ElringKlinger looking to maintain strong organic growth in sales after record performance in 2014
Dettingen/Erms (Germany), March 31, 2015 +++ The ElringKlinger Group saw its sales revenue expand by 15.3% to EUR 1,325.8 (1,150.1) million in 2014. Expressed in organic terms, growth amounted to 11.2%, thus substantially outpacing the rate of expansion in global vehicle production as well as the Group's own growth target of 5 to 7%. Despite downside factors associated with ElringKlinger's E-Mobility division and sluggish business in Brazil as a result of local market forces, adjusted EBIT before purchase price allocation rose by 8.3% to EUR 162.3 (149.8) million. Net income after non-controlling interests, adjusted for the one-time gain recorded in the previous year from the assumption of control over ElringKlinger Marusan Corporation, Japan, improved by 14.0% to EUR 105.7 (92.7) million.
Strong structural growth in revenue
The substantial organic increase in sales revenue recorded by the Group in the 2014 financial year was achieved against the backdrop of widely divergent regional trends within the global automobile markets. As in the past, China and North America again provided the main impetus for growth. Having been caught in a downward spiral for many years, the Western European market also expanded in 2014, up by almost 5% calculated on the basis of overall car sales. By contrast, the vehicle markets in both Russia and Brazil were faced with an out-and-out slump. Overall, global car production expanded by around 3% in 2014. The ElringKlinger Group benefited in particular from structural growth within many of the product groups marketed by the Original Equipment segment with a focus on CO2 reduction, such as lightweight plastic components or turbocharger gaskets. At 11.2%, therefore, the level of organic revenue growth (excluding the effects of consolidation and assuming stable exchange rates) achieved by the Group was considerably higher than the expansion in global vehicle production in percentage terms. The full consolidation of ElringKlinger Marusan Corporation* contributed EUR 23.1 million to Group revenue in 2014.
Further improvement in adjusted EBIT before purchase price allocation despite unfavorable performance in E-Mobility division
As regards earnings, it should be noted that ElringKlinger had generated a one-time gain of EUR 17.6 million in the previous year following the assumption of control of ElringKlinger Marusan Corporation effective from December 31, 2013. In 2014, reported EBIT rose by 5.0% compared to the prior-year figure adjusted for this exceptional item (EUR 146.6 million), taking the total to EUR 154.0 million.
Group EBIT, adjusted for non-recurring items and before purchase price allocation, stood at EUR 162.3 (149.8) million, up 8.3% on the previous year; this corresponds to a margin of 12.2% (13.0%). This increase in earnings was attributable largely to significant structural revenue growth within the Group's core field of business as well as new serial production ramp-ups and improved earnings in the area of exhaust gas purification. Due to current demand patterns, the new E-Mobility division, by contrast, fell well short of the original target and recorded a loss of EUR 8.0 (-7.2) million before interest and taxes. The Brazilian subsidiary remained around EUR 4.0 million below the original earnings target in 2014 as a result of the severe downturn in the local market.
In total, non-recurring exceptional charges amounted to EUR 4.9 million in 2014, which had a dampening effect on earnings. These expenses were attributable in full to the fourth quarter. First, the subsidiary ElringKlinger Korea Co., Ltd. had to account for inventory corrections and impairments of EUR 2.0 million as part of the plant relocation to the newly constructed site in Gumi. Secondly, a warranty incident attributable to the parent company, ElringKlinger AG, and dating back to 2008 was definitively settled in the reporting period. There are no longer any risks associated with this matter. In this context, however, a sum of EUR 1.5 million in receivables had to be derecognized, which was accounted for in profit/loss. At the same time, ElringKlinger received cash of EUR 8.5 million as a result of the insurance payment. Thirdly, as part of the complete revision of Management Board contracts of service, a one-time amount of EUR 1.4 million had to be allocated to provisions in respect of long-term variable incentive components of compensation (LTI II) that are attributable in economic terms to the two previous years.
