KHD Humboldt Wedag International AG / Release of an announcement according to
Article 37x of the WpHG [the German Securities Trading Act]
15.05.2014 08:00
Interim report according to Article 37x of the WpHG, transmitted by
DGAP - a company of EQS Group 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, 2014
/
ISIN: DE0006578008
German Securities Identification Number (WKN): 657800
Stock Exchange Symbol: KWG
www.khd.com
Summary of First Quarter of 2014
- Continued restraint among customers in awarding orders
- Revenues increase of 31.6% over first quarter of the previous year to
EUR 59.9 million
- EBIT of EUR -1.7 million due to decreasing gross profit margin and
higher personnel expenses
- Positive operating cash flow of EUR 21.4 million
- Confirmation of expectations for the financial year 2014
Key Figures at a Glance
<pre>
Jan. 1 - Jan. 1 - Variance
in EUR million Mar. 31, 2014 Mar. 31, 2013 in %
Order Intake 25.3 21.6 15.7%
Revenue 59.9 45.5 31.6%
Gross Profit 7.0 6.3 11.1%
Gross Profit margin (in %) 11.6 14.0
EBIT -1.7 -1.5 -13.3%
EBIT margin (in %) -2.8 -3.3
EBT -1.3 -1.0 -30.0%
Group net profit for the period -1.2 -0.7 -71.4%
EPS in EUR -0.02 -0.01
Cash flow from operating activities 21.4 -14.1
Cash flow from investing activities -0.3 -0.3
Cash flow from financing activities -0.7 0.7
Variance
in EUR million Mar. 31, 2014 Dec. 31, 2013 in %
Equity 223.0 222.5 0.2%
Equity ratio (in %) 53.5 53.2
Cash and cash equivalents 251.9 228.2 10.4%
Order Backlog* 304.8 339.3 -10.2%
Employees 771 775 1.8%
</pre>
*Previous year's figure adjusted for canceled order in Russia
Market Environment
According to currently available data, the global economy picked up speed
during the first three months of this year, above all due to the good
development in the USA. The economic recovery in the eurozone appears to
have stabilized at a low level. However, at the same time, economic risks
have significantly increased in some emerging economies. The tension on the
financial markets is the main cause for concern following some significant
capital outflows resulting from US monetary policy. The political crisis in
Ukraine is also a cause of additional risks for global economic growth.
In April, the International Monetary Fund (IMF) forecast global economic
growth of 3.6% for 2014 as a whole (previous year: 3.0%); a rise of 4.9%
(previous year: 4.7%) is forecast for the developing and emerging
economies.
Changes in the key sales markets of KHD Humboldt Wedag International AG
(hereinafter referred to as 'KHD' or 'Group') are detailed below:
- In India, the expected increase in economic growth to 5.4% (previous
year: 3.2%) was hardly noticeable during the first quarter, nor was
there any sign of an upswing in the cement industry. Familiar problems
such as surplus capacities and pricing pressure in the cement industry
remain. In January, Exane BNP Paribas significantly lowered its growth
forecast for the cement market.
- There was increased uncertainty in Russia as a consequence of the
political developments. The IMF revised its growth forecast for 2014 to
1.3%. Growth in the first quarter decreased compared with the first
quarter of the previous year.
- The growth of Turkey's national economy slowed due to a decrease in
private consumption, but the IMF expects continued high levels of
government investment. According to the current forecast from Exane BNP
Paribas, cement consumption is growing more strongly than expected.
- The unusually bad weather during the first quarter somewhat slowed the
good economic development in the USA; however, the IMF still expects
strong growth of 2.8%. The positive economic environment and especially
the recovery in the real estate sector will also benefit the cement
industry.
- In Latin America, US monetary policy muted the already weak growth.
While Mexico is benefiting from the upswing in the USA, the IMF has
lowered its growth forecast for South America overall to 2.5% - in
particular due to the weak development in Brazil.
- In China, weak economic figures caused uncertainty among companies and
on the financial markets during the first quarter. However, demand for
cement continued to rise due to extensive government investment
programs.
