KHD Humboldt Wedag International AG / Release of an announcement according to
Article 37x of the WpHG [the German Securities Trading Act]
15.05.2015 10:10
Interim report according to Article 37x of the WpHG, transmitted by
DGAP - a service 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, 2015
/
ISIN: DE0006578008
German Securities Identification Number (WKN): 657800
Stock Exchange Symbol: KWG
www.khd.com
Summary of First Quarter of 2015
- Continued restraint among customers in awarding new orders
- Revenue decrease of -15.4% to EUR 50.7 million compared to the first
quarter of the previous year
- EBIT of EUR -5.5 million due to decreasing gross profit margin
- Guidance for the key performance indicators for the 2015 financial year
confirmed
Key Figures at a Glance
<pre>
Jan. 1 - Jan. 1 -
Mar. 31, Mar. 31, Variance
in EUR million 2015 2014 in %
Order intake 58.3 25.3 130.4
Revenue 50.7 59.9 -15.4
Gross profit 3.7 7.0 -47.1
Gross profit margin (in %) 7.3 11.6 -37.1
EBIT -5.5 -1.7 -223.5
EBIT margin (in %) -10.8 -2.8 -285,7
EBT -3.0 -1.3 -130.8
Group net result for the period -4.2 -1.2 -250.0
EPS (in EUR) -0.08 -0.02 -300.0
Cash flow from operating
activities -13.5 21.4
Cash flow from investing
activities -0.2 -0.3
Cash flow from financing
activities 2.7 -0.7
Mar. 31, Dec. 31, Variance
in EUR million 2015 2014 in %
Equity 225.8 225.9 0.0
Equity ratio (in %) 56.8 57.3 -0.9
Cash and cash equivalents 119.2 123.6 -3.6
Intercompany loans* 100.0 100.0 0.0
Net working capital 22.4 18.1 23.8
Order backlog 203.1 195.4 3.9
Employees 752 777 -3.2
</pre>
* Including intercompany loan of EUR 50 million with the option for early
repayment with 30 days notice
Please note that differences can result from the use of rounded amounts and
percentages.
Management of the KHD Group
In the first few months of the 2015 financial year, KHD Humboldt Wedag
International AG has resituated itself to meet future challenges with a new
top management team. Since January 1, 2015, Daniel Uttelbach, who is in
charge of Sales & Technology, is now a member of the Management Board.
In February, Johan Cnossen was appointed to the Management Board, effective
May 1, 2015. Mr. Cnossen is taking over the position of Chief Executive
Officer (CEO) previously held by Jouni Salo, who resigned from the
Management Board as of April 30, 2015.
Effective April 10, 2015, Jürgen Luckas has been appointed to the
Management Board. Mr. Luckas took over the position of Chief Financial
Officer (CFO) previously held by Ralph Quellmalz.
Market Environment
The overall economic environment did not change significantly in the first
quarter of 2015 with respect to the previous year. In April, the
International Monetary Fund (IMF) confirmed its global growth forecast of
3.5% (previous year: 3.4%) for the year overall. There are indications of
greater momentum in the industrial countries, which are benefiting to a
large extent from the low crude oil prices. For 2015, the IMF is
forecasting growth of 2.4%, in contrast to 1.8% in the previous year. On
the other hand, a lower growth rate of 4.3% is expected in the emerging and
developing countries (previous year: 4.6%), which is a result of weaker
development in China, South America and Russia.
The expansionary monetary policy of the European Central Bank (ECB) has
resulted in a weakening of the euro with respect to other currencies that
are significant for KHD. The quarterly average exchange rate for the euro
with respect to the U.S. dollar was 17.8% lower than the rate for the same
period last year; with respect to the Indian rupee, the euro is down 17.1%.
In contrast, the Russian ruble was subjected to a strong downward trend,
its value decreasing by an average of 47.8%.
There is still no indication of a significant recovery in the cement
markets. In its forecast published in February, market research institute
CW Research predicts an increase in global cement consumption of 2.9% in
the current year (previous year: 2.6%).
Changes in the key sales markets of the KHD Group (hereinafter referred to
as 'KHD' or 'Group') are detailed below:
- In the first quarter, India continued to benefit from low crude oil
prices and an improved investment environment. In the current year, CW
Research is expecting a 6% increase in cement consumption and an
increase in capacity of 4%.
- According to currently available information, economic sanctions and
the falling oil price have resulted in an economic downturn in Russia.
In February, CW Research adjusted the forecast for cement consumption
downward, now expecting cement consumption to decrease by 10%.
- Economic activity showed weak development in Turkey during the first
quarter. Nevertheless, CW Research predicts a 5% increase in cement
consumption over the entire year.
