Tognum in H1 2009
Posted on August 11, 2009
The specialist for propulsion and power solutions Tognum experienced the effects of the economic and financial crisis in the first half of 2009. In spite of this, the company reported adjusted net profits and specifies the forecast for 2009 within the previous corridor.
- Order intake and revenues down as a result of the financial and economic crisis
- Adjusted EBIT margin at 6.7%
- Adjusted earnings per share of €0.39
- 2009 forecast confirmed and specified
Friedrichshafen, 11 August 2009. The specialist for propulsion and power solutions Tognum experienced the effects of the economic and financial crisis in the first half of 2009. In spite of this, the company reported adjusted net profits and specifies the forecast for 2009 within the previous corridor.
"Our first six months show that, even though many of our end-markets have been hit by the financial and economic crisis, we continue to be profitable based on our broadly diversified international setup and our project related business, which is not measurable in quarterly periods", explained Volker Heuer, chairman of the executive board of Tognum AG. "Particularly in the current economic crisis, we are sticking to our strategy and investing more in research and development. Our goal is to consolidate our technological leadership in order to emerge from the crisis even stronger."
Heuer confirmed and specified the known forecast for 2009 as a whole: "Based on the current planning status, we assume revenues will decline by 15 to 20 per cent and anticipate an adjusted return on sales of six to nine per cent." The outlook published originally had assumed a decline in revenues of 10 to 20% and an adjusted EBIT margin in the upper single-digit percentage range.
Decline in order intake and revenues
The order intake, which is strongly influenced by project business, was 22.6% lower year-over-year, declining to €1,275.9 million (H1 2008: €1,648.4 million). Revenues were down 18.3% to €1,239.2 million (H1 2008: €1,517.0 million).
High R&D expenditure affects EBIT
The adjusted EBIT dropped 58.5% to €83 million in the reporting period (H1 2008: €200.1 million). The key factor leading to this decline was the lower volume of business, which resulted in a reduced capacity utilisation in engine production. The difficult market environment in the automotive industry led to declining business in propeller shafts. Increased activities in the regions resulted in a 27.8% increase in selling costs in the first six months to €105.6 million (H1 2008: €82.6 million). This includes allowances for customer accounts in the second quarter amounting to €8 million.
As planned, a strong increase in expenditures for research and development (up 51.6% in the first six months to €69 million) is also reflected in the adjusted EBIT. The total cost of research and development activities in the first six months – including paid development activities and capitalised development costs – amount to €104 million (H1 2008: €77.3 million).
Adjusted net profit and stable gross profit margin
At the end of the first six months, adjusted net profit at €50.9 million show a positive performance, but remain 61.7% below last year’s level
(H1 2008: €133 million). Adjusted earnings per share for the reporting period thus amount to €0.39 (H1 2008: €1.01).
An adjusted gross profit of €303.6 million (H1 2008: €375.9 million) results in a stable adjusted gross profit margin of 24.5% (H1 2008: 24.8%).
Marginal drop in equity ratio
As expected, the equity ratio was down marginally compared with the end of 2008 and as at 30 June 2009 was 25.3% (31.12.2008: 26.3%). Net financial debt had increased by around 6.5% at the balance sheet date to €357.9 million (31.12.2008: €336 million). These two performance indicators are influenced significantly by the dividend payment of €92 million for the financial year 2008, which took place in June. The free cash flow improved for the 6-month period, increasing 23% to €65.2 million (H1 2008: €53 million).
End markets reacting differently
The Engines and Onsite Energy & Components (OE&C) reporting segments reported declines in revenues and profit in the first six months of 2009 due to the economic and financial crisis. The Distribution segment’s profit improved slightly.
In the Engines segment, revenues for the first six months were down 16.5% to €829 million (H1 2008: €992.7 million). The decline in revenues in the Marine application area is due to a decline in the yacht and commercial marine business. Navy and project business in this segment, however, performed extremely well. The greatest decline was reported in the industrial engines business, where a project-related decline in rail vehicle propulsion systems occurred. The After Sales/Other (Engines) segment proved to be a recession resistant pillar of the segment.
Revenues in the OE&C segment at €366.1 million were 26.9% lower year-over-year (H1 2008: €500.6 million). The greatest decline in percentage terms was reported in the propeller shaft business. There was a negative effect due to significant reductions in call-offs from OEM customers for diesel engines used in decentralised power generation facilities. The performance of the After Sales/Other (Onsite Energy) and OE Gas & Fuel Cell Systems improved year-over-year.
The Distribution segment that was established at the beginning of the financial year includes fully consolidated sales subsidiaries outside Germany, primarily in the European and Asia-Pacific regions. Revenue volume in the reporting period was down 21.1%, with virtually all consolidated foreign subsidiaries in this segment affected by the negative performance. Revenues in After Sales remained stable. The segment’s adjusted EBIT rose slightly, 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
2009 outlook confirmed and specified
Despite the continuing volatile market environment, Tognum has confirmed and specified its guidance for the current financial year 2009. This is the result of current developments and the availability of more precise information that is used as the basis for planning scenarios for the second half of the year. In view of the current order backlog – particularly for large engines and the project business – the company plans with an increased utilisation of its production capacity from September to December 2009. As a result, Tognum now assumes there will be a decline in revenue performance of 15% to 20% for the financial year 2009 compared with 2008 and expects adjusted return on sales for 2009 to remain in the upper single-digit percentage range (6 to 9%). Accordingly, the adjusted earnings per share will be below last year’s level, while the company anticipates that the tax rate will remain unchanged at around 30%.
The interim report for the first six months of 2009 is available for download at www.tognum.com under Investors.
Key figures – Tognum Group
|In € million |
|H1 2008||H1 2009||Change||Q2 2008||Q2 2009||Change|
|EBIT margin (adj.)||13.2%||6.7%||-6.5pp||12.7%||3.2%||-9.5pp|
|Net profit (adj.)||133.0||50.9||-61.7%||74.7||12.7||-83.0%|
|EPS* (adj.) in €||1.01||0.39||-61.4%||0.57||0.10||-82.5%|
|Free cash flow||53.0||65.2||23.0%||-2.2||3.0||236.4%|
|Gross profit margin||24.8%||24.5%||-0.3pp||24.0%||23.1%||-0.9pp|