Tognum meets forecast for 2009
Posted on March 11, 2010
The specialist for propulsion and power solutions Tognum has met its forecast for the financial year 2009 in full and stands by its dividend policy.
- Revenues in 2009 at €2.5 billion within forecast corridor
- Adjusted EBIT margin at 7.9%
- Net financial debt down significantly to €192 million
- Dividend proposal: €0.35 per share
- 2010: revenues between €2.3 and €2.5 billion expected
Friedrichshafen/Stuttgart, 11 March 2010. The specialist for propulsion and power solutions Tognum has met its forecast for the financial year 2009 in full and stands by its dividend policy.
“Despite the global financial and economic crisis, Tognum has managed the financial year 2009 well. We have met our forecasts as promised, achieved a solid level of profitability, despite declining revenues, higher capital expenditures and advance investments and we have been able to reduce our net financial debt significantly,” said Volker Heuer, chairman of the executive board of Tognum AG. “Many of our markets continue to be difficult and volatile, which will also present us with challenges in the current financial year. We are going through a stage of transition, in which the markets and our business should become increasingly stable. We will continue to pursue our proven strategy based on five growth initiatives, and will reap the benefits as soon as markets recover.”
In 2010, Tognum expects to generate revenues of between €2.3 and €2.5 billion. For adjusted return on sales, the company anticipates a level of between 6 and 9%, despite increased advance investments for future projects.
Revenues 2009 within forecast corridor
The order intake was down 28% in the financial year 2009 to €2,330 million (previous year: €3,231 million). The ordering behaviour of the customers was characterized by lower volume orders being placed at shorter notice. Revenues were down 19% to €2,529 million (previous year: €3,133 million). Excluding the Rotorion companies, the decline would have been 17.8%. The export ratio increased in the reporting period to just under 81% (previous year: 79%). A growing share of revenues is generated in Asia.
Focused investments in R&D and sales, administration costs down
With its “Robust Action Plan”, Tognum implemented effective measures to counteract the impact of the economic crisis at an early stage, which enabled it to successfully secure its business performance last year. The program targets the market, employment, cash and risk management, in addition to cost reduction and investment planning. As a result, the company achieved an earnings contribution of €100 million. At the same time, the company made focused investments in the financial year 2009 to further increase its technological edge and improve its competitive position in order to emerge stronger from the continuing economic crisis. The company increased expenditure on research and development by 29% to €143 million. The company also intensified its sales activities significantly, which contributed to a 20% increase in selling costs to €203 million. On the other hand, Tognum reduced its administrative costs by around 9% to €81 million, which had a positive effect on profit.
Profit target met: adjusted EBIT margin at 7.9%
Adjusted earnings before interest and taxes (EBIT) in 2009 amounted to €199 million and were thus 51% below the previous year’s level of €407 million. The decline is primarily due to lower revenues and a declining gross profit. The adjusted EBIT margin amounts to 7.9% (previous year: 13.0%). This means that Tognum has met its projected profitability target for 2009.
The adjusted Group net profit in the financial year 2009 amounted to €121 million (previous year: €264 million), resulting in adjusted earnings per share of €0.92 (previous year: €2.01). Tognum will continue to pursue the dividend policy it established during the IPO, on the basis of which 30 to 50% of the adjusted annual net profit is to be distributed to shareholders. At the annual general meeting to be held on 18 May 2010, the supervisory board and the executive board will propose a dividend of €0.35 per share for the financial year just ended (previous year: €0.70).
Sound financing structure: net financial debt significantly reduced, equity base strengthened
Tognum has sufficient liquid funds available for investments. Free cash flow, which comprises cash flow from operating activities and investing activities, increased in the reporting period to €224 million (previous year: €65 million). This was mainly due to reduced stock levels, which decreased the net current assets.
Net financial debt was reduced significantly compared with the end of 2008, decreasing by 43% to €192 million. The company’s equity ratio rose from 26.3% as at 31 December 2008 to 27.6% at the end of 2009, thus reaching its highest level since the IPO in the middle of 2007.
