Leoni boosts sales and profitability more strongly than expected
Dynamic business performance in all target markets – EUR 131 million earnings before interest and taxes – less net debt – EUR 0.70 dividend
Thanks to steadily rising demand, developing new markets and customer groups as well as its stringent cost management, the cable specialist far exceeded all the targets originally set for the past financial year. Both business divisions outpaced the growth of numerous peer markets. The reasons for exceeding the sales forecast, which initially was about EUR 2.4 billion, were the surprisingly strong economic upturn and the sustained momentum in the emerging countries, above all China. The substantial rise in the price of copper accounted for EUR 187.4 million or 9 percentage points of the sales increase.
Leoni also used the past economic crisis to make its organisation leaner, to optimise its cost structure and therefore to raise its profitability. The factors contributing to the strong increase in earnings, which were originally budgeted at EUR 50 million, continued to be a beneficial product mix, involving for example an increasing proportion of high-end vehicle equipment, economies of scale thanks to a higher degree of capacity utilisation as well as an optimised production network.
Personnel: pre-crisis number exceeded
On 31 December 2010 Leoni employed 55,156 people worldwide, which is 5,334 more staff than one year earlier and at least 10,000 more than at the lowest point during the crisis in April 2009. The growth was the result primarily of recruitment at production facilities in North Africa, Eastern Europe, the Americas and Asia. Overall, the workforce outside Germany grew from 46,027 to 51,381 employees, which equates to 93.2 percent of the total number. In Germany, Leoni had 3,775 employees, as opposed to 3,795 people one year earlier.
WCS: China as growth driver no. 1
In the Wire & Cable Solutions Division the economic recovery in the course of 2010 exerted a much more beneficial effect than expected among virtually all customer groups, a development that resulted in very good utilisation of capacity. The division’s external sales increased strongly during the year under report; by about 41 percent to EUR 1,321.5 million (previous year: EUR 935.5 million), of which at least 18 percentage points were attributable to the substantial rise in the price of copper during the year. EBIT amounted to EUR 56.3 million (previous year: a loss of EUR 34.2 million).
The expansion in China merits particular mention. Here the sales generated during the period under report rose by about 64 percent to EUR 159 million. This increase in the amount of business is the result not least of having newly introduced the organisational form of a Business Area China. Furthermore, Leoni succeeded in broadening its business involving environmental technologies in 2010. For example, the Company took new orders for cables that will be used in rolling stock and in the solar sector.
WSD: progressing internationalisation
The Wiring Systems Division benefited more than average in 2010 from the strong recovery of demand in the global motor vehicle industry and increased its external sales by about one third to EUR 1,634.2 million (previous year: EUR 1,224.6 million). The carmakers PSA, Mercedes-Benz, General Motors, VW Group and BMW accounted for the largest proportion of sales. The division’s EBIT came to EUR 74.3 million (previous year: a loss of EUR 78.5 million).
Business recovered across all customer groups and regions. There was a significant increase in business with the commercial vehicle industry, which was especially severely affected during the crisis. The trend in demand for cable harnesses and wiring systems was especially favourable in China, where sales roughly tripled in 2010 due to several new projects, as well as in the United States where German premium cars were in higher demand. In addition, Leoni enhanced its range of products and services for vehicles with alternative drive systems and for this market established its cross-divisional Business Unit Electromobility.
Financial situation: more equity than net debt
Leoni succeeded in significantly exceeding its goal of at least neutral free cash flow before dividends, against the backdrop of the good business performance generating a Group-wide figure of EUR 50.7 million (previous year: EUR 2.1 million). Net debt consequently dropped from EUR 495.4 million to EUR 444.6 million in the year under report. As at 31 December, equity simultaneously rose from EUR 369.1 million to EUR 481.2 million, with this figure therefore exceeding net debt again for the first time since the onset of the economic crisis.
In the wake of the rapid economic recovery, Leoni stepped up its Group-wide capital investment programme to EUR 107.4 million (previous year: EUR 83.2 million), of which intangible assets as well as property, plant and equipment accounted for EUR 103.1 million while EUR 4.3 million was spent on investments and acquisitions.
Forecast: sales rise accompanied by growing earnings
Based on its leading position in numerous business fields, Leoni will again be able to outpace the growth of its most important markets during the 2011 financial year. China, Russia and India meanwhile harbour special potential. From today’s perspective, consolidated sales should rise to more than EUR 3.1 billion. As the principal cost items are likely to increase by less than sales, further beneficial economies of scale are to be expected and structural improvements should also have an effect, the estimated EBIT is a record-level figure of approx. EUR 170 million.
For 2012 the Company holds out the prospect of consolidated sales of EUR 3.4 billion and a 20 percent return on capital employed (ROCE).
Group key figures
Consolidated sales [€ mil.]
+ 36.8 %
EBIT [€ mil.]
Adjusted EBIT * [€ mil.]
EBIT / sales [%]
Net income / loss [€ mil.]
Free cash flow ** [€ mil.]
Return on capital employed [%]
Capital expenditure on property, plant and equipment as well as intangible assets [€ mil.]
+ 26.0 %
Acquisitions and investments [€ mil.]
Employees (as at 31 Dec.)
+ 10.7 %
* Earnings adjusted for the impact of revaluation as part of allocating the prices of major acquisitions, restructuring expenses, impairment of non-current assets, gains on business acquisitions and derivatives relating to business combinations
** before acquisitions, (dividend and share transaction)