DGAP-News: KHD Humboldt Wedag International AG / Key word(s): Quarterly /
Interim Statement
KHD Humboldt Wedag International AG: Interim Report as of May 13, 2016
13.05.2016 / 10:00
The issuer is solely responsible for the content of this announcement.
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KHD Humboldt Wedag
International AG,
Cologne, Germany
Interim Report as of May 13, 2016
corresponding to Section 51 BörsO (Stock Exchange Regulations issued by the
Frankfurt Stock Exchange)
/
ISIN: DE0006578008
GERMAN SECURITIES IDENTIFICATION NUMBER (WKN): 657800
Stock Exchange Symbol: KWG
www.khd.com
Summary of the 1st Quarter 2016
- Continued restraint among customers in awarding orders
- Revenue decrease of 31.4% with respect to the first quarter of the
previous year to EUR 34.8 million
- EBIT in the amount of EUR -8.0 million, due to lower revenues,
additional costs in some projects and under-utilization of existing
capacities
- Adjustment of key financial targets in the forecast for the financial
year 2016
Key Figures at a Glance
<pre>
in EUR million Jan. 1 - Mar. Jan. 1 - Mar.
31, 2016 31, 2015
Order Intake -1.1 58.3
Revenue 34.8 50.7
Adjusted Gross 2.6 4.8
Profit
Adjusted Gross 7.5 9.5
Profit margin (in %)
EBIT -8.0 -5.5
EBIT-Margin (in %) -23.0 -10.8
EBT -6.2 -3.0
Group net result for -6.5 -4.2
the period
EPS (in EUR) -0.13 -0,08
Cash flow from -14.7 * -12.3 *
operating activities
Cash flow from 1.2 * 1.3 *
investing activities
Cash flow from 0.0 0.0
financing activities
in EUR million Mar. 31, 2016 Dec. 31, 2015
Equity 195.6 203.4
Equity ratio (in %) 51.5 51.8
Cash and 197.6 212.7
Intercompany loans
**
Net Working Capital 32.1 25.1
Order Backlog 148.0 183.8
Employees 744 735
</pre>
* The disclosure of interest received under cash flow from operating
activities or cash flow from investing activities from 2015 financial year
onwards.
** Intercompany loans amounting to EUR 100 million, including intercompany
loan of EUR 50 million with entitlement to call for early repayment by
giving 30 days' notice.
Please note that the use of rounded amounts and percentage figures may
result in differences due to commercial rounding.
Management of the KHD Group
Mr. Tao Xing was appointed as an additional member of the Management Board
of KHD Humboldt Wedag International AG (hereafter also referred to as "KHD"
or "Group") effective January 1, 2016. With his many years of experience in
the cement industry, the primary focus of his work includes expanding KHD's
business activities in China, Asia Pacific and America. Mr. Tao Xing was a
member of KHD's Supervisory Board from June to December 2015.
On March 11, 2016, Mr. Johan Cnossen resigned from his office as Chief
Executive Officer (CEO) and member of the Management Board with immediate
effect. After the former CEO's resignation the Management Board re-
organized its responsibilities in agreement with the Supervisory Board for
an interim period. The Chief Financial Officer (CFO), Mr. Jürgen Luckas,
took over the role of spokesman for KHD's Management Board.
Market Environment
The International Monetary Fund (IMF) predicts global growth of 3.4%
(previous year: 3.1%) for the year overall. In the emerging economies
growth is predicted to be the lowest since 2008 at just 4.0%. Growth in the
advanced industrialized economies is expected to increase to 2.1% (previous
year 1.9%).
According to the CW Group global cement consumption decreased by 1.7% in
2015, which was primarily caused by the slowdown in China, geopolitical
turmoil as well as low oil and commodity prices. Global cement consumption
will again contract by 1.2% in 2016. Nevertheless, cement consumption
excluding China is expected to grow by 4.2%. KHD's markets demonstrated
varying tendencies with regard to expected cement consumption:
- In India, although the government expects overall growth of 7.5%,
infrastructure projects are not going as fast as expected.
Nevertheless, 10,000 km of highways are in discussion and cement
consumption is expected to grow by 6.0% through 2016.
- Russia continues to be impacted by the sanctions as well as low oil
prices. Construction declined by 7.5% in 2015 and another decline is
expected for 2016. This will result in a predicted 5.0% contraction in
cement consumption.
- Slower economic growth in Turkey will lead to an expected 1.0% decline
in cement consumption in 2016.
- In the USA cement production capacity did not grow in 2015 and only 1.5
million tons of additional capacity is expected in 2016. Nevertheless,
investment in residential housing is set to increase by 16%. Lower
energy prices have also sparked investment so that a 5.0% increase in
cement consumption is expected for 2016 on top of 3.3% growth in 2015.
Business Development
Order intake in the first quarter of 2016 was negative at EUR -1.1 million.
This is due to the low level of new business (EUR12.8 million), order
cancellations and reductions (EUR-9.1 million) as well as the effects of
currency exchange rates on the order backlog. These changes in the order
backlog are adjusted by changing the order intake. The adjusted order
intake (EUR12.8 million) is considerably lower than both the order intake
in the first quarter of the previous year and budgeted order intake for the
first quarter of 2016. This disappointing start into 2016 is primarily due
to ongoing customer delays in awarding new orders.
