Demag Cranes Reports Record Profit for Financial Year 2005/2006
Düsseldorf, 25. January 2007
- All financial targets achieved
- Significant improvement of profitability
- Dynamic growth in all segments
- Notable reduction of net financial debt
- Dividend proposal: EUR 1.00 per share
- Outlook 2006/2007: Group sales increase of 7 to 10 percent, adjusted EBITDA 20 to 25 percent higher, adjusted EBIT up 24 to 29 percent
In financial year 2005/2006, Demag Cranes AG delivered sustained, profitable growth, thus fully meeting the targets set by the Management Board. The positive results are mainly attributable to the Group’s consistent focus on meeting the demands of markets for new products, process optimisation and cost reduction measures in addition to the favourable global economic developments. CEO Harald J. Joos summarises the past year as follows: "The year 2006 was a milestone for the Demag Cranes Group. With extraordinarily satisfactory business results, a rocketing start on the stock market and the successful launch of new products, we have gained a further edge on the competition and are ideally equipped for the future."
Order Intake and Sales Showing Dynamic Growth
At EUR 1,054.0 million, order intake of the Group was up by 14.4 percent over the prior year. The order book as at 30 September 2006 amounted to EUR 305.6 million, having grown 22.4 percent in the period under report. Thanks to continuing keen demand for products and services, Group sales at EUR 986.9 million were 11.9 percent higher, thus strengthening the market position of the Demag Cranes Group even further. As a result of successful positioning in emerging markets and intensive concentration on mature markets, the Group achieved sales growth in all relevant sectors. The sales share in emerging markets remained unchanged at 28 percent in financial year 2005/2006; the BRIC countries (Brazil, Russia, India and China) included in this figure recorded a sales increase of 22 percent.
Significant Improvement in Earnings Figures and Profitability
The Group achieved earnings before interest, taxes as well as depreciation and amortisation (EBITDA) of EUR 105.6 million, which corresponds to outstanding year-on-year growth of 24.4 percent. The EBITDA margin was up by 1.1 percentage points to 10.7 percent. The very positive results are mainly attributable to the Group's focus on, for example, process optimisation, product standardisation, component modularisation and optimisation measures in purchasing and production. Adjusted EBIT rose by 32.0 percent to EUR 84.5 million. The EBITDA margin improved as a result by 1.3 percentage points to 8.6 percent.
Earnings before taxes increased considerably to 32.5 million (prior year: EUR 2.5 million), which, however, were still impacted by one-off effects such as those relating to the Initial Public Offering (IPO) and stock exchange listing. Correspondingly, net income after tax was notably higher at EUR 22.1 million (prior year: EUR 0.5 million). The resulting earnings per share amount to EUR 1.04.
Industrial Cranes Segment: Significant Improvement in Profitability
The Industrial Cranes segment benefited, as expected, from a generally favourable economic environment and was able to expand its strong market position even further. At EUR 478.2 million, order intake of the Group was up by 8.8 percent over the prior year. The order book increased by 15.3 percent to EUR 164.0 million as compared to 30 September 2005. This positive development was driven by increased demand for standard cranes, process cranes, KBK crane construction kits and drives. Price stabilisation further supported sales, with the United States of America, Italy, Brazil and South Africa showing particularly strong growth. Adjusted EBIT in the Industrial Cranes segment totalled EUR 10.8 million, having developed at an exceptional rate of 730.8 percent. The EBIT margin grew eight-fold to 2.4 percent over the 0.3 percent of the prior year. This reflects the success of the restructuring programme and various optimisation and cost reduction measures.
Port Technology Segment: Record Sales and Strong Increase in Earnings
Throughout the financial year, the order situation in the Port Technology segment continued to be extremely positive. Order intake was up by 23.7 percent at EUR 300.5 million in the year under report. The order book totalled EUR 104.0 million, being 37.6 percent higher compared to the prior year’s figures. The fact that sales grew by 13.7 percent to a record level of EUR 269.6 million confirmed the success of the Group's market and product strategies. Sales were also pushed by a growing volume of global cargo handling. As a consequence, especially the Group's activities in Spain, the Netherlands as well as North and South America benefited in the period under report. Adjusted EBIT jumped 20.1 percent to EUR 24.5 million. This represents an over-proportional sales growth rate that led to an EBIT margin increase of 0.5 percentage points to 9.1 percent.
