ElringKlinger records boost in revenue and earnings in Q1 2014

Dettingen / Erms, (PresseBox) - Despite the adverse effects of foreign currency translation, the ElringKlinger Group managed to expand Group revenue by 15.3% to EUR 324.0 (281.0) million in the first quarter of 2014. Earnings before interest and taxes (EBIT = operating result) rose by 28.4% to EUR 42.1 (32.8) million. Net income after non-controlling interests stood at EUR 27.9 (23.8) million.

In the first three months of 2014 the ElringKlinger Group once again outperformed the global car markets in terms of revenue growth. An upturn in the number of new vehicle registrations in Western Europe as well as consistently solid demand from Asia and North America in conjunction with the introduction of new products resulted in organic revenue growth - i.e. without scope changes and foreign exchange effects - of 13.4%.

Due to the necessary retrospective application of IFRS 11 as regards the presentation of comparative prior-year figures, the joint venture ElringKlinger Marusan Corporation, Tokyo, Japan, was no longer accounted for on a proportionate basis but rather in accordance with the equity method. As a result, the Group revenue figure originally presented for the first quarter of 2013 was reduced to EUR 281.0 million, the difference being attributable to this subsidiary's revenue contribution (EUR 5.8 million) formerly included at a proportionate rate of 50%. In the first quarter of 2014, by contrast, the entity was fully consolidated as a result of the assumption of control effective from December 31, 2013, and was accounted for with its total revenue of EUR 11.9 million. The additional revenue contribution in the first quarter of 2014 thus stood at EUR 6.0 million. When determining organic revenue growth, the joint venture was accounted for as if the entity had remained subject to proportionate consolidation, as was originally the case.

The strength of the euro had a dilutive effect on Group revenue in the first quarter of 2014 given the fact that ElringKlinger generates around 40% of its sales revenue outside the eurozone. The negative effect on consolidated sales of translating revenues into the Group currency - euro - was equivalent to EUR 8.6 million.

EBIT rises to EUR 42.1 million - Marked improvement in earnings for Exhaust Gas Purification division

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased to EUR 60.8 (51.0) million. Depreciation and amortization rose to EUR 18.7 (18.2) million in the first quarter of 2014. This included a negative earnings effect of EUR 0.9 million in total relating to the purchase price allocation for Hug Engineering AG, Switzerland, (EUR 0.3 million) and ElringKlinger Marusan Corporation (EUR 0.6 million).

Despite the as yet negative earnings contribution made by the E-Mobility division (minus EUR 2.2 million), earnings before interest and taxes (EBIT) rose to EUR 42.1 (32.8) million in the first quarter of 2014. The staff profit-sharing bonus of EUR 1,450 (1,300) per employee for the workforce of ElringKlinger AG, ElringKlinger Kunststofftechnik GmbH and Elring Klinger Motortechnik GmbH, as agreed for the financial year 2013, was accounted for in other liabilities and resulted in additional staff costs of EUR 4.7 (3.7) million in the first quarter of 2014. In spite of this, EBIT rose by 28.4%, i.e. at a more pronounced rate than sales revenue. In addition to benefiting from revenue growth in all areas of the Original Equipment segment, EBIT was fueled in particular by the improvement in earnings contributed by the Exhaust Gas Purification division. Consistently strong demand in its US retrofitting business for heavy trucks as well as new projects for inland waterway vessels and business centered around exhaust gas purification systems for natural gas power plants prompted growth in revenue contributed by the Hug Group in the first three months of 2014, taking the figure to EUR 20.7 (11.0) million. At the same time, EBIT for the Hug Group rose to EUR 7.7 (1.1) million. By contrast, earnings contributed by ElringKlinger Meillor SAS, France, which are now in positive territory but still well below the Group average, had a dilutive effect on the Group's margin equivalent to around 0.2 percentage points. Additionally, full consolidation of ElringKlinger Marusan Corporation diluted the Group's EBIT margin by around 0.3 percentage points.

