Demag Cranes Increases Revenue and Earnings in First Quarter of Financial Year 2008/2009
Düsseldorf, 10. February 2009
- Steady Order Level: Group Order Intake Dips Moderately by 4.6 Percent
- Group Revenue Grows by 4.1 Percent
- Group Operating EBIT Up 1.9 Percent
- Group Funding Secured Until 2011
- Outlook: Uncertain Economic Conditions Expected to Prevail
Demag Cranes AG increased its revenue and earnings in the first quarter of financial year 2008/2009 despite the deteriorating economic environment. Up 4.1 percent, Group revenue grew to EUR 303.0 million. Operating EBIT (formally "adjusted EBIT“) stood at EUR 30.5 million, 1.9 percent higher than the prior-year quarter.
Economic Environment Clouded by Considerable Uncertainty
In the fourth calendar quarter of 2008 (first quarter of the Demag Cranes Group's 2008/2009 financial year), the global economic environment was significantly impacted by the financial and economic crisis. In the fourth quarter of 2008, the World Economic Climate Index produced by the ifo World Economic Survey fell to its lowest level for more than twenty years. This fall in the indicator is the result of an even gloomier view of the economic situation and lower expectations for the next six months. On this occasion, the downturn in the global economic climate affected not only the large economic regions of North America, Western Europe and Asia, but also Central and Eastern Europe, Russia and Latin America. The euro zone economy slipped into recession for the first time since monetary union began. Nearly all businesses, including the majority of our customers, have felt and are feeling the increasing effects of the global economic downturn. German exports particularly have felt the impact of the decline in demand all over the world.
Segments Show Different Effects of the Global Economic Downturn
In the Industrial Cranes segment, the decline in demand in the mature markets contrasted with growth potential in the emerging markets in the first quarter of the financial year. Due to the segment’s higher dependence on economic cycles, the Management Board continues to find it difficult to make forecasts, but believes the segment is well positioned. The Port Technology segment is dependent on worldwide cargo volumes and growth in container handling. The impact of the financial and economic crisis was most obvious in this segment in the fourth calendar quarter of 2008. Cargo volumes on the main container routes are declining as a result of falling demand and major projects and investment decisions are being postponed. These developments are now affecting both the Mobile Harbour Crane business and, in particular, terminal automation projects, as the original schedule for their implementation has been thrown into question, which in turn will have a negative impact on business in the Port Technology segment in the course of the current financial year. Over the medium and long term, however, experts still expect further growth in global cargo traffic and therefore continuing demand for the relevant handling equipment. The Services segment saw little of the effects of cyclical fluctuations in the course of the past quarter. The Management Board believes this segment is well prepared to face an economic downturn. This segment will not be badly affected by a slight decline in capacity utilisation because equipment will have to be maintained as usual in the interests of safety, reliability and availability.
Steady Order Level: Group Order Intake Dips Moderately by 4.6 Percent
The Group's order volume in the first quarter of financial year 2008/2009 was steady, order intake dipping moderately by 4.6 percent to EUR 281.3 million. In the first quarter of financial year 2008/2009, the Group order book grew by 13.5 percent year on year to EUR 488.1 million. At segment level, the Industrial Cranes segment profited from continuing demand for products. First-quarter order intake rose by a further 2.9 percent year on year to EUR 150.4 million entirely through organic growth. The order book was 32.0 percent up on the figure as at 31 December 2007 at EUR 336.2 million. In the Port Technology segment, the weak economic environment caused port and terminal operators to extend investments over longer time periods and postpone some major projects. This pushed order intake down by around EUR 26 million and the order book down by some EUR 30 million. The Services segment continued to see strong demand for its products in the first quarter of financial year 2008/2009. Order intake increased by 9.4 percent compared to the prior-year quarter. The order book was 14.0 percent higher than the figure at the end of the prior-year period at EUR 54.3 million.
Group Revenue Grows by 4.1 Percent
Thanks to sustained demand for products and services, Group revenue increased by 4.1 percent to EUR 303.0 million in the period under review. This growth was driven by the Industrial Cranes and Services segments. In the first quarter of financial year 2008/2009, the Industrial Cranes segment generated revenue amounting to EUR 153.5 million, which represents an increase of 8.2 percent.
