Nuremberg – The global economic crisis again exerted a considerably adverse effect on Leoni in the 2^nd quarter of 2009. Yet the Company made substantial progress compared with the first three months of 2009. Although the Q2/2009 consolidated sales of this leading provider of cable systems to the automotive sector and other industries were, at EUR 530.3 million, 35.3 percent below the previous year’s like-for-like figure of EUR 820.0 million, they were about 8 percent above the 1^st quarter’s figure.  Thanks to the resolute implementation of the far-reaching cost reduction programme, the earnings situation improved perceptibly in the course of the year. Adjusted for exceptional items*, the earnings before interest and taxes was, with a loss of EUR 3.1 million, almost at break-even level in the 2^nd quarter of 2009. Including restructuring expenses, impairment charges of non-current assets as well as the impact of allocating the purchase prices of earlier acquisitions, the quarterly EBIT-level result works out to a loss of EUR 31.0 million (previous year: profit of EUR 37.4 million).

In total for the 1^st half of 2009, Leoni generated consolidated sales of EUR 1,022.7 million (previous year: EUR 1,590.7 million) and an EBIT-level loss of EUR 77.8 million (previous year: profit of EUR 71.5 million). After taxes, the result was a net loss of EUR 88.2 million (previous year: net income of EUR 45.9 million). As part of adjusting capacity and reducing costs, the Company shed a significant number of jobs. On 30 June 2009, Leoni employed 45,522 people Group-wide, i. e. 7,762 fewer than on the same date in 2008. Of this total, there were 41,555 employees outside Germany (previous year: 49,100) and 3,967 in Germany (previous year: 4,184). Staff are currently working short-time at nearly all facilities in Germany and at numerous ones abroad. More job cuts are likely in the second half of the year. Leoni has made corresponding provisions, which, together with ongoing costs, resulted in substantial restructuring expenses totalling EUR 20.2 million in the first six months of 2009 (previous year: EUR 3.7 million).

Slight pick-up in wiring systems for the automotive industry

The demand situation in the Wiring Systems division stabilised at a low level as the year progressed. In the process, Leoni benefited not only from the launch of new premium-segment vehicle models but also partially from scrappage schemes, which have boosted sales of small and medium-sized cars in various countries. The external sales of the Wiring Systems division amounted to EUR 311.2 million in the 2nd quarter of 2009 and, although they were thus significantly below the 2008 like-for-like figure (EUR 429.0 million), this was 15 percent above the level in the 1st quarter of 2009. The Wiring Systems division’s total sales came to EUR 581.2 million in the first half of 2009 (previous year: EUR 840.1 million).

Mixed picture in the wire and cable business

Performance in the market segments of importance to the Wire & Cable Solutions division varied widely in the 2nd quarter. Whereas demand for automotive cables, electrical appliance cables and cabling for infrastructure projects increased again, there was in some cases a sharp decline in the capital goods industry. The division’s external sales from the beginning of April to the end of June 2009 were, at EUR 219.1 million, well down from the previous year's exceptionally high figure of EUR 391.0 million. The volume of business stabilised compared with the first three months, with demand picking up considerably in June particularly for automotive data cables as well as cables for the solar industry and rolling stock engineering. For the first half of 2009 as a whole the division reports a business volume of EUR 441.4 million (previous year: EUR 750.5 million).

Forecast: Fiscal 2009 sales between EUR 2.1 and 2.2 billion

In view of the still uncertain economic situation and the lack of any signs of a sustained turnaround in the markets of importance to Leoni, it remains difficult to issue a forecast for the year as a whole. Leoni currently expects to generate consolidated sales of between EUR 2.1 and 2.2 billion in 2009 (previous year: EUR 2.9 billion. Provided that the upper end of this sales range is attained, Leoni should at least achieve break even at the level of adjusted earnings before interest and taxes* in the 2^nd half of 2009. With respect to free cash flow, which was positive in the amount of EUR 43.9 million in the 2^nd quarter (Q1/2009: a negative amount of EUR 107.9 million), the objective for the year as a whole continues to be a balanced figure.

As planned, Leoni will implement further personnel measures in the second half of the year, which require restructuring expenses of about EUR 30 million. Thus, those expenses are likely to amount to EUR 50 million for the year 2009 as a whole. At maximally EUR 110 million, capital expenditure in 2009 will be roughly the same size as depreciation/amortisation. The cost reduction programme will exert its full effect next year. Leoni will thus be able to operate profitably even in a persistently difficult economic setting and to rapidly benefit from a recovery in business.

Leoni-performance overview

* Earnings excluding the effect of revaluation according to the purchase price of major acquisitions, restructuring expenses and impairment of non-current assets.

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The entire quarterly financial report can be downloaded here.