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Group sales up 9.1% in 2012 - Adjusted EBIT below expectations despite growth
Earnings performance weaker in Q4
The significantly weaker sales and thus earnings contributions made by the Aftermarket and Engineered Plastics segments narrowed EBIT. Besides exceptional factors and non-recurring items towards the end of the year, had a dilutive effect on EBIT. Earnings were adversely affected by necessary adjustments of EUR 2.0 million to investee inventories.
At EUR 277.6 (269.6) million, the fourth quarter was slightly above target in terms of sales revenue, almost matching the figure recorded for the preceding quarter (EUR 279.8 million). However, both the Aftermarket and the Engineered Plastics segment had to contend with particularly weak sales. As a result, the pro-rata contribution made to Group sales by these more profitable segments was extremely unfavorable in the fourth quarter. At the same time, when compared to the third quarter, sales included a significantly higher proportion of lower-margin tooling revenue for serial production projects commencing in 2013.
Against the backdrop of an anemic vehicle market in Western Europe and the reduction of stock levels by some customers, the French subsidiary ElringKlinger Meillor SAS saw its fourth-quarter earnings deteriorate by around EUR 1.1 million compared to the preceding quarter. By contrast, exhaust specialist Hug Engineering AG put in a more encouraging performance. Its contribution to fourth-quarter earnings before taxes was just within positive territory for the first time. What is more, it managed to secure a number of contracts for the supply of exhaust gas purification systems for power plants and ships.
The Group's operating result for the fourth quarter of 2012 stood at EUR 25.8 (27.2) million; before purchase price allocation, it amounted to EUR 26.3 million. EBIT, which in contrast to the operating result takes account of foreign exchange gains and losses, was diluted by negative foreign exchange effects of EUR 1.4 million and purchase price allocations of EUR 0.5 million in the fourth quarter. As a result, EBIT totaled EUR 24.4 (27.0) million, or EUR 24.9 million before purchase price allocation, in the fourth quarter.
Acquisitions contribute to sales revenue
Alongside market expansion and the rollout of new products, revenue growth was also driven by acquisitions. The consolidation of acquired companies that had not been included in the Group financial statements in 2011 or 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.
For the full year 2012 these companies contributed EUR 48.2 mn to Group sales. Including the former Freudenberg entities acquired in early 2011 the acquisitions contributed EUR 98.0 million to Group sales in 2012. The contribution made by all acquired companies to Group earnings before taxes had a dilutive effect of minus EUR 4.2 million in total.
Adjusted operating result up 8.2% for full 2012 financial year
ElringKlinger posted an operating result of EUR 138.9 (151.1) million for the 2012 financial year as a whole. In this context, it should be noted that the previous year had included one-off exceptional income of EUR 22.7 million from the sale of an industrial park. Adjusted for this non-recurring item, the Group managed to lift its operating result by 8.2%. Having eliminated non-recurring items, the operating margin for 2012 remained largely unchanged year on year at 12.3% (12.4%).
EBIT adjusted for non-recurring items up 7.9%
Earnings before interest and taxes (EBIT) were adversely affected by foreign exchange losses of EUR 2.9 million. Therefore, at EUR 136.0 (148.7) million, EBIT was weaker than the Group's operating result. Compared to EBIT for the previous year (EUR 126.0 million), adjusted for the one-time gain on disposal of the industrial park, this corresponds to an increase of 7.9%. The adjusted EBIT margin was 12.1% (12.2%). Excluding the dilution of earnings attributable to the acquisition of the Hug Group, the Hummel-Formen Group and former ThaWa GmbH - the latter having already been integrated into ElringKlinger AG - as well as to the Freudenberg companies, which as yet generate lower margins in Group comparison, the ElringKlinger Group recorded an EBIT margin of around 13.5% in its core business in 2012.
Adjusted earnings before taxes grow faster than operating result Group earnings before taxes 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%.
Adjusted net income after minority interests up 9.6% on previous year
The tax rate fell to 27.8% (28.6%). On this basis, the ElringKlinger Group recorded net income after minority interests of EUR 85.9 (94.9) million in 2012. Adjusted for the one-time gain of EUR 16.5 million (after taxes) in the previous year, the Group saw net income after minority interests expand by 9.6%.
Order intake in positive territory for annual period
In 2012, order intake within the ElringKlinger Group rose by 4.2% in total to EUR 1,134.8 (1,089.0) million. At EUR 260.8 (272.6) million, order intake in the fourth quarter of 2012 was down 4.3% on the figure recorded in the same quarter of the previous year. As of December 31, 2012, order backlog stood at EUR 456.0 (448.4) million, up 1.7% on the figure recorded a year ago.
Further growth planned for sales and earnings in 2013
Based on the assumption of stagnating to slightly expanding global vehicle production, the ElringKlinger Group will be targeting organic revenue growth of 5 to 7% in 2013. Should global car production merely stagnate, revenue growth is more likely to be positioned at the lower end of this range. The operating margin attributable to ElringKlinger's core business will be adversely affected as a result of the as yet below Group average aggregated 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 dilutive effects will be less pronounced in 2013. Overall, ElringKlinger anticipates that earnings before interest and taxes (EBIT), adjusted for one-time effects, will expand at a more pronounced rate than sales revenue. Against this backdrop, adjusted EBIT is expected to range from EUR 150 to 155 million in 2013 (EUR 136.0 million in 2012).
The announcement of preliminary results for the business year 2012 will be accompanied by a conference call today, March 8, 2013, at 9.30 a.m. CET. The full announcement of the results for fiscal 2012 is scheduled for March 28, 2013.
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