Ireland | 15 May 2013 08:02
KHD Humboldt Wedag International AG / Release of an announcement according to Article 37x of the WpHG [the German Securities Trading Act]
15.05.2013 08:02
Interim report according to Article 37x of the WpHG, transmitted by
DGAP - a company of EquityStory AG.
The issuer is solely responsible for the content of this announcement.
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KHD Humboldt Wedag
International AG, Cologne, Germany
Interim Report Pursuant to Section 37x of the German Securities Trading Act
(WpHG)
as of May 15, 2013
ISIN: DE0006578008
German Securities Identification Number (WKN): 657800
Stock Exchange Symbol: KWG
www.khd.com
Q1 2013 Summary
- Customers slow in awarding new orders at the beginning of the year
- High order backlog
- 6.8% drop in revenue to EUR 45.5 million due to delays in project
execution
- Lower gross profit margin due to reduced margin quality of order
backlog
- Successful in implementing strict cost management program
- EBIT of EUR -1.5 million
- Equity ratio and liquidity at comfortable levels
- Confirmation of guidance for 2013 financial year
Key Figures at a Glance
Variance
in EUR million Mar. 31, 2013 Mar. 31, 2012 in %
Order intake 21.6 159.1 -86.4
Revenue 45.5 48.8 -6.8
Gross profit 6.3 8.4 -25.0
Gross profit margin (in %) 14.0 17.2 -18.6
EBIT -1.5 -0.6
EBIT margin (in %) -3.3 -1.2
EBT -1.0 0.4
Net result of the period -0.7 -0.2
Earnings per share (in EUR) -0.01 0.00
Cash flow from operating activities -14.1 -22.0 35.9
Cash flow from investing activities -0.3 -1.5 80.0
Cash flow from financing activities 0.7 12.2 -94.3
Variance
in EUR million Mar. 31, 2013 Dec. 31, 2012 in %
Equity 227.4 233.6 -2.7
Equity ratio (in %) 54.0 53.6 0.7
Cash and cash equivalents 268.9 282.6 -4.8
Order backlog 467.1 491.0 -4.9
Employees 775 783 -1.0
Market Environment
In contrast to the last quarter of 2012, world economic growth has gained
momentum in the first three months of the current year - particularly in
the developing and emerging economies - according to available data. While
the situation in the USA has improved slightly, the Eurozone remains in
recession.
Early indicators point to an improvement in growth over the course of the
year. The International Monetary Fund (IMF) forecasts global economic
growth of 3.3% for 2013 (2012: 3.2%); this rate is expected to reach 5.3 %
(2012: 5.1%) for developing and emerging economies.
The key sales markets of KHD Humboldt Wedag International AG (hereinafter
referred to as 'KHD' or 'Group') are generally benefiting from the economic
recovery:
- India benefits from the renewed growth in external demand as well as
political reforms. The IMF forecasts growth of 5.7% (previous year:
4.0%). In the first months of the year, however, the country's cement
market has yet to see any improvement.
- Continuing high growth rates of around 6% are expected for the other
Asian economies; infrastructure projects continue to ensure positive
development of the cement markets.
- The IMF predicts a stable growth rate in Russia of 3.4%. The cement
market is likely to maintain its strong growth trend as in the previous
year due to the expansion of infrastructure as well as housing
construction projects.
- In the USA the moderate upturn remains intact, with a growth rate of
1.9%. The recovery in the housing sector is having a positive impact on
cement consumption.
- Latin America is also enjoying stronger growth levels - Brazil's and
Argentina's economies in particular have revived again. However, the
Brazilian market experienced a slight decline in cement consumption in
the first quarter.
- China's growth rate is expected to be slightly stronger at 8.0% than in
the previous year (7.8 %) due to robust domestic consumer demand and
investments as well as increasing external demand. Cement production
was up by 8.2% in the first three months of the year.
In the medium-to-long term, factors such as ongoing urbanization,
demographic trends, and infrastructural needs in developing and emerging
economies will drive construction activities and, by extension, boost
cement consumption. The BRIC and IST (Indonesia, South Africa and Turkey)
countries in particular have contributed significantly to the growth of
cement consumption and are forecast to remain key drivers of growth in the
future. China remains the largest single market with a share of 59% of
global cement consumption.
Business Development
Very few new cement plant orders were awarded in the first quarter 2013
overall. There were no new orders with volumes comparable to those of the
major projects acquired in the previous year in Malaysia and Venezuela.
Accordingly, the order intake in the first three months amounted to just
EUR 21.6 million, compared to EUR 159.1 million in the same period in 2012.
KHD is well positioned in several ongoing tenders. Therefore, the Group
continues to expect a solid order intake for the 2013 business year and a
further increase in its order backlog.
Spare parts and service business contributed a very large portion of the
total order intake in the first quarter of 2013.
As of March 31, 2013, the order backlog remains at a high level (EUR 467.1
million) and has increased by EUR 63.1 million (15.6%) as compared to March
31, 2012.
Results of Operations
Revenue declined by 6.8% compared to the previous year (EUR 48.8 million)
to EUR 45.5 million. This decrease is mainly attributable to delays in
order execution. The projects in Malaysia and Venezuela have yielded
significant revenue contributions. Other major projects were still in their
early stages in late March 2013 and will realize their full revenue
potential over the remainder of 2013 and in the following years.
