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EANS-Adhoc: ElringKlinger benefits from recovery of automotive markets and raises net income for 2010 by 97%
-------------------------------------------------------------------------------- ad-hoc disclosure pursuant to section 15 of the WpHG transmitted by euro adhoc with the aim of a Europe-wide distribution. The issuer is solely responsible for the content of this announcement. --------------------------------------------------------------------------------
Dettingen/Erms, March 29, 2011 +++ Fiscal 2010 saw the ElringKlinger Group recover well from the crisis-induced effects of sluggish sales within the international automotive industry, with revenue up 37.4% to EUR 795.7 (579.3) million in 2010. Despite one- off charges, the Group's operating result stood at EUR 116.0 (63.3) million, thus exceeding last year's figure by 83.3%. Net income after minority interests rose by 97.6% to EUR 65.6 (33.2) million.
Growth driven by Original Equipment The surprisingly dynamic expansion of production output within the automobile sector, together with several new product start-ups, led to particularly strong growth in the Original Equipment segment. In regional terms, both Asia and North America made above-average contributions. In total, sales revenues in the Original Equipment segment increased by 45.1% to EUR 606.9 (418.2) million. Thus, ElringKlinger clearly outpaced global vehicle production in terms of growth.
Benefiting from better capacity utilization, alongside measures implemented during the crisis for the purpose of streamlining cost structures, the Group's financial performance improved visibly. The percentage rise in the cost of sales, up 30.4% to EUR 556.1 (426.3) million, was less pronounced than revenue growth.
Higher R&D expenditure on E-Mobility ElringKlinger recorded a further increase in research and development expenditure to EUR 43.7 (35.7) million. In response to significant customer interest in the Group's new cell contact systems for lithium-ion batteries, the workforce was further expanded within the newly created E-Mobility division during the fourth quarter of 2010. The ElringKlinger Group increased its capital expenditure on property, plant and equipment to EUR 127.3 (89.7) million. The focus was on the construction and expansion of new plants, including those at the Chinese sites in Suzhou and Changchun, as well as investments in equipment and tools for new product start-ups.
Non-recurring expenses in the fourth quarter In the fourth quarter of 2010 earnings were impacted by one-off charges in connection with the migration of activities relating to shielding technology from the site in Dettingen/Erms, Germany, to ElringKlinger Abschirmtechnik (Schweiz) AG, Switzerland, as well as relocation costs associated with Changchun ElringKlinger Ltd. in China, where a new plant with double the previous floorspace is scheduled to open in May 2011. In total, these items resulted in additional expense of EUR 1.8 million. The discontinuation of Aftermarket sales operations at the Spanish subsidiary ElringKlinger S.A.U. and the takeover of these activities by ElringKlinger AG resulted in one-off termination costs of EUR 0.5 million.
Furthermore, one-time provisions of EUR 1.7 million were created - also in the fourth quarter - in response to a ruling by the German Federal Labor Court in December 2010 on the interpretation of the Framework Collective Pay Agreement (Auslegung der Bestimmungen des Entgeltrahmentarifabkommens - ERA). The purpose of this provision is to hedge against potential settlement payments for the company´s obligations under the structural fund established by the Framework Collective Pay Agreement. Compared to the accounting method adopted in the past, the most recent changes in accounting policies particularly in respect of inventories, receivables, warranties and contingent losses resulted in additional non-recurring expense of EUR 0.5 million. More extensive flexitime accounts as a result of higher capacity utilization necessitated an increase in provisions by EUR 1.1 million in the fourth quarter.
EBIT rises by 69% In total, the Group's operating result rose by EUR 52.7 million year on year to EUR 116.0 (63.3) million. Compared to the previous year, which had been severely impacted by the crisis, the Group's operating result thus expanded by 83.3% in 2010, i.e. at a more pronounced rate than revenue. The operating margin reached 14.6% (10.9%). Earnings before interest and taxes (EBIT), which in contrast to the operating result takes account of foreign exchange gains and losses, were adversely affected by net foreign exchange losses of EUR 9.3 (0.0) million in 2010. At EUR 106.7 (63.3) million, EBIT grew by 68.6% in 2010. EBITDA rose by EUR 54.4 million to EUR 188.9 (134.5) million.