Business Development
Controlling, monitoring, and reporting within the Group have been carried
out in the two separate segments Capex (project business) and Parts &
Services since January 1, 2014. Comparability with the figures for the 2013
financial year is, however, only provided for the aggregated values.
During the first quarter of 2014, order intake was at EUR 25.0 million,
above the previous year's level (EUR 21.6 million), with the Parts &
Services segment contributing EUR 12.0 million, or 48.0%. Larger new orders
in project business (Capex segment) were awarded in the second quarter (see
report on events after March 31, 2014, p. 6).
Due to the cancellation of a project (see details on developments after
March 31, 2014), the order backlog was adjusted by EUR 74.5 million as of
December 31, 2013. Despite the adjustment, the order backlog was still at
the satisfactory level of EUR 304.8 million (end of 2013: EUR 339.3
million) as of March 31, 2014.
Group's Results of Operations
Revenue rose by 31.6% on the previous year (EUR 45.5 million) to EUR 59.9
million. The projects in Malaysia, India, and North America continued to
make significant contributions to revenue. The Capex segment contributed
EUR 46.9 million to revenue during the first quarter of 2014, while Parts &
Services contributed EUR 13.0 million.
The gross profit was EUR 7.0 million in the first quarter 2014 (previous
year: EUR 6.3 million). While gross profit of EUR 3.1 million in the Capex
segment (gross profit margin: 6.6%) was not satisfactory, the Parts &
Services segment was able to generate gross profit of EUR 3.9 million
(gross profit margin: 29.8%). At Group level, the gross profit margin
declined from 14.0% to 11.6%. The decline in the margin reflects the
execution of projects won in previous years against strong competition and
under high margin pressure. As in the previous quarters, the further
execution of a large project in Malaysia also had a negative effect on the
margin. A significant portion of this order is for structural steel and
general erection works. This scope has been passed through to KHD's
strategic partner AVIC with no additional gross profit for KHD.
Sales activities remain focused on strategically important projects in
KHD's core markets. At EUR 2.6 million, expenses remain unchanged compared
to the previous year. The rise in administrative expenses to EUR 4.6
million (previous year: EUR 3.8 million) is primarily the result of higher
personnel expenses. Other operating expenses decreased slightly to EUR 1.6
million (previous year: EUR 1.7 million). At EUR 1.0 million, significantly
more than half of the amount was attributable to research and development.
Other operating expenses also include expenses arising from changes in
exchange rates.
At EUR -1.7 million, earnings before interest and tax (EBIT) were below the
previous year's level (EUR -1.5 million); the EBIT margin was -2.8%
(previous year: -3.3%). While EBIT in the Capex segment was at a weak EUR
-4.5 million as expected, the Parts & Services segment generated EBIT of
EUR 2.8 million (EBIT margin: 21.4%). At EUR 0.3 million, the net finance
income fell slightly below that of the previous year (EUR 0.4 million) due
to the low interest rate. The earnings before tax (EBT) thus amount to EUR
-1.3 million (previous year: EUR -1.0 million).
The net result for the period came to EUR -1.2 million (previous year: EUR
-0.7 million) and translates into diluted and basic earnings per share of
EUR -0.02 (previous year: EUR -0.01).
Financial Position and Net Assets
Cash and cash equivalents at KHD increased by EUR 23.7 million to EUR 251.9
million in the first quarter of 2014. This increase was mainly attributable
to the cash flow from operating activities, which at EUR 21.4 million
represented a significant improvement on the previous year (EUR -14.1
million). Progress payments from customers upon reaching defined milestones
in project business mainly contributed to this. At EUR -0.3 million, cash
flow from investing activities remained unchanged compared with the first
quarter of 2013. Cash flow from financing activities (EUR -0.7 million)
includes inflows from the acceptance of the takeover offer for the treasury
shares as well as interest income, offset however by outflows due to the
change in restricted cash.
The balance sheet total of EUR 417.2 million changed only slightly from the
figure at the end of 2013 (EUR 418.1 million). The decline in trade
receivables (EUR -22.2 million) and gross amounts due from customers for
contract work (EUR -2.7 million) is offset by the increase in cash and cash
equivalents (EUR +23.8 million). Other current and non-current assets
changed only slightly.
