Tognum raises earnings guidance for 2011 after nine months

• Order intake up 16.8% in the first three quarters to €2,382.3 million
• Revenues increase by 21.2% to €2.057.7 million
• Increased adjusted EBIT margin of 11.5%
• Full year 2011: revenue guidance confirmed, earnings guidance raised

Friedrichshafen, 8 November 2011. The specialist for propulsion and power solutions Tognum after nine months raises its earnings guidance for the full year and at the same time confirms its revenue guidance. Order intake, revenues and adjusted EBIT margin increased significantly in the first three quarters compared with the same period last year. Tognum now expects an adjusted EBIT margin of around 11%. This represents a significant increase on last year’s figure (2010: 9.4%). The company had previously assumed it would achieve an adjusted EBIT of around €300 million for 2011. Tognum still expects to generate revenues of around €2.9 billion for the full year 2011.

“Tognum this year benefits significantly from the positive performance of its end markets: both order intake and revenues have risen in virtually all application areas compared with last year. Based on the excellent earnings performance in the third quarter, we expect to see slightly better earnings for the full year than previously anticipated,” explains Joachim Coers, CEO of Tognum AG. “We continue to invest heavily in research and development to further increase our technological edge and have already been able to further reduce fuel consumption and life cycle costs of our products. All in all, the signs at Tognum indicate further profitable growth.” With regard to the closing of Tognum’s takeover in the third quarter by Rolls-Royce and Daimler, Joachim Coers adds: “Our new majority owners are supporting us on our way to becoming the world’s leading provider of propulsion systems and distributed energy systems.”

Significant increase in order intake and revenues

Order intake increased in the first nine months of the year by 16.8% to €2.382.3 million (Q1-Q3 2010: €2.039.5 million), while revenues rose by 21.2% to €2.057.7 million (Q1-Q3 2010: €1.698.2 million).

Strong increase in adjusted EBIT, high adjusted EBIT margin

There was a strong increase in the adjusted EBIT of 54.8% to €237.1 million in the reporting period (Q1-Q3 2010: €153.2 million). The prime reason for this rise, besides the absolute increase in revenues, was the related improvement in capacity utilisation, higher efficiency levels, an improved revenue mix and a favourable development in terms of prices compared with costs. R&D expenditure in the first nine months of the year was up 13.8% to €133.5 million as planned (Q1-Q3 2010: €117.3 million). With these investments in the future, Tognum continues to expand its technological edge with new engines and systems. The adjusted EBIT margin increased to 11.5% (Q1-Q3 2010: 9.0%).

Adjusted earnings per share almost doubled

A 28.3% increase in adjusted gross profit to €617.0 million (Q1-Q3 2010: €481.0 million) resulted in an adjusted gross profit margin in the reporting period of 30.0% (Q1-Q3 2010: 28.3%). Adjusted group net income was up 87.7% to €162.7 million (Q1-Q3 2010: €86.7 million), resulting in adjusted earnings per share of €1.24 (Q1-Q3 2010: €0.66).

Adequate financing structure

Tognum’s equity ratio as at 30 September had risen to 28.4% (31 December 2010: 26.8%). “This is the highest equity ratio since our IPO in 2007. Furthermore, based on the company’s earnings power the net financial debt is low,” says Tognum CFO Dieter Royal. Net financial debt increased slightly to €101.0 million (31 December 2010: €57.2 million), which was primarily due to the dividend payment in the second quarter of €65.7 million. Free cash flow¹   was down in the first nine months to €20.6 million (Q1-Q3 2010: €103.7 million). This mainly reflects the high investments in the future and the growth-related increase in working capital. “Our financial management system is designed to support Tognum’s long-term profitable growth by means of an appropriate financing structure,” says Royal. “We are also flexible enough in financial terms to ensure that we are able to consistently make whatever future investments are required for our growth and product strategy.”

Improved performance in all reporting segments

All three reporting segments – Engines, Onsite Energy & Components (OE&C) and Distribution – improved their performance in the first nine months of the year.²  

Revenues in the Engines segment were up 15.2% in the reporting period to €1,395.5 million (Q1-Q3 2010: €1,211.0 million). In the Oil & Gas application area, there was a disproportionately high increase in revenues. This was due to the increased investing activities in this application area resulting from the increase in raw material prices. In the Industrial application area, rail and mining performed positively due to the continuing economic upswing. In the Marine application area, yacht and commercial business in particular contributed to the increase in revenues. In the Defense application area, revenues stagnated, as many projects were coming to an end and new projects, as scheduled, were not yet ready for completion. After Sales/Other business declined slightly, but remains at a high level. The adjusted segment EBIT increased significantly in the first three months by 30.4% to €200.1 million (Q1-Q3 2010: €153.4 million). The adjusted EBIT margin of this segment, at 14.3%, was significantly above last year’s level (Q1-Q3 2010: 12.7%).

The OE&C segment reported a significant increase in revenues in the reporting period by 29.5% to €683.1 million (Q1-Q3 2010: €527.6 million). The OE Diesel Systems & Engines application area continues to drive revenues. The business in diesel systems and the supply business with OEM customers both performed very positively. The business in gas systems in the field of OE Gas Power Systems is growing rapidly. The After Sales/Other application area saw an increase at an already high level of activity. The adjusted segment EBIT improved considerably compared with last year to €63.0 million (Q1-Q3 2010: €19.7 million). This represents an adjusted EBIT margin of 9.2% (Q1-Q3 2010: 3.7%).

The revenue volume of the Distribution segment increased by 82.0% in the first nine months to €357.8 million (Q1-Q3 2010: €196.6 million). The adjusted segment EBIT was up 50.7% to €20.5 million as a result of this strong growth in revenues (Q1-Q3 2010: €13.6 million), which means an adjusted EBIT margin of 5.7% (previous year: 6.9%).  

The interim report for the first nine months of 2011 is available for download at www.tognum.com under “Investors”.

Key figures for the Tognum Group

  

In € million (except*)	Q1-Q3 2010	Q1-Q3 2011	Change	Q3 2010	Q3 2011	Change
Order intake	2,039.5	2,382.3	16.8%	650.0	731.3	12.5%
Revenues	1,698.2	2,057.7	21.2%	612.2	718.8	17.4%
Gross profit margin (adj.)*	28.3%	30.0%	1.7pp	27.4%	27.3%	-0.1pp
EBIT (adj.)	153.2	237.1	54.8%	56.2	78.9	40.4%
EBIT margin (adj.)	9.0%	11.5%	2.5pp	9.2%	11.0%	1.8pp
Net profit (adj.)	86.7	162.7	87.7%	33.9	54.3	60.2%
Earnings per share (adj.) in €3	0.66	1.24	87.9%	0.26	0.41	57.7%
Equity ratio*4	27.6%	28.4%	0.8pp	27.6%	28.4%	0.8pp
Free cash flow5	103.7	20.6	-80.1%	18.0	-4.8	-126.7%
Net financial debt	57.26	101.0	+76.6%	57.27	101.0	+76.6%
Employees*8	8,998	9,697	7.8%	8,998	9,697	7.8%

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