This growth was driven mainly by the Process Cranes and Standard Cranes product lines. Revenue in the Port Technology segment fell by 4.1 percent compared with the prior-year quarter to EUR 64.3 million largely due to customers postponing investments and the resulting low order intake. This decline is equivalent to one to two fewer cranes compared with a year earlier. In the first quarter, revenue in the Services segment rose by 3.6 percent year on year to EUR 85.3 million. The segment benefited from a stronger field service team and a healthy spare parts business.
Group Operating EBIT Up 1.9 Percent
The Demag Cranes Group sustained the positive trend in earnings in the first quarter of financial year 2008/2009, generating an operating EBIT (formally "adjusted EBIT") of EUR 30.5 million, which represents an increase of 1.9 percent. At the segment level, operating EBIT in the Industrial Cranes segment increased by 38.7 percent to EUR 13.2 million, a strong performance due to the year-on-year increase in revenue. At the same time, however, the growth in earnings reflects the successful outcome of measures to optimise processes, such as operating closer to full capacity worldwide. Operating EBIT in the Port Technology segment was down EUR 1.3 million year on year from EUR 2.9 million to EUR 1.6 million, mainly because of lower revenue and initial cuts in production that reduced capacity utilisation rates at the factory. In an effort to cut costs, the Port Technology segment consequently shed around 150 temporary employees at the end of the first quarter. These initial repercussions, due to difficult market environment, have so far only affected this segment. At EUR 18.4 million, operating EBIT in the Services segment was almost unchanged year on year.
Group Funding Is Secured Until 2011
The Group’s funding needs are fully covered thanks to the revolving credit facility for EUR 325.0 million that runs until June 2011. As at 31 December 2008, drawings on the facility totalled EUR 168.4 million, with cash drawings accounting for EUR 105.0 million and drawings on the ancillary facility for guarantees for EUR 63.4 million. In addition, the Company is currently holding cash and cash equivalents amounting to EUR 80.6 million. Net debt therefore stands at EUR 29.1 million across the Group.
Outlook: Uncertain Economic Conditions Expected to Prevail
For financial year 2008/2009, the Management Board will not be issuing a full-year forecast for the time being due to the unpredictable economic environment and the considerable amount of uncertainty therefore involved in doing so. Harald J. Joos, CEO explains: "The Management Board would like to wait and see how the second quarter of the financial year develops before deciding whether conditions are appropriate for us to issue a firm year-end forecast. In our view, it is not possible to make a reliable forecast at this time."
About Demag Cranes AG:
The Demag Cranes Group is one of the world's leading suppliers of industrial cranes and crane components, harbour cranes and terminal automation technology. Services, in particular maintenance and refurbishment, are another key element of the Group’s business activities. The Group is divided into the business segments Industrial Cranes, Port Technology and Services and has strong and well-established Demag and Gottwald brands. Demag Cranes sees its core competence in the development and construction of technically sophisticated cranes and hoists as well as automated transport and logistics systems in ports and terminals, the provision of services for these products and the manufacture of high-quality components.
As a global supplier, Demag Cranes manufactures in 16 countries on five continents and operates a worldwide sales and service network that is present in over 60 countries through its subsidiaries, representative offices and a joint venture. In financial year 2007/2008, the Group, with its 6,093 employees, generated revenue of EUR 1,225.8 million. Since the end of June 2006, the Demag Cranes share (WKN: DCAG01) has been listed in the Prime Standard of the German Stock Exchange and is traded on various indices including the MDAX®.
Demag Cranes. We Can Handle It.
Conditions for forward-looking statements
This press release contains forward-looking statements relating to the business, financial performance and earnings of Demag Cranes AG and its subsidiaries and associates. Forward-looking statements are based on current plans, estimates, projections and expectations and are therefore subject to risks and uncertainties, most of which are difficult to estimate and which in general are beyond the control of Demag Cranes AG. Consequently, actual developments as well as actual earnings and performance may differ materially from those which are explicitly or implicitly assumed in the forward-looking statements. Demag Cranes AG does not intend or accept any obligation to publish updates of these forward-looking statements.