ElringKlinger AG

EANS-Adhoc: ElringKlinger AG
ElringKlinger gears up for weak automotive markets after fiscal 2008

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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.

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ots Originaltext: ElringKlinger AG
Im Internet recherchierbar: http://www.presseportal.ch

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
              Börse Düsseldorf / free trade
              Börse München / free trade
              Börse Stuttgart / regulated dealing



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