- Based on current estimates, in the USA, growth in the first quarter was
less than expected. However, the IMF continues to expect robust growth
of 3.1% for the year overall. For cement consumption in 2015, CW
Research predicts an increase of 7%.
- In Latin America there were no signs of recovery in the first quarter.
In particular, another slowdown is expected in Brazil this year.
However, cement production in Mexico showed growth, which benefited
from good economic development in the USA.
- In China, economic growth continued to slow in the first quarter, which
may affect cement demand. In the current year, CW Research is expecting
just a 3% increase in cement consumption.
Business Development
In the first quarter of 2015, order intake was EUR 58.3 million. This is
considerably higher than the level reached in the first quarter of the
previous year (EUR 25.3 million), but is still not entirely satisfactory.
Several investment decisions were delayed until the second half of 2015 by
individual customers in the Capex segment. Orders with an overall volume of
EUR 47.5 million were placed in the Capex business unit in the first
quarter of 2015 (previous year: EUR 13.3 million). The spare parts and
service business (Parts & Services segment) had a restrained start into the
2015 financial year with an order intake of EUR 10.9 million (previous
year: EUR 12.0 million).
As a result of an improved order intake volume, the order backlog as of
March 31, 2015, at EUR 203.1 million, showed a slight increase of EUR 3.9
million over the amount recorded on December 31, 2014.
Group's Results of Operations
In comparison with the first quarter revenue in previous year (EUR 59.9
million), revenue for the first quarter 2015 sank by 15.4% to EUR 50.7
million. Primarily projects in Russia and North America contributed to
revenue in this period. The gross profit for the first quarter of 2015 was
EUR 3.7 million (previous year: EUR 7.0 million) and as a result, the gross
profit margin decreased from 11.6% to 7.3%. The margin decline reflects
both the effects related to the execution of projects won in previous years
against strong competition and under high margin pressure and special
challenges in project execution that resulted in additional costs for
certain large projects.
In contrast to the first three months of 2014, sales expenses decreased
slightly by 2.4%, from EUR 2.6 million to EUR 2.5 million. Sales activities
remain focused on strategically important projects in KHD's core markets.
In comparison with the previous year, general and administrative expenses
of EUR 4.7 million have remained nearly constant (previous year: EUR 4.6
million). Other operating expenses increased considerably to EUR 6.1
million (previous year: EUR 1.6 million). In addition to EUR 1.2 million in
expenses for research and development (previous year: EUR 1.0 million),
these other operating expenses include, in particular, expenses due to fair
value adjustments of foreign exchange forward contracts amounting to EUR
3.8 million (previous year: EUR 0.0 million). The foreign exchange forward
contracts have been concluded for hedging foreign currency receivables.
From an economic perspective, other income in an amount of EUR 4.0 million
(previous year: EUR 0.0 million) resulting from exchange rate fluctuations
of the corresponding foreign currency receivables should be offset against
the expenses from foreign exchange forward contracts.
Earnings before interest and taxes (EBIT) amounted to EUR -5.5 million,
significantly lower than the previous year's figure (EUR -1.7 million). As
a result, the EBIT margin was -10.8% (previous year: -2.8%).
The Group's net finance income of EUR 2.5 million improved significantly
over the previous year (EUR 0.3 million). The primary reason for this is
the interest income of EUR 1.5 million resulting from two loans granted in
the 2014 financial year to AVIC International (HK) Group Ltd. in a total
amount of EUR 100 million. Earnings before taxes (EBT) amounted to EUR -3.0
million (previous year: EUR -1.3 million).
The net result for the period was EUR -4.2 million (previous year: EUR -1.2
million), which translates into diluted and basic earnings per share of EUR
-0.08 (previous year: EUR -0.02).
Segments' Results of Operations
Due to the low order backlog at the beginning of the year, the Capex
segment contributed merely EUR 37.5 million to revenue in the first quarter
of 2015 (previous year: EUR 46.9 million). The Parts & Services segment
revenue totaled EUR 13.2 million (previous year: EUR 13.0 million). While
the gross profit in the Capex segment at EUR 0.4 million, was
unsatisfactory (previous year: EUR 3.1 million), the Parts & Services
segment achieved a gross profit of EUR 3.3 million (previous year: EUR 3.9
million). This resulted in a gross profit margin in the Parts & Service
segment of 25.3% (previous year: 29.8%); in contrast, the gross profit
margin in the Capex segment was just 1.0% (previous year: 6.6%).
While EBIT in the Capex segment that amounted to EUR -7.7 million (previous
year: EUR -4.5 million) was unsatisfactory, the Parts & Services segment
achieved EBIT of EUR 2.2 million (previous year: EUR 2.8 million).
