Nuremberg – Due to strong production cuts in the automotive business, Leoni readjusts this year’s target figures: For the year as a whole, the company now expects sales of approximately EUR 2.9 billion (previously: at least 2.9) and earnings before interest and taxes (EBIT) of approximately EUR 95 million (previously: 110 to 120). Although the wire, cable and wiring systems specialist generated consolidated sales of EUR 2.3 billion in the first nine months of 2008 (previous year: 1.77). This 31 percent growth was due above all to having consolidated Leoni Wiring Systems France Group (LWSF), which was acquired at the beginning of 2008. Yet Leoni felt the economic downturn in the third quarter of 2008: sales no longer rose as strongly as expected and the substantial drop in the price of copper required writedowns on inventory. Earnings before interest, taxes and depreciation/amortisation (EBITDA) nevertheless rose by 8 percent to EUR 177.0 million in the first nine months of 2008.

In terms of earnings before interest and taxes (EBIT), which declined to EUR 95.7 million in the first nine months of the year (2007: 110.6), Leoni also had to absorb the impact of revaluation pertaining to business acquisitions, which primarily concerned LWSF. Consolidated net income from the beginning of January to the end of September 2008 was down to EUR 55.9 million (previous year: 72.4).

For the third quarter on its own Leoni reported a Group-wide 24 percent increase in sales to EUR 734.9 million. EBIT amounted to EUR 24.2 million (previous year: 37.5) and consolidated net income came to EUR 10.0 million (2007: 27.8).

On 30 September 2008, the Leoni Group employed 53,473 people, up from 34,958 one year earlier. The LWSF takeover was the main reason for this strong increase. The workforce outside Germany grew to 49,198 employees (from 30,970 in the previous year). In Germany Leoni employed 4,275 people on the reporting date (previous year: 3,988), equating to a growth of 7 percent. Group-wide and to the end of September 2008, Leoni spent EUR 108.5 million (2007: 56.6) on property, plant and equipment as well as intangible assets.

Wiring systems business growing slower than planned

In the Wiring Systems division the downturn in the automotive business in the third quarter of 2008 resulted in a smaller-than-projected sales increase. Due to consolidation of LWSF, the division’s external sales were nonetheless up strongly on the same quarter of the previous year; from EUR 229.3 million to EUR 366.4 million. Cumulatively over the first nine months of 2008 the volume of business rose by nearly 64 percent to EUR 1,206.6 million (2007: 736.0). LWSF provided EUR 458.9 million of this total. Leoni also made gains with sales of wiring systems and cable harnesses to the commercial vehicle industry. High development and start-up costs pertaining to new orders, measures to optimise the production structure, the persistently heavy pressure on prices as well as customers calling somewhat less product forward for ongoing projects than planned weighed on the division’s EBIT, which came to EUR 35.3 million after nine months (previous year: 41.5).

Slight sales increase in the Wire & Cable Solutions division

In the Wire & Cable Solutions division demand likewise eased in the third quarter. The division’s external sales from the beginning of July to the end of September 2008 were nevertheless up slightly to EUR 368.5 million (previous year: 364.0). The volume of sales increased by a total of 8 percent in the first nine months, to EUR 1,119.0 million (2007: 1,034.3). While demand for special cables used in medical equipment, in the capital goods and petrochemicals industries as well as in the irradiation crosslinking segment remained as high as before, business involving automotive cables showed initial signs of weakness. Demand in the telecommunications industry, for domestic appliance cables and in the infrastructure project business was also down. Due to the sharp decline in the price of copper, Leoni was compelled to write its corresponding inventory down significantly as at 30 September 2008. This was the principal reason why the Wire & Cable Solutions division’s EBIT for the first nine months of 2008 was down to EUR 60.0 million (from 71.0 in the previous year).

Forecast adjusted to persisting weaker underlying conditions

Owing to the significantly poorer underlying conditions, induced by the financial crisis, since the beginning of October and the persisting slump in demand above all in the automotive business, Leoni readjusts its forecast for 2008 as revised in mid October, to the current situation. A drop in demand of about 25 percent is expected for the fourth quarter versus the first three quarters of 2008, which is likely resulting in a break-even 4th quarter in terms of earnings before interests and taxes. For the year as a whole the Company now projects an increase in sales to approximately EUR 2.9 billion (previously: at least 2.9). From today’s perspective, earnings before interest and taxes (EBIT) will come to approximately EUR 95 million (previously: 110 to 120). In response to the reduction in orders from numerous car makers, the Company has initially cut back overtime and holiday entitlements at production facilities around the world, especially so in North Africa and Eastern Europe. In case of continuing scaling back of production corresponding staff reduction cannot be ruled out either. However, various new start-ups, which will partly go into series production from 2009 onwards, will cushion the need to adjust capacity. Leoni is currently preparing further cost cutting measures in close collaboration with its customers.

Further images can be found here.

The interim report is available for download at www.leoni.com/Q3-2008.0.html?L=1