- Revenue grew by 9.8 per cent to EUR 665.6 million
- Extraordinarily strong increase in EBIT to EUR 64.9 million
- Largest acquisition in PALFINGER’s history doubles marine business
In the first half of 2016, the PALFINGER Group posted further growth, which was primarily based on satisfactory increases in nearly all product areas in Europe. In the other market regions, subdued economic conditions, weak exchange rates and, in North America, necessary reorganization, resulted in ups and downs in performance. In the global marine business, the turbulences in the oil and gas industry had a negative impact during the reporting period. At the same time, PALFINGER succeeded in taking major steps towards building up the marine business as the Group’s second important mainstay.
Compared to the previous year, the PALFINGER Group’s revenue in the first half of 2016 rose by 9.8 per cent, coming to EUR 665.6 million as compared to EUR 606.2 million in the same period of 2015, thus achieving a new record for a half-year result. The EBIT of the PALFINGER Group showed an extraordinarily strong increase of 21.4 per cent from EUR 53.5 million to EUR 64.9 million. The consolidated net result for the first half of 2016 was EUR 39.7 million, 15.2 per cent higher than the previous year’s figure of EUR 34.5 million. At 13.4 per cent, the increase in revenue in the EUROPEAN UNITS segment was higher than that in the AREA UNITS segment of 2.1 per cent. As a consequence, the portion of the Group’s revenue contributed by the EUROPEAN UNITS segment increased to 70.6 per cent (HY1 2015: 68.3 per cent).
“We are happy once again to have achieved record revenue,” explains Herbert Ortner, CEO of PALFINGER AG. “The satisfactory capacity utilization in the European market in almost all product areas confirms that we are on the right track with our product mix. The acquisition of Harding, the largest acquisition in our Company’s history, will make us the world’s leading supplier of lifesaving equipment in the maritime industry. Through the planned takeover of TTS Group ASA, PALFINGER would become one of the top three players in the global ship equipment market. Thus we have come a huge step closer to our goal of increasing annual revenue to EUR 1.8 billion by 2017.”
Performance of the EUROPEAN UNITS segment
In the first half of 2016, the EUROPEAN UNITS segment saw a year-on-year increase in revenue of 13.4 per cent from EUR 414.3 million to EUR 469.7 million (Q2 2015: EUR 213.6 million; Q2 2016: EUR 243.1 million). The segment’s EBIT for the first half of 2016 grew by 38.5 per cent to EUR 73.6 million, as compared to EUR 53.1 million for the first half of 2015 (Q2 2015: EUR 26.9 million; Q2 2016: EUR 39.6 million). This outstanding improvement was made possible by the contributions of all European units as well as a favourable product mix. As a consequence, the segment’s EBIT margin rose from 12.8 per cent to 15.7 per cent in the reporting period.
The marine business, which is operated on a global scale, posted declines in revenue and earnings during the reporting period. Following growth during recent years, the repercussions of the weak oil price development were reflected in a revenue decrease of around 6.7 per cent in the first half of 2016. At the same time, PALFINGER took an enormous development step by completing the acquisition of the Harding Group at the end of June 2016. This will be reflected in a significant growth in business starting from the second half of 2016.
Performance of the AREA UNITS segment
Following the pleasing growth achieved in the previous year, revenue of the AREA UNITS segment once again increased slightly in the first half of 2016. After EUR 191.9 million in the same period of the previous year, revenue in the reporting period came to EUR 195.9 million (Q2 2015: EUR 100.2 million; Q2 2016: EUR 103.7 million). The segment’s EBIT, however, shrank from EUR 7.7 million to EUR 0.9 million (Q2 2015: EUR 6.3 million; Q2 2016: EUR 0.4 million). This was caused primarily by the necessary reorganization in the large North American market, the continued market turbulences in Brazil and lower earnings in Asia. The segment’s EBIT margin decreased from 4.0 per cent to 0.4 per cent in the first half of 2016.
In North America, PALFINGER was able to slightly exceed the previous year’s revenue level, however, the results were affected by the necessary reorganization. In South America, the persisting economic weakness resulted in a further contraction of business volume.