Financial Position and Net Assets
Total cash and cash equivalents decreased in the first quarter of 2015 by
EUR 4.4 million to EUR 119.2 million. This decrease was mainly attributable
to the reduction in cash flow from operating activities, which at EUR -13.3
million represents a significant decline from the first quarter of the
previous year (EUR 21.4 million). The reasons for the outflow of funds in
the first quarter primarily include payments to suppliers for which there
were no corresponding incoming payments from customers. The cash flow from
investment activities of EUR -0.2 million (previous year: EUR -0.3 million)
primarily includes investments in the group's property, plant and
equipment. The cash flow from financing activities of EUR 2.7 million
(previous year: EUR -0.7 million) includes cash inflow from interest income
in particular. Taking into consideration the effects of changes in currency
exchange rates in the amount of EUR 6.4 million, cash and cash equivalents
as of March 31, 2015 now total EUR 119.2 million (December 31, 2014: EUR
123.5 million).
The balance sheet total of EUR 397.7 million changed only slightly from the
figure at the end of 2014 (EUR 394.3 million). The increase in trade
receivables (EUR 1.6 million) as well as the increase in the gross amount
due from customers for contract work (EUR 6.6 million) is partially offset
by the decrease in cash and cash equivalents (EUR -4.4 million). Other
current and non-current assets changed only slightly.
On the liabilities side, commitments under construction contracts increased
by EUR 8.3 million, while trade and other payables decreased by EUR 4.8
million.
The net working capital - the difference between current assets (less cash
and cash equivalents) and current liabilities - increased from EUR 18.1
million as on December 31, 2014 to an amount of EUR 22.4 million.
Equity amounted to EUR 225.8 million, hardly changed from the figure at the
end of 2014 (EUR 225.9 million). The positive result from currency
translation differences of the balance sheets of foreign subsidiaries
nearly compensated for the negative net result for the period. As a result,
the equity ratio as of March 31, 2015 was 56.8% and decreased only slightly
compared with the figure as of December 31, 2014 (57.3%).
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, either individually or in
combination, do not pose a threat to the KHD Group as a going concern.
In comparison with the balance sheet date in 2014, 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, 2014 (page 39 ff. of the Group
Annual Report).
Outlook
In the 2015 financial year, weak economic activity in the emerging
countries will likely take the shape of continued restrained growth in
cement consumption. Moreover, geopolitical insecurity in Russia and in the
Middle East will result in only slow capacity expansion. Even though CW
Research does expect a slight increase in global capacity utilization
rates, it has to be considered that sufficient reserve capacity is
available in most markets. Opportunities for cement plant engineering
companies are found mainly in India, in a few markets in Southeast Asia, in
Turkey and in Northern Africa.
In the medium to long term, a return to accelerated growth in cement
consumption is expected 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. Due
not only to its efficient and environmentally friendly solutions, KHD is
well positioned in these areas. The margins in cement plant engineering
will likely remain under severe pressure for the foreseeable future.
At the close of the first quarter of 2015, KHD confirms the outlook
regarding the market environment and economic development of the Group and
essentially maintains the guidance for the key performance indicators
relevant for KHD as described in its 2014 Annual Report n.
The Group continues to expect a significantly higher volume of new orders
for 2015. Consequently, KHD aspires to achieve at least a doubling of the
order intake. However, due to economic and political uncertainties -
particularly the effects of the Ukraine crisis on the Russian market - the
predicted order intake in the Capex segment continues to be a afflicted
with a great deal of uncertainty.
Due to the low order backlog at the beginning of the financial year,
revenues in 2015 will remain significantly below the level of the previous
year. The gross profit margin will also remain at an unsatisfactory level
due to low margin projects currently in execution. Despite the cost
optimization measures introduced in recent years, significantly negative
earnings (EBIT) are expected for the 2015 financial year.
As a consequence of the difficult economic and political environment,
challenges in project execution and the resulting significantly negative
EBIT, KHD expects a negative result before taxes for the 2015 financial
year - despite a considerable improvement in the financial result. Due to
its solid equity and liquidity position, KHD also anticipates a stable
financial and net assets position for the 2015 financial year.
The Group also confirms the guidance about the expected future development
of the Capex and Parts & Services segments provided in its 2014 Annual
Report.
Cologne, Germany, May 15, 2015
The Management Board
(s) Johan Cnossen (s) Jürgen Luckas (s) Yizhen Zhu (s) Daniel Uttelbach
15.05.2015 The DGAP 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 as of March 31, 2015
| Source: EQS Group AG