PKC Group Plc INTERIM REPORT 31 October 2013 8.15 a.m.
PKC GROUP’S INTERIM REPORT 1-9/2013:
MAIN MARKETS’ WEAKNESS REFLECTED IN REVENUE AND EBITDA
JULY - SEPTEMBER 2013 HIGHLIGHTS
JANUARY - SEPTEMBER 2013 HIGHLIGHTS
REVENUE AND OPERATING PROFIT ESTIMATES FOR 2013 (UNCHANGED)
|KEY FIGURES||7-9/13||7-9/12||Change %||1-9/13||1-9/12||Change %||1-12/12|
(unless otherwise noted)
|% of revenue||8.0||9.9||8.4||9.2||8.9|
|% of revenue||5.8||7.9||6.3||7.5||7.0|
|% of revenue||4.6||6.3||5.1||6.0||5.5|
|% of revenue||3.8||5.5||3.8||5.5||4.7|
|Profit before taxes||5,542||9,784||-43.4||19,620||34,248||-42.7||34,946|
|Net profit for the report period||3,013||6,666||-54.8||12,164||23,291||-47.8||23,999|
|Earnings per share (EPS), EUR||0.14||0.31||-54.8||0.55||1.09||-49.5||1.12|
|Cash flow after investments||5,115||23,779||-78.5||6,428||52,084||-87.7||63,673|
|Average number of personnel||18,788||19,840||-5.3||19,292||20,931||-7.8||20,590|
|* before non-recurring items|
|** operating profit before PPA depreciation and amortisation and non-recurring items|
MATTI HYYTIÄINEN, PRESIDENT & CEO:
Truck production volumes during the first nine months fell short from last year’s comparison period production volumes in our main markets in North America and Europe. Actual production in Europe during the third quarter remained in the level of previous quarter. In North America truck production volumes began to fall contrary to forecasts in the third quarter and remained below previous quarter’s production volumes.
PKC’s revenue in the third quarter was EUR 211.6 million and operating profit before non-recurring items EUR 9.6 million. The weakening of operating profit margin is explained by extra expenses related to production transfers and ramp-up of new customer programs in Europe. Operating profit also continued to be burdened by losses in Brazilian operations. In Brazil, production volumes for trucks continued to grow during the third quarter. Despite the increased production volumes, we were still able to reduce the number of personnel in Brazil and thus to improve efficiency. On the other hand the significant depreciation of Brazilian real during the third quarter had a negative impact on material expenses. In addition, as previously announced, the unit cost of employees in Brazil increased during the third quarter due to new collective labour agreement.
Production forecasts for the whole year have been raised moderately in Europe and significantly in Brazil. On the other hand, the whole year production forecast in North America has been lowered. Actual production in North America turned into decline in the third quarter and the last quarter production is estimated to be at the level of third quarter at the most. 60% of PKC’s revenue is generated in North America and the development of this market during the rest of the year has substantial influence to PKC’s operating profit level for the whole year.
In Electronics business, the measures improving cost-competitiveness and the increased share of ODM products in the product mix have improved segment’s operating profit this year. Sales activities for electronics business’s own products, which include testing products for mobile devices, other electronic equipment using touch-screen technology and lightning protection system devices, have been high during the third quarter and customer feedback has been promising.
In September, we signed a Framework Agreement for Strategic Cooperation with Sinotruk for a joint venture company in China, which would manufacture wiring systems for Sinotruk and potentially other customers in China as well as for export. Sinotruk is one of the leading companies in heavy duty truck industry in China with a market share of about 15%. The intention of Sinotruk and PKC is to negotiate on the establishment of the joint venture company, so that it could start operations within the first half of 2014.
With regard to the implementation of our strategy, it is essential that we have a strong balance sheet and sufficient funds available for growth projects. During the period, we implemented a directed share issue and raised EUR 44.94 million before commissions and expenses. We also issued a EUR 100 million bond. Both issues were oversubscribed, which indicates investors’ confidence in the company and its growth strategy.
After the report period, PKC has published its decision to establish a new wiring systems factory in Smederevo, Serbia and signing of the memorandum of Understanding related thereto with the Republic of Serbia and City of Smederevo. The factory's purpose is to serve existing and potential new customers in Europe.
The cornerstones of PKC’s customer service are the zero-defect products and on-time deliveries. I would once again like to thank all our employees for their successful work during the period.
European heavy truck production in 2013 is estimated to decrease by about 1% compared to 2012 and medium truck production to remain unchanged compared to 2012 level. The overall economic uncertainty is estimated to keep the commercial vehicle demand in Europe at a lower level. However, the production volumes are estimated to increase due to transition to Euro 6 emission standard in the last quarter.
North American heavy duty truck production is estimated to decrease by 10%, medium duty truck production to increase 7% and light vehicle production to increase by 5% from 2012 level. It is estimated that the last quarter production volumes of heavy trucks will at the most remain on previous quarter’s level.
Brazilian heavy duty truck production is estimated to increase by 47% and medium duty truck production by 66% compared to 2012. The governmental incentive program to support the purchase of new trucks is currently valid until the end of 2013.
PKC’s market outlook is further impacted by some light vehicle and component programs that are near end-of-life-cycle and will be ramped-down in 2013.
The demand of industrial electronic and telecommunications sector appliances is estimated to remain at the previous level. Volumes of renewable-energy and energy saving products including smart grid solutions are expected to increase slightly.
PKC GROUP’S OUTLOOK
PKC Group estimates its full year 2013 revenue to be lower than in 2012 and estimates its comparable operating profit excluding non-recurring items not to reach 2012 level. In 2012 PKC’s revenue was EUR 928.2 million and comparable operating profit excluding non-recurring items was EUR 51.5 million.
DISCLOSING PROCEDURES OF FINANCIAL REVIEWS
PKC Group Plc follows the disclosure procedure enabled by Standard 5.2b published by the Finnish Financial Supervision Authority, and discloses relevant information related to its Interim Report with this release. PKC's Interim Report for January-September 2013 is attached to this release and is also available on company's website at www.pkcgroup.com.
PKC GROUP PLC
Board of Directors
President & CEO
For additional information, contact:
Matti Hyytiäinen, President & CEO, PKC Group Plc, +358 400 710 968
A press conference on the interim report will be arranged for analysts and investors today, 31 October 2013, at 10.00 a.m., at the address Event Arena Bank, Unioninkatu 20, Helsinki.
PKC Interim Report Q3 2013
PKC Group is a global partner, designing, manufacturing and integrating electrical distribution systems, electronics and related architecture components for the commercial vehicle industry and other selected segments. The Group has production facilities in Brazil, China, Estonia, Finland, Germany, Mexico, Poland, Russia and the USA. The Group's revenue in 2012 totalled EUR 928.2 million. PKC Group Plc is listed on NASDAQ OMX Helsinki Ltd.