Tognum confirms forecast for 2009 after Q3
Posted on November 10, 2009
The specialist for propulsion and power solutions Tognum, as expected, reported a significant decline in growth in the first three quarters of 2009 as a result of the global economic and financial crisis. At the end of the first nine months, however, the company’s adjusted EBIT margin is within the target corridor for the full year. Tognum’s forecast for the current financial year remains unchanged.
- Decline in order intake and revenues as expected
- Adjusted EBIT margin at 6.6% within target corridor for the full year
- Adjusted earnings per share of €0.51
Friedrichshafen, 10 November 2009. The specialist for propulsion and power solutions Tognum, as expected, reported a significant decline in growth in the first three quarters of 2009 as a result of the global economic and financial crisis. At the end of the first nine months, however, the company’s adjusted EBIT margin is within the target corridor for the full year. Tognum’s forecast for the current financial year remains unchanged.
“Our company, as does the entire German mechanical engineering industry, continues to face major challenges. However, our action package to counteract the effects of the economic crisis – our ”Robust Action Plan” – bears fruit, demonstrating the effectiveness of our strategy. On the basis of the current order situation, we expect a strong fourth quarter and assume we will achieve the goals we have set for the year”, said Volker Heuer, chairman of the executive board of Tognum AG. The company continues to expect a decline in revenues of 15 to 20% for 2009 and an adjusted EBIT margin of 6 to 9%.
“With targeted investments in our technological expertise and in sales, we will further expand our technology leadership and our strong position on the global market. This will provide us with the best prerequisites for getting off to a fast start when the markets pick up again.“
Decline in order intake and revenues
In the first nine months of 2009, the order intake was down 29.8% compared with the same period last year to €1,764.1 million (Q1-Q3 2008: €2,512.0 million). The ordering behaviour of the customers remained hesitant, with orders being placed at much shorter notice. Revenues were down 23.4% to €1,765.2 million (Q1-Q3 2008: €2,303.9 million).
At the end of the first nine months, the adjusted EBIT amounted to €115.9 million and were thus 64.2% below last year’s level of €323.6 million. The EBIT margin for the first nine months was 6.6% (Q1-Q3 2008: 14.0%). Compared with the previous quarter, Tognum saw an increase in profitability: the adjusted EBIT improved from €19.2 million to €32.9 million by comparison with the second quarter 2009, while the adjusted EBIT margin doubled from 3.2% to 6.3%.
Targeted investments in R&D and sales, administration costs down
Tognum increased its expenditure for research and development in the reporting period as scheduled by 20.0% to €102.2 million (Q1-Q3 2008: €85.2 million). In the third quarter alone, €33.3 million (Q3 2008: €39.7 million) went into promising future technologies and products. Although the company placed greater focus on special measures designed to increase sales in the regions, it was able to keep selling costs in the third quarter constant at €42.0 million (Q3 2008: €41.6 million). Administrative costs were down 8.4% as a result of the “Robust Action Plan” to €61.0 million (Q1-Q3 2008: €66.6 million), which had a strengthening effect on profit.
Significant increase in adjusted net profit
Despite the considerable reduction in workload, the adjusted gross profit margin declined only marginally. With an adjusted gross profit in the first nine months of €427.5 million (Q1-Q3 2008: €602.9 million), the margin dropped to 24.2% (Q1-Q3 2008: 26.2%).
At the end of the first nine months, adjusted net profit at €67.4 million is clearly positive, albeit two thirds below the last year’s level (Q1-Q3 2008: €202.1 million). Adjusted earnings per share amount to €0.51 (Q1-Q3 2008: €1.54).
Sound financing structure
Free cash flow increased in the first nine months by just under two thirds from €86.9 million in the same period last year to €143.7 million. The main reason for this was the reduction in net working capital.
The equity ratio at 26.3% as at 30 September 2009 had reached the level reported at the end of the previous year. By repaying liabilities, it has been possible to reduce net financial debt by 19.5% compared with the level at the end of 2008 to €270.4 million. This has led to significantly lower interest expenses and an improved interest result.
Revenues and profit development in the segments
All three segments reported economy-related declines in revenues in the reporting period. At the same time, after-sales business in each of the segments performed extremely well and proved most resistant to economic fluctuations.
The Engines segment at the end of nine months reported revenues of €1,153.9 million (Q1-Q3 2008: €1,516.3 million), which represented a decline of 23.9%. The most severely affected sector was that of industrial engines, in which a project-related decline in rail propulsion systems was reported. As a result of the drop in prices for raw materials, the Industrial sub-segment, with application areas such as agricultural and construction vehicles, industrial machinery and mining vehicles, reported a lower demand. In the Marine sub-segment, government and project business performed extremely well, while the business in yachts and commercial vessels also declined. The adjusted EBIT margin was at 6.7% (Q1-Q3 2008: 17.3%).
In the Onsite Energy & Components segment, revenues were down 28.6% in the first nine months of 2009 from €748.8 million in the same period last year to €535.0 million. The greatest decline in percentage terms was reported by the OE Diesel Systems & Engines sub-segment, as customers had significantly reduced their call-offs. By contrast, propeller shafts delivered the strongest performance to date in the current year in the third quarter, reflecting the positive trend in the automotive sector. The adjusted EBIT margin amounted to 4.6%
(Q1-Q3 2008: 7.8%).
The Distribution segment, which includes group-owned sales companies operating outside Germany, reported a decline in revenues of 22.8% to €323.1 million (Q1-Q3 2008: €418.5 million). This affected virtually all consolidated subsidiaries in this segment. The adjusted EBIT margin increased to 9.0% (Q1-Q3 2008: 6.7%). This was due to the stabilising effect of the good profit situation in Asia.
Free cash flow = cash flow from operating activities and cash flow from investing activities
All segment figures incl. intersegmental relations, i.e. transactions between all segments
Outlook for 2009 reaffirmed
As a result of the current backlog of orders, Tognum expects there will be an increase in production capacity in the fourth quarter. Even taking into account the sale of the propeller shaft unit on 31 October 2009, the company continues to abide by its forecast for the year and expects a decline in revenues of between 15 and 20% compared with last year. In the case of the adjusted EBIT margin, Tognum is still aiming for a level of 6 to 9%.
The interim report for the first nine months of 2009 is available for download at www.tognum.com under Investors.
Key figures – Tognum Group
|In € million |
|Q1-Q3 2008||Q1-Q3 2009||Change||Q3 2008||Q3 2009||Change|
|EBIT margin (adj.)||14.0%||6.6%||-7.4pp||15.7%||6.3%||-9.4pp|
|Net profit (adj.)||202.1||67.4||-66.7%||69.0||16.5||-76.1%|
|EPS* (adj.) in €||1.54||0.51||-66.9%||0.53||0.13||-75.5%|
|Free cash flow||86.9||143.7||+65.4%||33.9||78.5||131.6%|
|Gross profit margin||26.2%||24.2%||-2pp||28.8%||23.6%||-5.2pp|