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EANS-Adhoc: Annual results for 2009: ElringKlinger defies industry crisis with cost streamlining and upturn in sales during second half
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Dettingen/Erms, March 30, 2010 +++ Against the backdrop of the severe slump in sales within the international vehicle industry, the ElringKlinger Group was faced with a decline in sales revenue by 11.9% to EUR 579.3 (657.8) million in 2009. Despite this situation, the Group achieved earnings before interest and taxes (EBIT) of EUR 63.3 (71.5) million. Net income after minority interests fell by 16.6% to EUR 33.2 (39.8) million.
Demand picks up over course of year With car production figures plunging by more than a quarter in total within the vehicle markets of Western Europe, the US and Japan during 2009, ElringKlinger was impacted by a significant decline in demand, particularly in the first half of the year. By contrast, the second half saw a marked improvement in demand. The more favorable business performance of the subsidiaries in Asia and South America as a result of market conditions in these regions, in addition to the solid development of the Group's Aftermarket segment, provided additional buoyancy. Despite the continued weakness seen within the area of commercial vehicles and at ElringKlinger Kunststofftechnik GmbH, revenue from Group sales rose by 19.6% in the fourth quarter of 2009 compared with the uninspired final quarter of 2008.
Continued investments and R&D during the crisis At EUR 35.7 (36.5) million, ElringKlinger maintained its high level of expenditure on research and development during the crisis, channeling funds into projects such as fuel cells, particulate filter coating and battery components, the aim being to further improve its competitive position. In 2009, ElringKlinger received EUR 3.6 (1.2) million in grants from government-funded programs for new development projects. Capital expenditure on property, plant and equipment as well as investment property remained well above average from a multiyear perspective, at EUR 89.7 (132.2) million, and was directed primarily at streamlining projects and preparations for new product start-ups.
Break-even point lowered through cost savings The ElringKlinger Group responded to the severe market slump as early as the end of fall 2008 by initiating a comprehensive cost-reduction program targeted at general expenses and staff costs, the positive effects of which were seen over the course of 2009. As the year progressed, more moderate material prices also contributed to the gradual improvement in ElringKlinger's gross margin, which edged up from 22.6% in the first quarter to 28.8% in the fourth quarter of 2009. Settlement payments associated with commodity price hedging added an extra EUR 9.6 million to material expenses in 2009. Due to the rise in the price of nickel and the concomitant changes to the fair value of commodity-related derivatives, the Group used or reversed the majority of provisions that had previously been recognized in 2008. Correspondingly, other operating income rose by an additional EUR 13.2 million in 2009. The net result of the reduction in provisions on the one hand and the settlement payments on the other was a positive contribution of EUR 3.6 million (Q1 EUR -3.9 million, Q2 EUR +5.8 million, Q3 EUR +1.6 million) to earnings before income taxes. In total, there was no significant earnings effect from commodity price hedging in the fourth quarter of 2009 (EUR +0.2 million).
EBIT contracts by 11.5% With sales beginning to improve, cost-reduction measures gradually taking effect and material expenses coming down at a more pronounced rate over the course of the year, the Group´s operating result gradually improved. The operating result also benefited from the above-mentioned reversal of provisions for alloy surcharge hedging, which had been prompted by price developments within the area of nickel. Compared to the previous year, which, as outlined, had been impacted by the recognition of provisions of EUR 15.9 million for commodity-related hedging transactions, EBIT contracted by EUR 8.2 million to EUR 63.3 (71.5) million in the period under review. The EBIT margin remained unchanged year-on-year at 10.9%.
At EUR -13.9 (-15.8) million, net finance cost was lower than in the previous year, having benefited from a reduction in net debt as well as exchange rate differences. As a result, earnings before taxes for the ElringKlinger Group amounted to EUR 49.4 (60.0) million in 2009. Compared to the previous year, this corresponds to a decline of 17.7%, slightly more pronounced than in the case of sales.
At 29.5% (28.1%), the income tax rate was slightly higher in 2009. Thus, net income stood at EUR 34.8 (43.2) million, which was 19.4% down on last year's figure. Due to the additional interests acquired by ElringKlinger AG, profit attributable to minority interests declined to EUR 1.6 (3.3) million. Profit attributable to the owners of the parent, ElringKlinger AG, i.e. net income after minority interests, fell by 16.6% to EUR 33.2 (39.8) million in 2009. On this basis, earnings per share amounted to EUR 0.58 (0.69) in 2009.
With net cash of EUR 148.8 (98.2) million from operating activities, the ElringKlinger Group exceeded last year's figure by 51.5% and reaffirmed its financial capabilities even in times of economic crisis.
Dividend to rise After allocation of EUR 9.6 (2.3) million to revenue reserves, net retained earnings, i.e. distributable profit, for ElringKlinger AG amounted to EUR 11.5 (8.6) million. With the consent of the Supervisory Board, the Management Board will propose to the Annual General Meeting a higher dividend of EUR 0.20 (0.15) per share for the 2009 financial year.
Order intake up for fourth quarter in succession Following a major slump in the fourth quarter of 2008, which continued into the first quarter of 2009, the rest of the year was marked by a substantial recovery. In the fourth quarter of 2009, new orders for the ElringKlinger Group reached EUR 172.8 (106.1) million, the highest fourth-quarter level ever recorded by the Group. In 2009 as a whole, order intake for the Group fell by 1.4% to EUR 612.9 (621.3) million due to base effects.
Successful entry into battery technology Within the area of combustion engines, ElringKlinger has been benefiting from the growing trend towards more efficient, downsized and turbocharged engines, having established an extensive product portfolio tailored to this market. As regards hybrid vehicles, which are equipped with both a combustion engine and an electric drive unit, as well as purely electrically powered vehicles, the company will in future be able to supply newly developed components for rechargeable lithium-ion batteries. In creating a dedicated Battery Technology division, ElringKlinger acknowledged from an organizational perspective the growing importance of this new product group for the company. The company succeeded in advancing to SOP level an innovative solution to connect lithium- ion cells and modules. Alongside cell connector modules, ElringKlinger also developed high-performance plastic housing modules for the purpose of cell mounting and covering. The advanced connector solution for high-performance lithium-ion batteries is to be applied to hybrid vehicles as well as purely electrically powered cars. Pursuing this route, ElringKlinger has managed to take pole position ahead of many competing concepts, as well as securing its first contract for the supply of these components. The associated revenue potential from this contract for 2011 is expected to be within the mid-single-digit million range. ElringKlinger anticipates that its new technological solution will also unlock opportunities relating to other projects.
Outlook for 2010 Although the direction of future sales trends became more discernible over the course of 2009, the automobile market remains in a situation that leaves confined scope for projections. ElringKlinger believes there will be a significant shift in demand from the largely stagnating triad markets towards the developing countries of Asia and is preparing itself accordingly with the construction of two new plants in China. For 2010, the ElringKlinger Group anticipates organic sales growth of 7 to 10%. Earnings before interest and taxes are expected to rise at a more pronounced rate of 12 to 15%. Within this context, growth will be driven primarily by the company's subsidiaries.
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ots Originaltext: ElringKlinger AG
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