Nuremberg – LEONI AG released its figures for the 2003 financial year at today’s balance sheet press conference. The Company generated consolidated external sales from continued operations of EUR 1,080 million in fiscal 2003 despite sluggish demand in key markets. Year on year, this equates to a small decline of two percent from the fiscal 2002 figure of EUR 1,103 million. In line with US accounting principles (US GAAP), the sales amounting to EUR 9 million (EUR 11 million in 2002) of LEONI Flex, which has been sold, are no longer in included. Due to the strength of the euro, exchange rates made an especially severe impact on LEONI’s sales. After adjusting for this factor, the Company generated an increase in sales of about two percent, as expected. Fiscal 2003 net income amounted to EUR 21.2 million and was thus down 30 percent from the previous year on a like-for-like basis, when – stripped of an exceptional gain due to the change in accounting principles – the figure was EUR 30.4 million. The fact that the decrease in earnings turned out more pronounced than originally forecast is attributable above all to the restructuring measures applied at LEONI Felisi S.p.A. in Italy. Further exceptional charges arose from the sale of French subsidiary LEONI Flex.
Expenses incurred by restructuring LEONI Felisi as well as currency losses had a detrimental effect on the EBITDA and EBIT figures. At about EUR 99.9 million, consolidated earnings before interest, taxes, depreciation and amortisation were about 18 percent down in the previous year’s figure of EUR 121.8 million. Earnings before interest and taxes (EBIT) dropped by 32.3 percent from the previous year’s EUR 71.6 million to EUR 48.5 million. Disregarding the aforementioned factors, EBITDA was down seven percent year on year and EBIT fell by 13 percent. As planned, the funds made available for capital investment were up about 19 percent from EUR 79 million to EUR 94 million due to the progress made on the major projects launched in 2002 as well as start-up of new projects in the Wiring Systems Division. Additions to property, plant and equipment amounted to as much as EUR 98 million in 2003, of which EUR 67 million pertained to the Wiring Systems Division.
Accordingly, the majority of the roughly 2,900 new employees were taken on in the Wiring Systems Division, and here above all at the new facilities in eastern Europe. In total, LEONI employed 21,392 people worldwide at the end of 2003 (previous year: 18,478).
LEONI Wiring Systems preparing for future growth
The Wiring Systems Division felt the effects last year of the largely flat automotive business. Impending model replacements had an additional effect on the wiring systems business. Due to these factors as well as heavy impact of exchange rates in some areas, sales in the 2003 financial year were down about five percent to EUR 557.8 million from EUR 588.2 million in the previous year. The decline shrinks to two percent after adjusting for exchange rates. These figures no longer include the sales of French subsidiary LEONI Flex (EUR 11.2 million in 2002 and EUR 9.2 million in 2003), which has been sold. Advance outlays for major projects currently underway exerted a considerable influence on the earnings of the Wiring Systems Division. Overall, earnings before interest and taxes (EBIT) adjusted for discontinued operations were down 32 percent to EUR 26.2 million. The key in the current financial year will be how the new models for which LEONI is supplying product – above all the Opel Astra – perform in terms of sales. Further crucial new product start-ups involve production of cable harnesses for DaimlerChrysler’s new A-Class as well as the BMW 1 Series.
Leading position in tailor-made cable solutions
The Cable Division held up well in the past financial year and, in spite of difficult underlying conditions, increased sales by two percent from EUR 433 million to EUR 441 million. Based on constant exchange rates, the increase comes to one of about six percent. Whereas demand in many segments of the European market was down, the Cable Division was very successful in the Chinese market – especially so with automotive cables. The plant for production of special cables for the mobile phone industry, which is located in Changzhou and was set up in 2002, also made its first significant contribution to sales in the past year. Fierce competition and the resulting heavy pressure on prices of standard products impaired the earnings of the Cable Division in fiscal 2003. Earnings before interest and taxes (EBIT) were thus down by about ten percent from the previous year’s EUR 38.9 million to EUR 34.8 million in 2003. In the future, LEONI will increasingly focus on special cables and cable systems made to customer specifications for applications such as robotics and medical technology, among others. The Company has meanwhile managed to secure a leading position in the global market in this high-margin business.
Further restructuring in the Wire Division
The difficult conditions for the cable industry also had an adverse effect on the sales and earnings of the Wire Division. With an uptrend of business in the United States and China, LEONI Wire was able to partially offset the decline in other regions, especially so in Europe, and to generate sales of EUR 80.7 million, which equates to a small decrease of about one percent from the previous year’s figure of EUR 81.6 million. Given the same exchange rates, there would have been an increase by about seven percent. The persistently low level of demand from the telecommunications and data technology sectors as well as continued heavy pressure on prices caused LEONI Wire to fall short of its original target of a significant improvement in earnings. The result before interest and taxes dropped from a loss of EUR 7.5 million in 2002 to a loss of EUR 11.2 million. This figure includes the exceptional charges associated with restructuring at the LEONI Felisi facility, where wire and strand production was shut down in the fourth quarter of 2003. Disregarding this extraordinary factor, the result before interest and taxes would have improved to a loss of EUR 5 million. With the adjustments made to production capacity in 2003, restructuring of the Wire Division has now largely been completed – creating the basis for at least a break-even result.
Profitable growth in the years ahead
LEONI has also signalled to its shareholders that the 2003 financial year merely represented a pause on the Company’s path of growth: The Management Board and Supervisory Board will propose to at the annual general meeting on 18 May of this year that shareholders approve payout of an unchanged dividend for fiscal 2003 of EUR 1.15 per share despite the decrease in net income. Thanks to its presence in different markets and resolute tapping of growth opportunities LEONI will be able to do well in future too, under conditions that have become more difficult. At Group level, the forecast for the current financial year is of a sales increase by about ten percent and a disproportionately strong rise in net income.
