Leoni’s sales up, but earnings down in the 3rd quarter of 2015
Full-year EBIT at more than EUR 130 million
Of the sales increase in the first three quarters (EUR 322.8 million), EUR 155.8 million stemmed from organic growth. Changes in exchange rates exerted a positive effect of EUR 199.1 million and the low price of copper had an adverse effect of EUR 32.1 million. In the EMEA (Europe, Middle East and Africa) region, sales was up by about 7 percent to EUR 2,191.6 million (previous year: EUR 2,045.9 million); in the Americas it rose by nearly 25 percent to EUR 567.4 million (previous year: EUR 455.4 million) and in Asia it increased by almost 12 percent to EUR 617.2 million (previous year: EUR 552.1 million).
Wiring Systems Division: earnings slump in the third quarter
External sales in the Wiring Systems Division (WSD) were up by nearly 13 percent to EUR 649.6 million in the period from July to September 2015 (previous year: EUR 576.5 million). On the other hand, there was a quarter-on-quarter decrease in EBIT to EUR 5.8 million (previous year: EUR 11.7 million) due to surprisingly heavy charges, most of which arose in September. The principal reasons for this were accelerated and more complex than expected ramp-ups of new projects because customers increased the amount of product they called forward at short notice and ordered more extensive cable harnesses than planned. These essentially positive developments for Leoni resulted in unbudgeted additional costs and inefficient processes in the Wiring Systems Division. These shortcomings entail longer-persisting adverse effects. Major staffing bottlenecks occurred at one facility in Romania that was particularly affected. As the region has full employment, the division had to cover its staffing needs from other countries and with agency manpower. The unexpectedly steep increase in the minimum wage in Romania was a further burden.
Additional factors weighing on earnings involved the early end of some profitable projects, for instance in the agricultural sector and with respect to some car models. Overall in the first three quarters of 2015, the Wiring Systems Division’s external sales increased by about 12 percent to EUR 1,987.3 million (previous year: EUR 1,771.9 million), while its EBIT was down by approximately 16 percent to EUR 58.7 million (previous year: EUR 69.8 million).
Wire & Cable Solutions: sales and earnings both up in the third quarter
The Wire & Cable Solutions Division (WCS) increased its external sales by about 6 percent year on year to EUR 462.1 million in the period from July to September 2015 (previous year: EUR 437.3 million) and by just over 8 percent year on year to EUR 1,388.9 million for the nine-month period (previous year: EUR 1,281.5 million). This involved growth in demand for automotive cables as well as for robotics and high-speed cables, while the business comprising data cables as well as cables for infrastructure projects and the petrochemical industry was weaker than projected. Earnings before interest and taxes rose by just over 4 percent to EUR 24.1 million in the third quarter of 2015 (previous year: EUR 23.1 million). The EBIT of EUR 56.5 million for the first nine months was still about 10 percent below the same figure for the previous year (EUR 62.9 million) because various factors had an adverse impact in the first half – these included an unfavourable product mix in the automotive cables business, which grew relatively strongly, and advance spending on the WCS ON Excellence performance programme, which already generated beneficial effect in the third quarter.
Nearly 75,000 employees
The number of employees in the Leoni Group on 30 September 2015 was up by 7,582 people on the same date in the previous year to 74,973 staff (30 September 2014: 67,391). The recruitment during the current financial year took place mainly at wiring systems facilities in Eastern Europe and North Africa as well as at automotive cable plants in Asia and the Americas, but also in Germany.
Forecast for 2015
For the whole of 2015 Leoni will increase its consolidated sales as recently forecast to at least EUR 4.4 billion (previous year: EUR 4.1 billion), with this growth having been generated by both divisions. Earnings before interest and taxes, on the other hand, will only amount to more than EUR 130 million (previous year: EUR 182.5 million) and will therefore, as announced on 12 October, fall substantially short of the originally targeted figure of more than EUR 200 million. The factors responsible are mainly the described, unexpected charges in the Wiring Systems Division as well as, to a lesser extent, business that was short of estimates in some industrial segments.
Dieter Bellé, President & CEO of Leoni AG, said: “As a well positioned and financed company, which continues to have good prospects, Leoni will thoroughly and lastingly eliminate the current margin problem and return to a course of profit-oriented growth.” Therefore, a task force headed by Dieter Bellé and Dr. Frank Hiller, Management Board member with responsibility for the WCS division, was set up, which is analysing the precise causes and will develop the corresponding countermeasures with top priority.
As reported, earnings next year will probably also be reduced by dips in demand and the consequently missing profit contributions as well as due to the worsened economic conditions in China and Russia as well as among the US commercial vehicle industry and some carmakers. Considering the necessary reviews, especially also of the project start-ups scheduled for 2016, Leoni will present a robust forecast for fiscal 2016 earnings by the time of its balance sheet press conference on 23 March.
Leoni performance overview
|Group key figures||3rd quarter||1st–3rd quarter|
|Sales [€ million]||1,111.7||1,013.8||9.7 %||3,376.2||3,053.4||10.6 %|
|EBITDA [€ million]||67.1||67.1||0.0 %||220.5||225.6||(2.3) %|
|EBIT [€ million]||29.8||34.7||(14.1) %||115.3||132.7||(13.1) %|
|Adjusted EBIT * [€ million]||32.2||36.4||(11.5) %||124.7||140.2||(11.1) %|
|EBT [€ million]||23.8||26.0||(8.5) %||95.4||109.3||(12.7) %|
|Consolidated net income [€ million]||15.7||16.1||(2.5) %||67.5||77.5||(12.9) %|
|Capex incl. acquisitions [€ million]||63.5||51.0||24.5 %||162.2||140.2||15.7 %|
|Equity ratio [%]||34.5 %||33.9 %||–||34.5 %||33.9 %||–|
|Earnings per share [€]||0.48||0.49||(2.0) %||2.06||2.37||(13.1) %|
|Employees [as at 30 September]||74,973||67,391||11.3 %||74,973||67,391||11.3 %|
* Earnings adjusted for the impact of revaluation as part of allocating the prices of major acquisitions, restructuring, impairment of non-current assets, gains on business disposals and on business combinations including related derivatives.