Services Segment: Further Growth through Outsourcing
The Services segment was favourably influenced by the expansion of its worldwide network as well as a positive economic climate. Consequently, order intake at EUR 275.3 million was 15.2 percent over the figure of financial year 2005/2006. Order book reached EUR 37.5 million, having grown by 17.6 percent as compared to 30 September 2005. Sales were up by 14.4 percent to EUR 268.3 million. One of the main growth drivers was the ongoing trend among customers to outsource their maintenance and modernisation operations. This led to the acquisition of additional maintenance contracts in the period under report. On a regional basis, sales went up in particular in the United States of America and in Germany. Adjusted EBIT improved year-on-year by 16.5 percent to EUR 49.3 million. Profitability was also boosted in this segment. At 18.4 percent, the EBIT margin was 0.4 percent higher over the same period in the prior year.
Notable Reduction in Net Financial Debt
Due to the positive cash flow before financing, net financial debt was reduced by 25.2 percent to EUR 133.3 million. Due to the simultaneous increase in shareholders’ equity by 17.6 percent to EUR 188.9 million, the gearing (net financial debt to total equity) improved by 40.4 percentage points to 70.6 percent
Dividend Payment of EUR 1.00 Planned
The Management Board of Demag Cranes AG would like shareholders to participate in the success of the Company to reflect performance. Already in the context of the IPO, it was announced that between 50 and 60 percent of the adjusted annual net income for financial year 2005/2006 would be distributed in the form of dividends. Staying true to its promise, the Management and Supervisory Boards will propose to the General Shareholders’ Meeting a dividend to the amount of EUR 1.00, which corresponds to a dividend yield of 4.5 percent of the offer price at the time of the IPO. For the coming years, we pursue a dividend policy with a pay-out ratio of 35 to 45 percent of the adjusted annual net income.
Slight Increase in the Number of Employees
As at 30 September 2006, the Group had a total of 5,680 permanent employees (excluding temporary employees, apprentices and trainees). Compared to the prior year, this represents an increase of 2.9 percent. The number of employees in the Port Technology segment increased notably. Faced with the sharp increase in production volume, we have mainly focussed on the recruitment of specialists for our production, inventory management, and customer services.
Outlook: Further Increases in Sales and Earnings Expected
For the course of financial year 2006/2007, the Management Board anticipates a stable economic environment with strong growth trends in some markets. From today’s point of view, it can be assumed that demand for the products and services in the three segments, Industrial Cranes, Port Technology and Services, will continue to increase, particularly due to the impact of the market and product initiatives that have been launched. Particular confidence is gained from the positive order intake for new products in the Industrial Cranes and Port Technology segments, including order intake for fully automated applications. For the Services segment, the Management Board of Demag Cranes AG anticipates a continuing trend among customers towards outsourcing, which is expected to result in increased coverage of the Company’s own installed base with maintenance and modernisation contracts. With more than 650,000 “Demag” electric cranes and hoists in operation, Demag Cranes has the largest installed base worldwide. The medium-term goal is to increase service coverage from approximately 40 percent this financial year to 50 percent.
In view of this growth, the Management Board of Demag Cranes AG expects sales to increase in a range from 7.0 to 10.0 percent in financial year 2006/2007 compared to the prior year. Demag Cranes expects the operating result to continue to improve significantly as a result of its strategy of sustained profitable growth. At the Group level, adjusted EBITDA is expected to grow from 20 to 25 percent and adjusted EBIT between 24 and 29 percent. A considerable improvement in profitability is particularly expected in the Industrial Cranes segment. CEO Joos emphasises, “After successfully refocusing the Group on sustained profitable growth, we are ideally placed to expand our leading market positions even further and to create added value for our shareholders, customers and employees.”
About Demag Cranes:
Demag Cranes AG is one of the world’s leading providers of industrial cranes, crane components, harbour cranes and port automation technology. Services, in particular maintenance and refurbishment services, are another core element of its business activities. The Group is divided up into the three segments: Industrial Cranes, Port Technology and Services. It has the strong and established "Demag" and "Gottwald" brands. Demag Cranes sees its core expertise in the development and design of technologically advanced cranes and hoists as well as automated transport and logistic systems in ports, the provision of services for these products and the manufacture of high-quality components.
As a global supplier, Demag Cranes manufactures in 16 countries on five continents and operates a worldwide sales and service network that is present in over 60 countries through its subsidiaries, representative offices and joint ventures. In financial year 2005/2006, 5,680 employees generated sales of some EUR 987 million. Since the end of June 2006, the Demag Cranes share (WKN: DCAG01) has been listed in the Prime Standard of the German Stock Exchange and is included in the SDAX share index.
Demag Cranes. We Can Handle It.