At EUR minus 22.1 (-13.9) million, net finance costs were significantly higher than in the previous financial year. This was attributable mainly to foreign exchange effects. The remeasurement at the end of the reporting period of liabilities relating to the financing of ElringKlinger's acquisition of the Swiss-based SEVEX Group in 2008 led to finance costs of EUR 8.9 million, of which EUR 2.9 million were attributable to the fourth quarter. The ElringKlinger Group saw its earnings before taxes surge by 90.3% to EUR 94.0 (49.4) million.
Net income up 97% With the income tax rate having fallen to 27.0% (29.5%), net income rose at a more pronounced rate than pre-tax earnings, up 97.1% to EUR 68.6 (34.8) million. The share of minority interests as a percentage of net income declined as a result of the additional interests acquired by ElringKlinger AG in 2010. Consequently, profit attributable to shareholders of ElringKlinger AG rose by 97.6% to EUR 65.6 (33.2) million. This resulted in earnings per share of EUR 1.11 (0.58).
The significant expansion of production volumes in 2010 led to a corresponding increase in the amount of capital tied up in inventories and receivables, as a result of which operating cash flow contracted to EUR 116.2 (148.8) million.
Dividend to rise by 75% After allocation of EUR 14.3 (9.6) million to revenue reserves, net retained earnings, i.e. distributable profit, for ElringKlinger AG amounted to EUR 22.2 (11.5) million. With the consent of the Supervisory Board, the Management Board will propose to the Annual General Meeting a dividend of EUR 0.35 (0.20) per share, which corresponds to an increase of 75,0 % compared to the previous year. Within this context, it should be noted that the new shares in ElringKlinger AG issued on October 6, 2010, as part of a seasoned equity offering are entitled to dividends as from January 1, 2010.
Order intake expands further in fourth quarter of 2010 The Group saw a substantial recovery in its order intake. In the fourth quarter of 2010, incoming orders for the ElringKlinger Group reached EUR 227.3 (172.8) million, the highest level ever recorded for the final quarter. In 2010 as a whole, order intake for the Group rose by 44.7% to EUR 886.6 (612.9) million.
Business expected to develop favorably Based on the assumption that the economy will develop at a stable rate and that global vehicle production will increase by around 3%, the ElringKlinger Group anticipates organic revenue growth of between 5% and 7% in 2011. This will be complemented by a revenue contribution of an estimated EUR 49 million from the consolidation of the Metal Flat Gaskets division acquired from the Freudenberg Group. As a result of the division's inclusion in the scope of consolidation of the ElringKlinger Group, the Group's operating margin for fiscal 2011 as a whole will be temporarily diluted, due to the fact that the divisional operating margin is currently much lower than the average figure for the Group. The dilutive effect on the Group's operating margin is expected to be equivalent to around 0.6 to 0.8 percentage points. The objective is to lift the operating margin of the newly acquired business towards 10% by the end of 2011 with the help of integration measures currently being implemented as well as extensive automation and process alignment. The aim is to guide the former Freudenberg sites towards the level of the ElringKlinger Group in 2012, similar to the timeline applied to the integration of the Swiss SEVEX Group in 2008.
Despite the aforementioned dilutive effects and the fact that various products are still within the start-up pipeline, as well as an upward trend in commodity prices, Group EBIT is expected to grow at a more pronounced rate than revenue, rising by 15 to 25%. The Group anticipates that it can return to its pre-crisis EBIT margin of between 16 and 18% by 2012.
Further external growth - Acquisition plans The ElringKlinger Group hereby also announces that advanced negotiations are currently taking place with the Swiss company Hug Engineering AG, the objective being for ElringKlinger AG to acquire a majority interest. The Supervisory Board of ElringKlinger AG agreed to the project on March 25, 2010. Hug's core business is centered around the development, engineering and manufacture of exhaust abatement systems for catalytic exhaust aftertreatment as well as diesel particulate filters for stationary and mobile applications.
In future, Hug diesel particulate filter systems are to be combined with the ElringKlinger CleanCoat coating material for soot reduction and will be used within the commercial vehicle sector, in off-road vehicles as well as in stationary applications.
The Swiss-based Hug Group anticipates sales revenue of around EUR 46 million in fiscal 2010/11. The majority acquisition could potentially be transacted in the short term. The parties involved have agreed not to disclose details of the purchase price.
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