24.11.2008
Announcement No. 20
SUMMARY
Effects of more difficult market conditions seen on several fronts
With Group revenue in 3rd quarter 2008 of 3,528 mDKK (+ 5%), adjusted operating
income (EBIT) of 272 mDKK (+10%) and Group net income before tax of 218 mDKK,
earnings development compared with 3rd quarter 2007 was acceptable - but below
expectations for the period. Overall, organic growth of 4% was realised in 3rd
quarter 2008.
The negative development that has taken place during 2008 has brought
significantly more difficult market conditions to a number of the markets in
which NKT operates. As expected, this is negatively influencing earnings in
both NKT Cables and Nilfisk-Advance, but it is also creating opportunities to
realise a number of desirable measures.
The positive development of the past couple of years has made it difficult to
implement major structural measures without at the same time losing market
shares. The decline in the level of activity now makes it appropriate to
accelerate a number of the structural initiatives which the Group Management
had planned for the current strategic period - initiatives whose purpose is to
consolidate and strengthen NKT's business segments for the future.
At NKT Cables, a very sharp slowdown has been registered in the level of
activity in the low voltage cable market. A slowdown sharper than anticipated,
and with a negative impact on earnings. This development has led to falling
sales volumes and therefore increasing competition. The market for high voltage
cables remains strong, but this is not sufficient to compensate for the fall in
low voltage sales volumes. The construction of the new factory in Cologne is
proceeding to plan, and the factory is still expected to be ready for
production in 2009.
At Nilfisk-Advance, the 3rd quarter results are satisfactory, but here too
developments were characterised by declining market growth and rising pressure
on earnings. This development will negatively influence rest of 2008. Despite
continuing high raw material prices and lower capacity utilisation, gross
profit rose slightly. The first signs of future falling raw material prices
have appeared. The execution of structural and adjustment measures referred to
in the 2nd quarter interim financial report is proceeding to plan, at a cost of
31 mDKK in the 3rd quarter.
At NKT Flexibles development continues to be positive, with another strong
performance in the 3rd quarter.
Due to the negative developments in trading conditions the expectations
previously declared for the NKT Group are no longer feasible. Forecast Group
net earnings before tax and restructuring costs for 2008 have therefore been
adjusted from around 950 mDKK to around 775 mDKK.
In order to tackle the more difficult market situation at NKT Cables it has
been decided to implement a series of restructuring measures aimed at further
adjusting employee numbers and at the same time optimising the product range by
phasing out certain types of items. Collectively these measures will in 2008
result in implementation costs of around 75 mDKK with a negative impact on
liquidity of 25 mDKK. The measures will positively influence earnings by around
25 mDKK, with full effect from 2009.
After taking into account this initiative and also the measures at
Nilfisk-Advance described in the 2nd quarter interim financial report, forecast
Group net earnings before tax for 2008 have been reduced with 250 mDKK to
around 650 mDKK, compared with around 900 mDKK initially predicted.