In Russia, the contributions to revenue and earnings in the first half of 2016 almost reached the previous year’s good level, despite the weakness of the ruble. The joint ventures with KAMAZ have started off as planned, opening up additional potential for the future.
While in the previous year a contract placed under a tender allowed for satisfactory results of the Asia and Pacific market region, economic conditions and business performance remained subdued in the reporting period.
In the reporting period, significant acquisition projects were prepared and/or implemented. In May 2016, the Spanish dealer MYCSA was acquired and PALFINGER Iberica was founded. The acquisition of the Norwegian Harding Group was closed as at 30 June 2016. Moreover, a takeover bid for the Norwegian stock exchange listed TTS Group was prepared and submitted on 18 July. These activities were also reflected in the unit’s EBIT, which was –EUR 9.8 million for the first half of 2016 after –EUR 7.4 million in the same period of the previous year (Q2 2015: –EUR 3.9 million; Q2 2016: –EUR 5.1 million).
Expansion of marine business as the strong second mainstay of the PALFINGER Group
As at 30 June 2016, PALFINGER expanded its marine business by closing the acquisition of 100 per cent of the shares in Herkules Harding Holding AS, i.e. the globally operating Harding Group. Harding is one of the leading suppliers of lifesaving equipment and lifecycle services for maritime installations and ships. With a staff of approximately 800, Harding generated revenue of around EUR 140 million in 2015. The acquisition is the largest in the history of the PALFINGER Group. As a result of the takeover, PALFINGER’s marine business will almost double its business volume and generate revenue of over EUR 300 million, which is more than 20 per cent of the Group’s total revenue.
With the acquisition of the Harding Group at the end of June, the marine activities reached a significant magnitude and hence also became of substantial strategic significance for PALFINGER. Correspondingly, PALFINGER is adjusting its internal and external reporting as of the beginning of the third quarter of 2016. Segment performance figures will now be broken down into the two segments “Land” and “Sea”, and no longer into the EUROPEAN UNITS segment and the AREA UNITS segment. The VENTURES unit and the group-wide functions will be comprised in the new “Holding” unit.
PALFINGER intends to take over, via its subsidiary Palfinger Marine GmbH, Salzburg, the Norwegian company TTS Group ASA. The offer document was approved and published by the Oslo Stock Exchange on 18 July 2016. For every share traded on the Oslo Stock Exchange, a cash amount of NOK 5.60 has been offered.
The TTS Group, headquartered in Bergen, has global operations with a focus on the design, development and supply of equipment solutions and services for the marine and offshore industry and the oil and gas industry. Moreover, TTS is a leading supplier of marine and offshore cranes with active heave compensation (AHC).
There is little overlapping between the products and services offered by PALFINGER MARINE and those of the TTS Group. The acquisition would create substantial synergies with PALFINGER’s previous marine operations and the acquisition of the Harding Group.
This would make PALFINGER one of the top three players in the global ship equipment market. With a staff of around 3,000 employees working in 22 countries and revenue of more than EUR 600 million, PALFINGER MARINE would account for approx. one-third of the Group’s total revenue after the conclusion of this takeover and would thus be the strong second mainstay of the PALFINGER Group.
Visibility in PALFINGER’s core markets is very low; the result of the referendum in Great Britain as well as recent events in Turkey have brought uncertainty to all European markets. For the time being, the present level of incoming orders gives reason to expect further positive developments in the second half of 2016, however, outside Europe the previous year’s level will not be achieved.
The acquisition of the Harding Group and the planned takeover of the TTS Group in the marine sector are milestones in the growth history of the PALFINGER Group, resulting in a significant expansion of the business.
For the 2016 financial year, without taking into account the acquisitions made and planned, the management expects organic revenue growth, and an increase in earnings when adjusted for integration and reorganization expenses.
PALFINGER still sees the potential to increase the annual revenue generated by the Group, including the joint venture companies in China and Russia, to approx. EUR 1.8 billion by 2017. In connection with the large acquisitions carried out in the marine sector, PALFINGER has come a step closer to this goal.