As a result of the substantial investments made in the Group's future growth (2014: EUR 147.0 million in ppe), depreciation and amortization rose by EUR 5.0 million to EUR 79.4 (74.4) million. The purchase price allocations contained in write-downs with regard to hidden reserves realized increased to EUR 3.4 (1.3) million.
Compared to the prior-year figure, adjusted for the one-time gain from the assumption of control of Marusan, earnings before taxes rose by 16.6% to EUR 153.1 million (EUR 131.3 million, including one-time gain: EUR 148.9 million). This was driven largely by lower net finance costs of EUR 0.9 (15.3) million, which included foreign exchange gains of EUR 10.0 (-4.4) million. The foreign exchange gains were attributable primarily to the sustained depreciation of the euro over the course of 2014, particularly against the US dollar and Asian currencies. Net interest costs remained largely unchanged at EUR 10.9 (11.2) million.
Adjusted net income after non-controlling interests up by 14%
Due in part to the recognition of deferred taxes in connection with the above-mentioned insurance incident, the Group's tax rate rose to 27.8% (25.3%) in 2014. The prior-year tax rate had benefited from the positive effects of the assumption of control over ElringKlinger Marusan Corporation. Excluding exceptional income from the assumption of control of ElringKlinger Marusan Corporation in 2013, the Group's net income after non-controlling interests was 14.0% higher at EUR 105.7 million (EUR 92.7 million; including one-off gain: EUR 105.4 million). Adjusted earnings per share stood at EUR 1.67 (EUR 1.46; including one-off gain: EUR 1.66).
Order intake up by 10%
The Group's expectations of sustained growth in revenue in 2015 are underpinned by its order intake. Orders placed by customers rose by 10.5% to EUR 1,418.6 (1,284.4) million in the 2014 financial year just ended. The book-to-bill ratio thus stood at 1.07, which reflects the consistently solid level of demand. Correspondingly, order backlog as of December 31, 2014, was up 15.6% year on year at EUR 688.2 (595.4) million.
Further revenue and earnings growth planned for 2015
Based on the assumption that global car production will expand by around 2%, the ElringKlinger Group anticipates that its revenue will increase by 5 to 7% organically, thus again significantly outpacing market growth. Additionally, the consolidation of recently acquired M&W (in future ElringKlinger Automotive Manufacturing Inc., USA) will contribute around EUR 30 million to Group revenue in the financial year as a whole. Adjusted for non-recurring items, EBIT before purchase price allocation is expected to be between EUR 170 and 180 million in 2015. Due to the greater relevance of acquired entities, adjusted EBIT will in future be presented before the effects of purchase price allocation. Owing to current demand patterns and the as yet insufficient degree of capacity utilization in production, the E-Mobility division is at present not expected to see a fundamental improvement in its earnings performance in 2015. Return on capital employed (2014: 12.4%) at Group level is expected to expand slightly in 2015.
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* Due to the necessary retrospective application of IFRS 11 as regards the presentation of comparative prior-year figures (2013), ElringKlinger Marusan Corporation 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 2013 fell retrospectively to EUR 1,150.1 million, the difference being attributable to the entity's revenue contribution (EUR 25.1 million) formerly included at a proportionate rate of 50%. Thus, EBIT presented with regard to 2013 was EUR 0.7 million lower retrospectively, while earnings before taxes were EUR 0.3 million lower retrospectively. By contrast, ElringKlinger Marusan was fully consolidated in 2014 as a result of the assumption of control completed as of December 31, 2013, and was included in Group revenue with its total revenue of EUR 46.2 million. Therefore, the additional revenue contribution was EUR 23.1 million in 2014. When determining organic revenue growth, the joint venture was accounted for as if the entity had remained subject to proportionate consolidation, as originally presented in 2013.
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For further information, please contact:
ElringKlinger AG - Investor Relations/ Corporate PR
Stephan Haas
Max-Eyth-Straße 2
72581 Dettingen
Fon: +49 7123 724 - 137
E-Mail: stephan.haas[at]elringklinger.com
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