72581 Dettingen / Erms, de
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Preliminary annual results for 2010: Upturn in automobile markets delivers above-average gains for ElringKlinger
Dynamic growth for Original Equipment
In conjunction with several new product start-ups, the surprisingly dynamic expansion of production output within the automobile sector led to particularly strong growth in the Original Equipment segment. Original Equipment recorded a 45.1% increase in sales, taking its total to EUR 606.9 (418.2) million.
Benefiting from a significant rise in capacity utilization, alongside measures implemented during the crisis for the purpose of streamlining cost structures, the Group's financial performance improved visibly compared to the previous year. The cost of sales rose at a less pronounced rate than revenue, up 30.4% to EUR 556.1 (426.3) million.
Higher R&D expenditure on E-Mobility
At EUR 43.7 (35.7) million, ElringKlinger's research and development expenditure continued to rise. 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.
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 shielding technology activities 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 other operating expense of EUR 1.8 million. The discontinuation of the Aftermarket sales business of the Spanish subsidiary ElringKlinger S.A.U. and the takeover of these functions by ElringKlinger AG resulted in termination costs of EUR 0.5 million.
Furthermore, provisions of EUR 1.7 million were created - also in the fourth quarter - in response to a ruling of 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 one-off provision is to hedge against potential settlement payments for the company's obligations under the structural fund established by the Framework Collective Pay Agreement. The changes to accounting policies formerly applied by the Group particularly with regard to inventories, receivables, warranties and contingent losses resulted in additional non-recurring expense of EUR 0.5 million in relation to provisions. 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.
Operating result up 83%
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 currency gains and losses, was adversely affected by net currency 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 -22.1 (-13.9) million, net finance costs were significantly higher than in the previous financial year. This item was impacted in particular by foreign currency effects. The remeasurement at the end of the reporting period of liabilities relating to the financing of ElringKlinger's acquisition of the SEVEX Group, Switzerland, led to finance costs of EUR 8.9 million, of which EUR 2.9 million were attributable to the fourth quarter. As a result, earnings before taxes for the ElringKlinger Group amounted to EUR 94.0 (49.4) million in 2010. Compared to the previous financial year, this represented an increase of 90.3%.
Net income up 97%
Net income rose by 97.1% year on year, reaching EUR 68.6 (34.8) million. Profit attributable to minority interests 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).
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 ever level for a final quarter. In 2010 as a whole, order intake for the Group rose by 44.7% to EUR 886.6 (612.9) million.
Based on the assumption of continued stability in terms of economic performance and an expansion of global vehicle production of approximately 3%, ElringKlinger 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 lower than the average figure for the Group and in view of the purchase price allocation of around EUR 1.5 million. 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 a level of 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, material prices trending higher and the fact that various products are still within the start-up pipeline, Group EBIT is expected to grow at a more pronounced rate than sales revenue, rising by 15 to 25%. The Group anticipates that it can return to its pre-crisis EBIT margin of between 16 and 18% in 2012.
A conference call has been scheduled for 10:30 CET on March 14, 2011, for the purpose of presenting the Group's preliminary results. The detailed results for the 2010 financial year will be published as part of a Financial Statements Press Conference and Analysts' Meeting on March 29, 2011.
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