Eliminating the effects of purchase price allocation, EBIT in the first quarter of 2014 stood at EUR 43.0 million, while the corresponding EBIT margin was 13.3%.

For the purpose of improved comparability, as from January 1, 2014, ElringKlinger no longer includes foreign exchange effects, which are mainly attributable to financing activities, in the financial indicator EBIT. Thus, as is standard, EBIT corresponds to the company's operating result reported in the income statement. Applying the former method of calculation, EBIT - which in contrast to the operating result included foreign exchange gains and losses from financing activities - would have amounted to EUR 42.2 (35.8) million in the first quarter of 2014.

Net finance costs up due to foreign exchange effects

Net finance costs rose by EUR 2.8 million to minus EUR 2.6 (plus 0.2) million. The figure previously reported for the first quarter of 2013 had been minus EUR 0.3 million. The difference in the figure reported now is attributable to income contributed by ElringKlinger Marusan Corporation, which until December 31, 2013, had been accounted for on the basis of proportionate consolidation and, under the provisions of IFRS 11, has now been consolidated retrospectively using the equity method. The year-on-year increase in net finance costs was mainly due to the foreign exchange gains of EUR 2.5 (Q1 2014: 0.1) million recorded in the first quarter of 2013.

Net income after non-controlling interests up by 18%

Earnings before taxes rose by EUR 6.5 million, reaching EUR 39.5 (33.0) million. Due to the increase in earnings before taxes, the Group was also faced with higher tax expenses in the first quarter of 2014. The latter amounted to EUR 10.2 (8.4) million. The Group's tax rate increased slightly to 25.8% (25.5%). The ElringKlinger Group managed to exceed net income for the first quarter of the previous year by 19.1%. Net income for the first three months of 2014 thus stood at EUR 29.3 (24.6) million. Net income attributable to non-controlling interests rose to EUR 1.3 (0.8) million, primarily as a result of the significant improvement in earnings contributed by the Hug Group. Therefore, net income attributable to the shareholders of ElringKlinger AG stood at EUR 27.9 (23.8) million, an increase of 17.6%. On this basis, basic and diluted earnings per share totaled EUR 0.44 (0.37) in the first quarter of 2014.

Order intake remains positive - Order backlog at record level

Order intake in the first quarter of 2014 edged up by 0.6% to EUR 331.2 million, starting from a high prior-year base of EUR 329.2 million. The ElringKlinger Group is supported by a solid order backlog when it comes to achieving sales growth targeted for 2014. As of March 31, 2014, order backlog stood at EUR 602.6 (499.1) million in total. This corresponds to a year-on-year increase of 20.7%.

Forecast for the full year confirmed - Further growth in revenue and earnings in 2014

The company has confirmed its forecast for the annual period as a whole. For 2014, ElringKlinger anticipates that production output in the global car market will expand by 2 to 3%. Against this backdrop, the ElringKlinger Group has forecast that - on the back of revenue totaling EUR 1,175.2 million in the 2013 financial year (ElringKlinger Marusan Corporation was included in this figure on a proportionate basis) - its revenue will grow by 5 to 7% organically in 2014, thus outpacing the market as a whole in terms of percentage growth. The full consolidation of ElringKlinger Marusan Corporation, Japan, will additionally contribute around EUR 25 million to Group revenue. Full inclusion of this lower-margin subsidiary within the scope of consolidation will have a slightly dilutive effect on the EBIT margin of the ElringKlinger Group in 2014 (approx. minus 0.3 percentage points). At the same time, the introduction of Euro VI is likely to lead to higher capacity utilization in the truck category over the course of the year. Additionally, revenue streams attributable to battery technology are expected to expand and the level of organic growth projected for Group revenue will be accompanied by earnings contributions. In total, these factors will provide a slight improvement to the Group's EBIT margin. Adjusted for non-recurring items, EBIT is to rise to a level of EUR 160 to 165 million.

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