euro adhoc: ElringKlinger AG
Earnings Forecast
ElringKlinger prepares for
further contraction in demand and adjusts sales and earnings expectations
-------------------------------------------------------------------------------- Disclosure announcement transmitted by euro adhoc. The issuer is responsible for the content of this announcement. --------------------------------------------------------------------------------
19.01.2009
Dettingen/Erms (Germany), January 19, 2009 +++ Consolidated fiscal 2008 sales of the ElringKlinger Group are projected to be around 9% up on the previous year's figure as a result of contributions from the recently acquired Swiss SEVEX Group and the expansion of the company's ownership interest in ElringKlinger Marusan. The company will thus meet the lower end of its 2008 sales estimate that had recently been down-graded.
Earnings were impacted by negative exchange rate effects equivalent to EUR 5.0 million, which were associated with financing of the SEVEX acquisition in Swiss francs, as well as by additional costs attributable to commodity price hedging. In addition, the one-off special payment agreed as part of the most recent collective wage settlement resulted in expenses of EUR 1.1 million in the fourth quarter of 2008. The extreme downturn in demand for automobiles prompted a further reduction in volumes requested as part of customer delivery schedules, which in turn led to noticeably weaker demand trends also at the Group's international subsidiary and affiliated companies towards the end of the year.
In view of this situation and on the basis of its preliminary assessment, the ElringKlinger Group - including the SEVEX Group and ElringKlinger Marusan whose earnings performances as yet remain relatively weak when compared to other units within the Group - anticipates an EBIT margin of 11 to 12% for the 2008 financial year, adjusted for non-recurring effects that encompass purchase price allocation (approx. EUR 2.5 million), added value attributable to the increased stake in Marusan (EUR 5.8 million) and the special payment associated with the collective wage agreement (EUR 1.1 million).
This includes one-off provisions attributable to long-term commodity price hedging of alloy surcharges for high-grade steel amounting to EUR 15.9 million in total, EUR 4.8 million of which in the fourth quarter. While these costs have an adverse effect on current earnings, they will ensure that the budgeted procurement prices are achieved in the medium term. Excluding the provisions attributable to commodity price hedging, the adjusted EBIT margin for 2008 is expected to be between 13 and 14%. There will be no significant hedging costs in 2009.
Against the backdrop of the continued downturn seen in the international automotive market, the Group has initiated an extensive cost-reduction program aimed at improving its earnings performance in 2009 and has projected an overall savings potential of approx. EUR 10.0 million. In general, the company will not be extending temporary employment contracts. Short-time work has been applied for at the Group's German plants and is scheduled to be implemented as from February 1. The Group will achieve additional cost streamlining with the help of savings in the area of material- and equipmentrelated expenses as well as through process optimization. The decline in commodity and material prices recorded for the first time in several years is beginning to have a positive medium-term effect on the overall cost situation. Capital expenditure is to be reduced from approx. EUR 95 million in 2008 to EUR 40 - 45 million in 2009. Investments made for the purpose of company streamlining as well as expenses earmarked for research and development will remain unchanged. Projection for 2009
For the coming year, ElringKlinger anticipates a further visible decline in sales volumes of automobiles and trucks, a trend which will also impact on the development of growth markets in Brazil, Russia, India and China. However, owing to the historically exceptional market circumstances, the issuance of forecasts remains difficult. In view of the global recession and significant uncertainties as to the short-term performance of the vehicle sector as a whole, ElringKlinger is therefore currently making preparations for several different scenarios in 2009.
These range from a repeat of the sales and EBIT performance of 2008 on the assumption that automotive markets will gradually recover in the second half of 2009 to the scenario of a decline in vehicle production by a further 20 to 25% in the markets of North America and Europe, coinciding with an additional contraction in vehicle sales within the emerging markets. If this negative scenario were to come about, ElringKlinger anticipates Group sales of EUR 580 to 600 million for the financial year 2009 as a whole. In this negative scenario, the EBIT margin is projected to be 8 to 10%.
In 2009, contributions will come from product ramp-ups, particularly in the United States and Asia, equivalent to approx. EUR 70 million (projected) as well as the recently acquired SEVEX Group and ElringKlinger Marusan, which will be included in the consolidated group for an additional quarter.
An upturn in the automobile market is not anticipated until the second half of 2009 or the year 2010. 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 reduce fuel consumption and CO2 emissions, the company considers itself well positioned to again generate organic sales growth of 5 to 7% p.a. in the medium term and, in relative terms, a slightly more pronounced rate of growth in earnings per annum.
end of announcement euro adhoc --------------------------------------------------------------------------------
Further inquiry note:
Lena Landenberger
Telefon: +49(0)7123 724 631
E-Mail: lena.landenberger@elringklinger.de
Branche: Automotive Equipment
ISIN: DE0007856023
WKN: 785602
Index: CDAX, 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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