In the first quarter of 2016 the Capex segment generated orders with a
total volume of EUR 3.7 million (previous year EUR 47.5 million). Order
intake in the Plant Services segment reached EUR 9.1 million. This was
below the previous year figure of EUR 10.9 million, but close to the
budgeted amount.
As a result of the unsatisfactory level of order intake volume, order
backlog as of March 31, 2016 was at EUR 148.0 million. This shows a
considerable decrease of EUR 35.8 million compared to the amount recorded
on December 31, 2015. The current order backlog no longer ensures the full
utilization of existing capacities. Despite major improvements in order
intake expected later in the year, capacity adjustments at individual
subsidiaries of KHD Group are being carefully evaluated.
Group Earnings Situation
In comparison with the previous year's first quarter revenue (EUR 50.7
million), revenue for this quarter decreased by 31.4% to EUR 34.8 million.
Primarily projects in India, North America and Russia contributed to this
total. Gross profit for the first quarter of 2016 was EUR 0.7 million
(previous year: EUR 3.7 million). Cost of sales include EUR 1.9 million of
idle capacity costs (previous year: EUR 1.1 million) because existing
capacities could not be fully utilized. As these costs are not directly
associated with the revenue recognized, they were corrected when the
adjusted gross profit was calculated. The resulting adjusted gross profit
for the first quarter of 2016 amounted to EUR 2.6 million (previous year:
EUR 4.8 million). The adjusted gross profit margin decreased by 2
percentage points to 7.5%. Hence, adjusted gross profit margin remains on
an unsatisfactory level and is still negatively affected by impacts related
to the execution of orders won in previous years against strong competition
and under high margin pressure. Furthermore, exceptional challenges in
order execution resulted in additional costs in the execution of certain
large projects.
In contrast to the first three months of 2015, sales expenses increased by
6.5%, from EUR 2.5 million to EUR 2.7 million. Despite the difficult market
environment, KHD is purposely investing in Account Management and in
expanding its sales activities. Sales activities continue to focus on
strategically important projects in KHD's core markets. In one of KHD's
traditionally strong markets, Iran, KHD has substantially expanded its
sales office at the beginning of 2016, after several years of embargo. This
assures competent and efficient on-the-spot customer support. In contrast
to the previous year, general and administrative costs of EUR 3.9 million
decreased considerably by 16.1% (previous year: EUR 4.7 million). This
reduction attributed to the success of continual cost management efforts
within the Group. Other operating expenses also decreased considerably to
EUR 2.8 million (previous year: EUR 6.1 million). In addition to EUR 1.1
million in expenses for research and development (previous year: EUR 1.2
million), other operating expenses also include expenses from exchange rate
effects of EUR 0.3 million (previous year: 0.6 million) and expenses based
on foreign exchange forward contracts to hedge foreign currency receivables
and payables of EUR 0.3 million (previous year: EUR 3.8 million). From an
economic perspective, income resulting from the effects of currency
exchange rates on the foreign currency receivables and payables amounting
to EUR 0.5 million (previous year: EUR 4.0 million) should be offset
against the expenses.
Profit before interest and taxes (EBIT) in an amount of EUR -8.0 million is
below the previous year's figure (EUR -5.5 million). Low revenue volume,
unsatisfactory gross profit and the above mentioned special effects led to
an EBIT margin of -23.0% (previous year: -10.8%).
Net finance income decreased to EUR 2.1 million (previous year: EUR 2.7
million), whilst finance expenses rose from EUR 0.1 million to EUR 0.3
million. The financial result in total decreased to EUR 1.8 million (EUR2.5
million). As in the previous year, net finance income included interest
income of EUR 1.5 million from two loans made to AVIC International (HK)
Group Ltd. in 2014. This resulted in profit before taxes (EBT) of EUR -6.2
million (previous year: EUR -3.0 million).
The group net profit for the period was EUR -6.5 million (previous year:
EUR -4.2 million), which translates into diluted and basic (undiluted)
earnings per share of EUR -0.13 (previous year:
EUR -0.08).
Segment Earnings Situation
Due to the low order backlog at the beginning of the year, the Capex
segment contributed just EUR 24.8 million to revenue in the first quarter
of 2016 (previous year: EUR 42.1 million). Plant Services revenue totaled
EUR 10.0 million (previous year: EUR 8.6 million). Adjusted gross profit in
the Capex segment of EUR -0.5 million (previous year: EUR 2.4 million) was
disappointing, whereas the Plant Services segment achieved EUR 3.2 million
in adjusted gross profit (previous year: EUR 2.4 million). This translates
to an adjusted gross profit margin figure of -2.0% (previous year: 5.7%)
for the Capex segment, whereas the Plant Services segment achieved an
adjusted gross profit margin of 31.7% (previous year: 27.6%).