Segmental revenues and profit development
The Engines and Onsite Energy & Components segments as well as the Distribution segment that was created in 2009 reported economy-related declines in revenues. However, the after-sales business, with a positive performance in all three segments, proved to be resistant to economic fluctuations.
The Engines segment generated revenues of €1,681 million (previous year: €2,053 million) and was thus 18% below the level of the previous year. The sector of industrial engines, in which a project-related decline in rail propulsion systems was reported, was most severely affected. The decline in prices on the international commodity markets had a negative impact on mining and on the oil and gas industry. The sales of agricultural equipment and industrial machinery for the construction industry also declined. In the market segment for marine applications, government and project business, which is long-term oriented, performed very well, whereas the business in yachts and commercial vessels declined. The segment’s adjusted EBIT margin was 8.1% (previous year: 16.1%).
In the Onsite Energy & Components segment, revenues were down 29% to €719 million (previous year: €1,015 million). Not including Rotorion’s propeller shafts business, which was sold effective 31 October 2009, this would have been a decline of 27%. Onsite Energy Diesel Systems & Engines in particular reported a strong decline, as customers had reduced their call-offs significantly. In Onsite Energy Gas & Fuel Cell Systems application area, revenues also declined. The segment’s adjusted EBIT margin amounted to 3.8% (previous year: 6.0%).
Revenues generated by the Distribution segment dropped to €524 million (previous year: €602 million), with virtually all consolidated foreign sales companies affected by the decline. The adjusted EBIT margin increased to 9.5% (previous year: 7.9%). In this case, the good profit situation in Asia had a stabilising effect.
As at the end of 2009, the Tognum Group had 8,726 employees. Of the 7,309 employees in Germany, 5,969 are employed at the company’s headquarters in Friedrichshafen. The decline of 2% compared with the situation at the end of the previous year was due primarily to the fact that fixed-term employment contracts in production in Germany and the USA were not extended. “2009 demanded an enormous effort from our workforce. In view of the difficult economic conditions, our employees demonstrated that they were prepared to take on responsibility, so that, as a result of our flexible working time model and additional action we took, we have so far been able to avoid the introduction of short-time work in particular, and our core workforce has remained on board,” said Heuer, praising the efforts of the entire workforce. These measures to secure jobs are also an integral part of the “Robust Action Plan”.
Strategic focus targets sustainable growth
Tognum relies on five strategic growth initiatives – focused on the product portfolio, propulsion systems, onsite energy systems, after sales and regional expansion. Clear objective is to increase the company’s innovative power. To this end, the company intends to increase its expenditure for the development of new technologies once again. “Our policy has always been to offer our customers the best possible solutions, which means we never make compromises. It’s the reason why we continue to invest in our technology leadership, which also enables us to improve our competitive situation,” Tognum’s CEO Heuer stressed. In the internationalization of production capacity, the company also intends to make targeted investments in the current financial year. Tognum announced just a few days ago that production in the USA is to be relocated from Detroit to South Carolina, where the company can produce more cost-effectively and capacity can be extended in the medium term if required.
Tognum’s new annual report, including a letter by the chairman of the executive board to shareholders, customers and business partners, as well as the Group’s and individual financial statements for the financial year 2009, are available for download from the company’s website at www.tognum.com in the "Investors" section.
Key figures for the Tognum Group
| (€ million as of 31 December |
if not otherwise indicated)
|EBIT margin (adjusted)||13.0%||7.9%||-5.1 pp|
|Net profit (adjusted)||264||121||-54%|
|Earnings per share (adjusted)1||€ 2.01||€ 0.92||-54%|
|€ 0.70||€ 0.35||-50%|
|Balance sheet total||2,554||2,469||-3%|
|Equity ratio3||26.3%||27.6%||+1.3 pp|
|Net financial debt||336||192||-43%|
|Free cash flow4||65||224||+245%|
1 Earnings per share calculated on the basis of net profit divided by the weighted number of shares: 131,375,000 in 2008 and 2009
2 Subject to the approval of the annual shareholders’ meeting on 18 May 2010
3 Shareholders’ equity as a proportion of total assets
4 The free cash flow comprises the cash flow from operating activities plus the cash flow from investing activities