ElringKlinger concludes 2016 financial year with strong final quarter

ElringKlinger concludes 2016 financial year with strong final quarter

- Revenue up by 3.3% to EUR 1,557 million and by 4.7% in organic terms

- EBIT before purchase price allocation on a par with previous year at EUR 140 million

- Proposed dividend of EUR 0.50 per share corresponds to payout ratio of 40%

- Marked improvement in operating free cash flow

- Guidance for 2017: organic revenue growth of 2 to 4 percentage points above global market growth, EBIT margin before purchase price allocation around 9 to 10%

Dettingen/Erms (Germany), March 30, 2017 +++ The ElringKlinger Group completed fiscal 2016 with a powerful sprint to the finish. Sales revenue for the annual period was expanded by 3.3% year on year, taking the figure to EUR 1,557.4 (1,507.3) million. This was fueled by the Group's performance in the fourth quarter, which saw sales revenue grow by 4.4%.

Had foreign exchange rates remained unchanged, growth would have been as much as 5.5% or EUR 83.5 million. Accounting for portfolio effects - e.g., by the acquisition of Hug Engineering B.V. or the asset deal relating to Maier Formenbau GmbH - totaling EUR 12.4 million, organic growth stood at EUR 71.1 million or 4.7%. Global automobile production expanded by around 3% over the same period.

Growth primarily in Asia and Europe (excluding Germany)
ElringKlinger saw revenue improve in almost all sales regions over the course of 2016. While business in the home market of Germany picked up only slightly, sales performance in the rest of Europe proved much more favorable. Here, revenue increased by EUR 18.8 million or 4.0% to EUR 489.1 (470.3) million, as a result of which this region accounted for 31% (31%) of total sales. Growth generated in the Asia-Pacific region was much more pronounced, with revenue expanding by EUR 28.3 million or 10.5% to EUR 299.0 million. As a result, this region now accounts for 19% (18%) of total sales revenue generated by the Group.

Earnings dampened by capacity constraints in Swiss entity
The Group recorded EBIT of EUR 140.4 (140.4) million before purchase price allocation in 2016 as a whole, which was on a par with the previous year. While growth in revenue had a favorable impact on earnings, these positive contributions to profit were offset by charges relating to the Swiss subsidiary affected by capacity constraints. Trailing additional costs of around EUR 11 million in the first half of the year, together with a fundamentally higher level of fixed operating costs and the delayed impact of optimization measures due to the absence of customer approvals for the migration of manufacturing operations exerted downward pressure on the Group's earnings performance. Against this backdrop, figures for the first three quarters of 2016 in each case lagged behind those recorded in the previous year. It took until the fourth quarter for anticipated benefits to materialize, with EBIT before purchase price allocation rising by EUR 12.0 million, or 44%, year on year to EUR 39.5 (27.5) million. This improvement in performance was attributable primarily to measures aimed at remedying capacity constraints. In parallel, solid market conditions and the sale of real estate for a figure at the very low end of the single-digit million euro range proved advantageous.

The following two factors in particular had an impact on the rest of the income statement: First, a year-on-year decline in the Group's net foreign exchange gain and an increase in interest expenses were reflected in its net finance result. Secondly, various tax-related effects translated into higher income taxes in the fourth quarter. As a result, the tax rate stood at 46% in the fourth quarter and at 33% for the annual period as a whole. Despite EBIT being on a par with the prior-year figure, the Group thus saw its net income (after non-controlling interests) fall to EUR 78.6 (91.6) million. Correspondingly, earnings per share stood at EUR 1.24, down on the prior-year figure of EUR 1.45.

High payout ratio in line with long-term dividend policy
Against the background of lower earnings per share, the Management Board and Supervisory Board will submit a joint proposal to the Annual General Meeting on May 16, 2017, for a dividend payment of EUR 0.50 per share. On this basis, the dividend ratio has risen to 40% (38%) and thus lies at the upper range of the long-term policy adopted by the Group, which stipulates that around 30 to 40% of earnings per share should be distributed to shareholders.

Financial position remains strong
ElringKlinger's balance sheet continues to be robust. At the end of the financial year just ended the Group's equity ratio stood at 47.2% (48.5%), which was still well within the upper half of the target range of 40 to 50% of total assets.

Investments scaled back, operating free cash flow improved markedly
Once again, the Group carried out focused investments in its future growth. At EUR 171.3 million, representing 11.0% of revenue, capital expenditure directed at property, plant, and equipment as well as real estate was slightly lower than in the previous year (EUR 176.1 million or 11.7%). Among the major projects in Germany was a new logistics center at the Group headquarters in Dettingen/Erms, construction work on which commenced in July 2016. Additionally, relatively substantial investments were made at the sites in Gelting, Ergenzingen, Langenzenn, and Bietigheim-Bissingen. At an international level, alongside more substantial measures in Switzerland and the United States, key investments included the start of construction work on a facility in Kecskemét, Hungary, as well as new plants in Turkey and China. Additionally, the two US sites in Warren and Roseville were brought together at a new plant in neighboring Southfield in 2016.

Measures targeted at net working capital proved beneficial, with this key financial indicator remaining largely unchanged at EUR 524.6 (523.2) million despite growth in revenue. Overall, this led to a visible improvement in operating free cash flow; it stood at EUR -3.8 million, compared to EUR -65.2 million in the previous year.