While EBIT in the Capex segment, EUR -8.7 million (previous year: EUR --6.7
million), was very unsatisfactory, the Plant Services segment achieved EBIT
of EUR 0.7 million (previous year: EUR 1.2 million).
Financial Position and Net Assets
In the first quarter of 2016, total cash and cash equivalents declined by
EUR 15.0 million to EUR 97.6 million. The main reason for this development
was cash flow from operating activities, which amounted to EUR -14.7
million, which was lower than the first quarter of the previous year (EUR
-12.3 million). The outflow of funds in the first quarter was primarily due
to a lack of advance payments from customers as a result of the low order
intake as well as low progress payments, due to the advance stage of
completion of the major orders in the order backlog. Cash flow from
investing activities of EUR 1.2 million (previous year: EUR 1.3 million)
mainly results from the interest payments received from the loans granted
to AVIC. Taking the effects of currency exchange rates in the amount of EUR
-1.5 million into consideration, cash and cash equivalents as of March 31,
2016 now total EUR 97.6 million (December 31, 2015: EUR 112.6 million).
In comparison with the end of 2015 (EUR 392.3 million), the balance sheet
total decreased by EUR 12.3 million to EUR 380.0 million. On the asset side
there were major increases in trade receivables (+ EUR 2.1 million), gross
amounts due from customers for contract work (+ EUR 2.0 million) as well as
income tax assets (+ EUR 2.0 million). However, a decrease was recorded for
advance payments made (- EUR 3.5 million) and cash and cash equivalents
(- EUR 15.0 million). Other current and non-current assets changed only
slightly.
On the liabilities side, trade payables decreased by EUR 5.6 million and
provisions by EUR 0.9 million, while commitments under construction
contracts increased by EUR 2.8 million. Other current and non-current
liabilities changed only slightly.
Net working capital - the difference between current assets (less cash and
cash equivalents) and current liabilities - increased from the total on
December 31, 2015 (EUR 25.1 million) to EUR 32.1 million.
Equity was at EUR 195.6 million, down EUR 7.8 million compared to the end
of 2015 (EUR 203.4 million). The reasons for this decline included both the
negative net result of the period of EUR 6.5 million and EUR 1.3 million in
currency translation differences recognized in equity resulting from
converting the balance sheets of foreign Group subsidiaries. Thus, the
equity ratio as of March 31, 2016 was 51.5%, and remained virtually
unchanged with respect to the amount reported as of December 31, 2015
(51.8%).
Risks and Opportunities Report
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.
In comparison with the balance sheet date in 2015, 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, 2015 (page 55 ff. of the Group
Annual Report).
Outlook
Political uncertainties, low commodity prices, the slowdown in China as
well as consolidation in the cement industry will continue to have a
significant impact on business throughout 2016 and most likely 2017.
Chinese cement consumption is expected to contract by 5% per year before
growth returns in 2019. For Sub-Saharan African as well as in the USA
cement imports will play a major role, so that despite growing cement
demand, only limited investment in new cement capacity is expected. Due to
the difficult investment environment in Russia, decisions for new cement
plants or for modernizations and expansions will continue to be postponed.
Some markets, where KHD is well-positioned will see continued growth. This
includes in particular India, where cement demand is expected to grow by
6.8% p.a. through 2020. Pricing for the projects that will be awarded in
the near future will remain under pressure due an extremely high level of
competition in all markets.
A crucial part of the outlook provided in the 2015 Annual Report was the
expectation of a significant increase in order intake over the previous
year, especially in the first quarter of 2016. KHD continues to expect a
considerably higher volume of new orders in the 2016 financial year than in
the previous year. Thus, the reported outlook for the order intake remains
unchanged. However, KHD will not reach the revenue and EBIT targets for the
current financial year. This is mainly due to the lack of order intake in
the first quarter in the Capex segment. According to the current forecast,
KHD is expecting revenues for the 2016 financial year that will be
approximately 10% lower than in the previous year. EBIT is expected to be
significantly lower than in the 2015 financial year.
With the expectation that the planned order intake for the remaining three
quarters of the financial year will be achieved, KHD confirms that the
forecasted significant increase in order backlog and a balanced operating
cash flow can still be achieved.
Despite the current challenges, KHD has a solid equity and liquidity
position, which can also help it master especially difficult market
conditions in the cyclical business of cement plant engineering. The Group
continues to anticipate a stable financial position and net assets
situation for the financial year 2016.
Cologne, Germany, May 13, 2016
The Management Board
(s) Jürgen Luckas (s) Yizhen Zhu (s) Daniel Uttelbach
(s) Tao Xing
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Language: English
Company: KHD Humboldt Wedag International AG
Colonia-Allee 3
51067 Köln
Germany
Phone: +49 (0)221 6504 1500
Fax: +49 (0)221 6504 1409
E-mail: michael.nielsen@khd.com
Internet: www.khd.com
ISIN: DE0006578008
WKN: 657800
Listed: Regulated Market in Frankfurt (General Standard);
Regulated Unofficial Market in Berlin
End of News DGAP News Service
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463501 13.05.2016
DGAP-News: KHD Humboldt Wedag International AG: Interim Report as of May 13, 2016
| Source: EQS Group AG