On the liabilities side, trade and other payables decreased (EUR -4.8
million), while commitments under construction contracts rose (EUR +5.4
million).
Equity was at EUR 223.0 million, hardly changing from the figure at the end
of 2013 (EUR 222.5 million).
Risks and Opportunities
KHD's approach to risk management ensures that changes in the risk position
are promptly identified. To the extent required, provisions are set up for
specific risks. The risks identified do not pose a threat to the KHD Group
as a going concern, either individually or in combination.
By comparison with the balance sheet date in 2013, there has been no
significant change as of the date of this Interim Report in the assessment
of risks and opportunities. Please refer to the relevant section in the KHD
Group management report as of December 31, 2013 (page 39 ff. of the Group
Annual Report).
Developments after March 31, 2014
On April 9, KHD received orders with a total value of over EUR 90 million
for the supply of equipment and services for a new cement plant in the
Kaluga region (Russia). The plant encompasses two production lines each
with a capacity of 3,000 tons of cement clinker per day. The customer,
Pervaja Cementnaja Kompanija (PZK), is part of the same group of companies
as the large Russian construction group SU-155. The project will be
recorded in order intake as soon as the advance payments have been
received.
On April 1, KHD was informed by Stavropolsky Zavod Stroitelnih Materialov,
a member of the EUROCEMENT Group, of the cancellation of its project. The
order backlog as of December 31, 2013 was therefore adjusted accordingly by
EUR 74.5 million.
Outlook
The economy in the KHD core markets is expected to continue developing at a
muted pace during the 2014 financial year. The economic risks have
increased significantly in particular in Latin America and Eastern Europe.
Nevertheless, according to a survey by Exane BNP Paribas among the leading
cement producers, cement consumption should increase by between 2.9% and
6.5% in 2014. In particular in the USA, the good economic development is
likely to continue having a positive effect. Drivers for growth also
include countries in Sub-Saharan Africa, the Middle East, and Asia. In
India, cement producers expect a volume growth of 3.7% with a continued low
margin during the course of the year, while growth of 5.1% is expected in
China. Demand in Russia is forecast to rise by 4.9% and by 5.0% in Turkey.
In the long term, continuing growth in cement consumption is likely in all
core markets. Surplus capacities in some markets continue to limit the
opportunities for capacity expansions; however, modernization programs and
upgrades to improve efficiency and to meet increased environmental
requirements are important growth drivers. KHD is well positioned in these
areas not least thanks to its efficient and environmentally friendly
solutions.
Closing the first quarter of 2014, KHD can basically confirm the outlook
provided in its 2013 Annual Report regarding the market environment and
economic development of the Group. The Group continues to expect a
significantly higher volume of new orders for 2014. On the one hand
opportunities relating to the forecast for the 2014 financial year remain
largely unchanged; on the other hand KHD noted increasing uncertainties
with regard to its business in the important Russian market due to the
political crisis in the Ukraine. Awarding and execution of orders in Russia
might slow down. In addition, increasing risks relating to the forecast for
the 2014 financial year are triggered by the intended merger of Holcim and
Lafarge. Several cement producers may wait for opportunities resulting from
the Holcim -Lafarge divestment program rather than investing in new cement
production capacity.
We continue to expect revenue to reach the level of the previous year. As
was the case in 2013, orders won against strong competition and under high
margin pressure will be the main contributors to revenue in the current
year. The gross profit margin is therefore likely to remain at an
unsatisfactory level. Considering the increasing risks described in the
paragraph above the EBIT margin for the 2014 financial year is now
forecasted as slightly negative.
KHD also anticipates a stable financial and net assets position for the
rest of the year.
Cologne, Germany, May 15, 2014
The Management Board
(s) Jouni Salo (s) Ralph Quellmalz (s) Yizhen Zhu
15.05.2014 DGAP's Distribution Services include Regulatory Announcements,
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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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DGAP-IRE: KHD Humboldt Wedag International AG: Interim Report Pursuant to Section 37x of the German Securities Trading Act (WpHG)
| Source: EQS Group AG