Outlook: ElringKlinger looks forward with confidence to 2017
ElringKlinger anticipates that demand within the area of personal mobility will continue to grow irrespective of the type of drive system deployed. Technology surrounding combustion engines will still be of relevance in the short to medium term. In the medium to long term, however, the key impetus is expected to come entirely from new drive technologies. As CEO Dr. Stefan Wolf explains, "Building on a broad product portfolio and diversified customer base, ElringKlinger is very well prepared for this process of transition. Thanks to gaskets and near-engine shielding parts and plastic modules, we have gained a strong foothold when it comes to conventional combustion engine technology. At the same time, innovative structural components as well as parts used in alternative drive systems are among the key contributors to growth."

Overall, the Group expects to be able to exceed global market growth by 2 to 4 percentage points per annum in the short to medium term. For 2017, industry experts have forecast market growth of 1 to 2%. In the medium term, the market is likely to expand by an annual average of 2% at a global level.

The growth in revenue targeted by the Group will also translate into improved earnings in 2017. Furthermore, operational measures - primarily the transfer of additional sections of production from Switzerland to Hungary - will have a positive impact on the Group's earnings situation. Against this background, the Group anticipates that its EBIT margin before purchase price allocation will stand at around 9 to 10%. The figure targeted for the medium term is around 13%.

EUR million	FY 2016	FY 2015	∆ abs.	∆ rel.
Order intake	1,693.7	1,615.3	+78.4	+4.9%
Order backlog	932.5	796.2	+136.3	+17.1%
Revenue	1,557.4	1,507.3	+50.1	+3.3%
of which FX effects			-33.4	-2.2%
of which acquisitions			+12.4	+0.8%
of which organic			+71.1	+4.7%
EBITDA	231.2	222.8	+8.4	+3.8%
EBIT before purchase price allocation	140.4	140.4	+0.0	+0%
EBIT margin before purchase price allocation (in %)	9.0%	9.3%	-0.3PP	-
Purchase price allocation	4.8	5.2	-0.4	-
EBIT	135.6	135.2	+0.4	+0.3%
Net finance result	-11.5	-6.5	-5.0	-76.9%
EBT	124.1	128.8	-4.7	-3.8%
Income taxes	41.5	33.0	+8.5	+25.8%
Effective tax rate (in %)	33.4	25.6	+7.8PP	-
Net income (after non-controlling interests)	78.6	91.6	-13.0	-14.2%
Earnings per share (in EUR)	1.24	1.45	-0.21	-14.5%
Dividend per share (in EUR)	0.50*	0.55	-0.05	-9.1%
Investments (in property, plant, and equipment)	171.3	176.1	-4.8	-2.7%
Operating free cash flow	-3.8	-65.2	+61.4	+94.2%
ROCE (in %)	8.7	9.5	-0.8PP	-
Net working capital	524.6	523.2	+1.4	+0.3%
Equity ratio (in %)	47.2	48.5	-1.3PP	-
Net financial liabilities	538.8	486.8	+52.0	+10.7%
Employees (as of Dec. 31)	8,591	7,912	+679	+8.6%
EUR million	Q4 2016	Q4 2015	∆ abs.	∆ rel.
Order intake	444.9	429.6	+15.3	+3.6%
Order backlog	932.5	796.2	+136.3	+17.1%
Revenue	407.2	390.0	+17.2	+4.4%
of which FX effects			-5.9	-1.5%
of which acquisitions			+3.1	+0.8%
of which organic			+20.0	+5.1%
EBITDA	64.5	50.2	+14.3	+28.5%
EBIT before purchase price allocation	39.5	27.5	+12.0	+43.6%
EBIT margin before purchase price allocation (in %)	9.7%	7.1%	+2.6PP	-
Purchase price allocation	1.1	1.3	-0.2	-
EBIT	38.4	26.2	+12.2	+46.6%
Net finance result	1.0	2.1	-1.1	-52.4%
EBT	39.4	28.3	+11.1	+39.2%
Income taxes	18.1	-4.5	+22.6	>100%
Effective tax rate (in %)	45.9	15.7	+30.2PP	-
Net income (after non-controlling interests)	19.7	22.4	-2.7	-12.1%
Earnings per share (in EUR)	0.31	0.35	-0.04	-11.4%

 

* Proposal to 2017 AGM

For further information, please contact:

ElringKlinger AG
Dr. Jens Winter
Investor Relations and Corporate PR
Max-Eyth-Straße 2
72581 Dettingen/Erms
Germany
Phone: +49 7123 724-88335
Fax: +49 7123 724-85 8335
E-mail: jens.winter[at]elringklinger.com
 

About ElringKlinger AG
As an automotive supplier, ElringKlinger has become a trusted partner to vehicle manufacturers - with a firm commitment to shaping the future of mobility. Be it optimized combustion engines, high-performance hybrids, or environmentally-friendly battery and fuel cell technology, ElringKlinger provides innovative solutions for all types of drive systems. ElringKlinger's lightweighting concepts help to reduce the overall weight of vehicles. As a result, vehicles powered by combustion engines consume less fuel and emit less CO₂, while those equipped with alternative propulsion systems benefit from an extended range. In response to increasingly complex combustion engine technology, the Group also continues to make refinements with regard to gaskets in order to meet the highest possible standards. Additional solutions include thermal and acoustic shielding components as well as particulate filters and end-to-end exhaust gas purification systems for engines used in stationary and mobile applications. The Group's portfolio is complemented by products made of the high-performance plastic PTFE which are also marketed to industries beyond the automotive sector. These efforts are supported by a dedicated workforce of more than 8,600 people at 47 ElringKlinger Group locations around the globe.