The gross profit in the reporting period was EUR 6.3 million (previous
year: EUR 8.4 million). The gross profit margin decreased from 17.2% to
14.0%, in line with expectations, since a considerable portion of the
orders included in this order backlog was won in a highly competitive
environment characterized by strong margin pressure.
In the first quarter, KHD was able to largely compensate for a EUR 2.1
million decrease in its gross profit by means of strict overhead cost
management.
Sales activities are mainly focused on strategically important projects in
KHD's core markets. An improved customer-relationship management system
enables KHD to focus on tenders with the best prospects of success. Sales
expenses decreased by 23.6% to EUR 2.6 million (previous year: EUR 3.4
million).
The Group's strict cost management program is also paying off with regard
to general and administrative expenses and other expenses. General and
administrative expenses were 8.2% lower than in the previous year at EUR
3.8 million (EUR 4.1 million). Other expenses declined by 14.8% to EUR 1.7
million (previous year: EUR 1.9 million). Research and development
accounted for more than half of this amount. Research and development
continues to focus on environmentally friendly technologies and increasing
our competitiveness. Current projects, which include areas such as the use
of alternative fuels, progressed on schedule.
Due to the cost savings, earnings before interest and tax (EBIT) were only
EUR 0.9 million lower than in the previous year at EUR -1.5 million (EUR
-0.6 million). In line with our expectations, net finance income (EUR 0.5
million) has failed to match the previous year's figure (EUR 1.0 million).
This is partly due to the historically low interest rate. The earnings
before tax (EBT) thus amount to EUR -1.0 million (previous year: EUR 0.4
million).
The net result of the period came to EUR -0.7 million (previous year: EUR
-0.2 million) and translates into diluted and basic earnings per share of
EUR -0.01 (previous year: EUR 0.00).
Financial Position and Net Assets
KHD's unrestricted cash and cash equivalents fell by EUR 13.7 million to
EUR 268.5 million in the first quarter of 2013.
This decrease was mainly attributable to the cash flow from operating
activities which, at EUR -14.1 million, represented an improvement on the
previous year (EUR -22.0 million). In the first quarter of 2013, large
projects at an advanced stage of execution were once again characterized by
a cash outflow. Cash flow from investing activities (EUR -0.3 million) and
financing activities (EUR 0.7 million) did not have any significant impact
on the development of cash and cash equivalents.
On the assets side of the balance sheet, the EUR 14.8 million decrease in
the balance sheet total - from EUR 435.7 million at the end of 2012 to EUR
420.9 million as of March 31, 2013 - is mainly characterized by a decline
in cash and cash equivalents (EUR -13.7 million). On the liabilities side
of the balance sheet, this decrease is chiefly attributable to a reduction
in commitments under construction contracts (EUR -9.0 million) and trade
and other payables (EUR -3.0 million).
The EUR 6.2 million decrease in equity to EUR 227.4 million results mainly
from the first-time application of the revised IAS 19 (change in accounting
policy). Due to the discontinuation of the corridor method, all actuarial
losses are now recognizable within pension benefit obligations. The EUR 6.4
million measurement effect has given rise to increased pension benefit
obligations as well as reduced equity.
Risks and Opportunities
There has been no material change in either the risks or the opportunities
facing KHD, since publication of the 2012 Annual Report.
Outlook
The economy in KHD's core markets is now recovering, which should also
provide positive momentum for the cement market. In the long term,
continuing growth in cement consumption is likely in all core markets.
However, some markets continue to suffer from excess capacity, which limits
the opportunities for new cement plants or for expanding capacity. In many
cases the focus is instead on modernization and retrofitting, which is
intended to improve the efficiency of existing plants while ensuring
compliance with stricter environmental requirements. KHD is well positioned
in these areas thanks to its efficient and environmentally friendly
solutions.
The general uncertainty and sensitivity on the market continue to represent
significant risks. This may lead to further delays in project awards and
execution and may even result in the cancellation of orders. Besides the
targeted measures for improving efficiency and profitability, technical and
commercial risks related to project execution also require our attention.
At the end of the first quarter, KHD can confirm the outlook made in the
2012 Annual Report regarding the market environment and the economic
development of the Group. KHD is well positioned to book additional orders
from upcoming projects despite the relatively low order intake in the first
quarter. For 2013 the Group continues to expect a solid order intake and a
further increase in its order backlog.
In line with expectations, revenue will improve over the next few quarters
as KHD works through its order backlog. Accordingly, the Group predicts
increased revenues for the 2013 financial year. Since revenue in the 2013
financial year will be increasingly generated through orders gained in a
highly competitive environment with strong margin pressure, we foresee a
lower gross profit margin, as is already apparent in the first quarter of
2013. However, the EBIT margin should improve slightly due to the ongoing
cost optimization and increased competitiveness, which have already begun
to pay off in the first quarter.
Developments after March 31, 2013
In April KHD signed an exclusive and perpetual license agreement, giving
Weir Minerals direct control over the design, manufacture and distribution
of HPGR (roller press) equipment in minerals processing applications
utilizing KHD's technology, in return for royalty payments on equipment
sales. The license agreement replaces the existing agency model under which
Weir has acted as KHD's agent, operating on a commission only basis.
Several KHD technical staff engaged in applying HPGRs in minerals
processing will be offered employment with Weir.
Cologne, Germany, May 15, 2013
The Management Board
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Language: English
Company: KHD Humboldt Wedag International AG
Colonia-Allee 3
51067 Köln
Germany
Internet: www.khd.com
End of Announcement DGAP News-Service
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