enterprises within the recently acquired SEVEX Group in the United States and China.
In the fourth quarter of 2008, the significant downturn in demand for new vehicles prompted a reduction in the volume of components requested by the vehicle industry as part of their production scheduling. In turn, this affected also the international subsidiaries and associated companies of the ElringKlinger Group. Despite this situation, net cash from operating activities amounted to EUR 98.2 (99.3) million, which was comparable to the high level achieved in the previous financial year.
Operating result down Commodity prices still hovering well above the long-term average together with significantly higher energy costs had an adverse effect. Earnings were also put under pressure by provisions of EUR 15.9 million for commodity-related hedging of high-grade steel alloy surcharges. The special payment agreed as part of the most recent collective wage settlement resulted in non-recurring expenses of EUR 1.1 million in the fourth quarter of 2008. The operating result contracted by EUR 47.2 million, or 38.4%, to EUR 75.8 (123.0) million in 2008. Before the purchase price allocation (EUR 3.6 million) in connection with the corporate acquisitions and adjusted for the non-recurring effects in 2008 - bargain purchase associated with interests acquired in Marusan Corporation, Japan (EUR 5.8 million), one-time payment relating to the collective pay increase (EUR 1.1 million) and one-off income from insurance benefits (2008: EUR 0.7 million; 2007: EUR 5.0 million) - the operating result stood at EUR 74.1 (118.0) million. The operating margin came in at 11.5%. Excluding the expenses associated with recognition of provisions for commodities-related hedging transactions (EUR 15.9 million), the adjusted operating result fell by 23.7% year on year to EUR 90.0 million. Deducting from the operating result an amount of EUR 4.3 million attributable predominantly to negative foreign currency effects, EBIT stood at EUR 71.5 (121.0) million in fiscal 2008.
As a result of higher interest expenses, net finance costs amounted to EUR 15.8 (8.1) million. This figure included a foreign currency loss of EUR 5.0 million attributable to the closing-rate recognition of purchase price financing in connection with the acquired SEVEX Group, denominated in Swiss francs. Thus, the ElringKlinger Group achieved earnings before taxes of EUR 60.0 (114.9) million. Adjusted for the non-recurring factors outlined above, earnings before taxes and purchase price allocation stood at EUR 58.2 million. This corresponds to a decline of 47.0% compared to the equivalent adjusted figure in fiscal 2007 (EUR 109.9 million). Without the expenses attributable to the provision recognized in consideration of commodities-related hedging transactions (EUR 15.9 million), adjusted earnings before taxes amounted to EUR 74.1 million in 2008.
The Group's income tax rate fell to 28.1% (30.1%) in 2008. Net income declined by 46.2% to EUR 43.2 (80.3) million. After
eliminating minority interest, profit attributable to shareholders of ElringKlinger AG amounted to EUR 39.8 (75.9) million. Before purchase price allocation and having eliminated the non-recurring factors, profit attributable to shareholders of
ElringKlinger AG was EUR 38.7 (67.2) million. The previous year's figure had included one-time items equivalent to EUR 3.2 million from insurance reimbursements for the factory fire in Runkel and EUR 5.5 million in connection with the remeasurement of deferred taxes. Earnings per share declined to EUR 0.69 in 2008 (2007: EUR 1.32, adjusted for 1:3 stock split).
Proposed dividend of EUR 0.15 With the consent of the Supervisory Board, the Management Board will propose to the Annual General Meeting a dividend of EUR 0.15 (2007: EUR 0.47, adjusted for 1:3 stock split) per share. The proposed dividend takes account of the decline in net income and the very challenging conditions currently experienced within the industry as a whole.
Order backlog down 15% year on year The sudden slump in demand for automobiles in the fourth quarter of 2008 was reflected in the direction taken by incoming orders. Order intake for the Group as a whole was down 3.6% to EUR 621.3 (644.7) million. Order backlog within the ElringKlinger Group contracted by 14.9%, falling to EUR 208.6 (245.1) million as at December 31, 2008.
Difficult outlook for 2009 Since the fourth quarter of 2008, the global vehicle markets have been in a situation that provides little scope for forward planning. The relatively good basis for planning that existed until now has been eroded mainly by the significant fluctuation - both upward and downward - in the volumes requested by vehicle manufacturers as part of their forward production scheduling as well as adjustments to orders by customers. Owing to the historically exceptional market circumstances, the issuance of forecasts is very difficult. In view of the global recession and uncertainties as to the short-term performance of the vehicle sector as a whole, ElringKlinger is currently making preparations for several different scenarios.
These range, in the best case, from matching the sales and EBIT figures of fiscal 2008 under the assumption that the global automobile markets recover significantly by the beginning of the second half of 2009 to the scenario of a decline in vehicle production within the Northern American and European markets by a further 20 to 25%, coinciding with a contraction of vehicle sales within the emerging markets. Should this latter scenario eventuate, ElringKlinger anticipates Group sales in the region of EUR 580 to 600 million and an EBIT margin of 8 to 10% for fiscal 2009 as a whole. This includes sales revenues from planned product launches as well as sales and earnings contributions from the SEVEX Group and ElringKlinger Marusan Corporation. In the first two months of 2009 the markets declined at a significantly more pronounced rate than previously assumed as part of the negative scenario. In January, vehicle sales declined by more than 25% in Europe and by 37% in the United States. The fall in vehicle production figures was even more extensive. If this extremely low level of vehicle sales continues over 2009 as a whole, ElringKlinger cannot rule out that Group sales recede towards EUR 500 million. Even in this case, ElringKlinger will be targeting an EBIT margin of 5 to 8%, supported by a Group-wide streamlining program of EUR 10 million already initiated with regard to general and personnel expenses and in the area of purchasing, as well as more intensive working capital management. Capital expenditure (excl. tools) is to be reduced from approx. EUR 95 million in 2008 to a maximum of EUR 40 million in 2009. Investments made for the purpose of company streamlining as well as expenses earmarked for research and development will remain unchanged.
Due to the fall in production output at vehicle manufacturers as a result of extended factory vacations, short-time working and current stock levels, the ElringKlinger Group anticipates that business performance in the first six months of 2009 will be significantly weaker than in the second half. The first signs of a gradual upturn in the automobile market are not expected until the second half of 2009 and, more visibly, the year 2010. The decline in commodity and material prices recorded for the first time in many years is beginning to have a positive medium-term effect on the overall cost situation.
Within this challenging environment, it has become evident, that technological expertise, financial strength and a solid equity base are increasingly important when it comes to acquiring new customer
projects and development contracts. ElringKlinger has the opportunity to benefit from this development and enhance its competitive position. Offering a range of products designed to contribute significantly to the reduction of fuel consumption and CO2 emissions, the company considers itself well positioned to again generate organic growth of 5 to 7% in the medium term, as well at the very least, proportionate growth in earnings.
end of announcement euro adhoc
Further inquiry note:
Stephan Haas
Phone: +49 (0) 7123 724 137
E-Mail: stephan.haas@elringklinger.de
Branche: Automotive Equipment
ISIN: DE0007856023
WKN: 785602
Index: MDAX, Classic All Share, Prime All Share
Börsen: Börse Frankfurt / regulated dealing/prime standard
Börse Berlin / free trade
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