ElringKlinger benefits from international positioning and increases sales by 9.1% in fiscal 2012

(PresseBox) ( Dettingen / Erms, )
In 2012, the ElringKlinger Group again saw its business expand at a faster rate than global vehicle production. Despite the protracted weakness of the European automotive market, the Group managed to increase its sales revenue by 9.1% to EUR 1,127.2 (1,032.8) million, which was slightly above target. Earnings before interest and taxes (EBIT) stood at EUR 136.0 (148.7) million. Adjusted for non-recurring income from the sale of the Ludwigsburg industrial park in the previous year (EUR 22.7 million), EBIT edged up by 7.9%. The Group's adjusted net income for the annual period, after non-controlling interests, rose by 9.6%.

Original Equipment remains growth driver

Benefiting from growth of around 4% in global vehicle production and a significant number of new product ramp-ups, sales revenue generated in the largest of the Group's segments, Original Equipment, surged by EUR 79.7 million to EUR 906.9 (827.2) million. In this context, the Cylinder-head Gaskets division expanded at the most pronounced rate in percentage terms.

Significant gains in Asia and Americas

The widespread malaise affecting vehicle markets in Western Europe, which has seen car sales contract by almost a quarter in the last five years, also had an impact on ElringKlinger's sales performance. However, whereas sales generated in Europe (excluding Germany) fell by almost 1% during the financial year 2012 as a whole, the Group managed to expand revenue by 24.9% in Asia and by 19.9% in the NAFTA region over the same period. Factoring in exports, the ElringKlinger Group now generates almost half of its Original Equipment sales in Asia and the Americas.

Acquisitions contribute to revenue growth in 2012

The consolidation of those acquired companies that had not been included in the Group financial statements in 2011, or that had only been accounted for on a pro-rata basis, contributed an incremental EUR 19.3 million to Group sales in 2012. In 2011, the Swiss exhaust gas purification specialist Hug Engineering AG had only been included in the scope of consolidation for a period of eight months, while the Hummel-Formen Group had only been accounted for in the Group accounts for three months. The company formerly trading as ThaWa GmbH was consolidated as from January 1, 2012. In the 2012 financial year as a whole, these entities contributed EUR 48.2 million to Group revenues. Including the former Freudenberg companies purchased at the beginning of 2011, the acquired entities accounted for EUR 98.0 million in sales revenue. The contribution made by acquired companies to Group earnings before taxes remained in negative territory at minus EUR 4.2 million, despite gradual improvements made within this area. Of this figure, a total of EUR 2.3 million was attributable to purchase price allocations.

Wheras the German and Italian site of the former Freudenberg entities were already clearly profitable in 2012, the French subsidiary ElringKlinger Meillor SAS suffered from the effects of an anemic vehicle market in Western Europe and the reduction of stock levels seen among some customers, and thus posted negative earnings before taxes. By contrast, the performance of exhaust abatement specialist Hug Engineering AG was more encouraging, with the company achieving turnaround in the fourth quarter, when Hug made its first positive contribution to group earnings before taxes. The company secured a number of contracts for the supply of exhaust gas purification systems for power plants, ships and locomotives during this period.

Adjusted operating result for 2012 up 8.2%

The ElringKlinger Group also succeeded in translating revenue growth into an improved operating result. The Group posted an operating result of EUR 138.9 (151.1) million. In this context, it should be noted that the previous year had included a one-off exceptional gain of EUR 22.7 million from the sale of the Ludwigsburg industrial park. Adjusted for this non-recurring item, the Group managed to improve its operating result by 8.2%.

Adjusted EBIT up by 7.9%

In 2012, earnings before interest and taxes were adversely affected by foreign exchange losses of EUR 2.9 million. Therefore, at EUR 136.0 (148.7) million, EBIT was noticeably lower than the Group's operating result. Compared to the previous year's figure (EUR 126.0 million), adjusted for the one-time gain on disposal of the industrial park, this corresponds to an increase of 7.9%. As a result of the weaker fourth quarter EBIT did not increase to the extent originally targeted (EUR 145 to 150 million). The adjusted EBIT margin remained virtually unchanged at 12.1% (12.2%). Adjusted for the dilutive effect that the acquired entities had on earnings, the ElringKlinger Group achieved an EBIT margin of around 13.5% in its core business.

Adjusted net income after non-controlling interests outpaces revenue growth

Pre-tax earnings thus amounted to EUR 123.8 (136.6) million. Excluding the above-mentioned exceptional gain recorded in the previous year, the ElringKlinger Group managed to increase its earnings before taxes by 8.7%. With the tax rate having fallen to 27.8% (28.6%), net income after non-controlling interests totaled EUR 85.9 (94.9) million. Adjusted for the one-time gain of EUR 16.5 million after taxes in the previous year, the Group saw net income, after non-controlling interests, expand by 9.6%.

Operating cash flow up by more than half

Net cash from operating activities was significantly higher than in the previous year, rising by 50.7% to EUR 112.3 (74.5) million. Although slightly down on the previous year's figure, capital expenditure remained high in fiscal 2012. The Group invested EUR 103.1 (112.7) million in new machinery and equipment for the introduction of new products and additional automation of production processes.

Order intake remains positive

In 2012 as a whole, order intake within the ElringKlinger Group rose by 4.2% to EUR 1,134.8 (1,089.0) million. In the fourth quarter of 2012, however, order intake contracted slightly at EUR 260.8 (272.6) million. As of December 31, 2012, order backlog totaled EUR 456.0 (448.4) million, thus exceeding the previous record by 1.7%.

Further growth planned for sales and earnings in 2013

ElringKlinger expects to see stagnating to slightly expanding global vehicle production in 2013. Against this backdrop, it will be targeting revenue growth of between 5 and 7% in 2013. Should global car production only stagnate, revenue growth is likely to be positioned at the lower end of this range. The operating margin attributable to ElringKlinger's core business will be diluted by the as yet below-average profit margins of the acquired entities and the associated purchase price allocations as well as the up-front costs relating to the E-Mobility division. However, the resulting adverse effects on earnings will be less pronounced in 2013. Overall, ElringKlinger anticipates that earnings before interest and taxes (EBIT), adjusted for one-time effects, will expand faster than sales revenue. Adjusted EBIT is expected to range from EUR 150 to 155 million in 2013 (EUR 136.0 million in 2012).
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