Vossloh asserting itself amid difficult conditions
Maintaining growth momentum in H1/2006 – Exceptional burdens depress group earnings – New strategy to be unveiled in SeptemberThe Vossloh Group upheld its position well in the first six months of fiscal 2006. Although the market environment continued difficult in Germany, key international markets are showing promising trends. Given this situation, Vossloh expects business in the latter half of the year to generally proceed according to budget.
During the first half of 2006, the Vossloh Group posted sales of €474.2 million, up 8 percent. Most of the added revenues were attributable the first-time full-period inclusion of Vossloh España (taken over as of April 1, 2005) and generally strong sales at the Rail Infrastructure division. Whereas H1 group sales in Germany suffered severely from losses at Information Technologies and the ongoing reluctance to place orders on the part of rail operators, export business surged.
H1/2006 EBIT totaled €22.3 million (down from €36.5 million) while group earnings slumped from €16.6 million to €9.0 million. The earnings erosion was chiefly due to exceptional burdens announced on June 23, following extensive in-house reviews. These burdens, which were largely recognized in the Q2/2006 accounts, encompass one-off project-related problems at Information Technologies, litigation costs, consultancy fees, and restructuring expenses. In all, Vossloh had rebudgeted its EBIT for 2006 from €91.7 million to €70.3 million and its group earnings from €47.3 million to €35.6 million.
H1 business by division was highly mixed: Rail Infrastructure booked a sales rise of 5.5 percent to €292.7 million, all of the added sales being sourced from the lowest-margin business unit Infrastructure Services. Switch Systems and Fastening Systems showed slight losses. As a consequence of the mutating sales mix but primarily in the wake of one-time burdens, this division’s H1 EBIT slipped from €41.4 million to €35.7 million.
The Motive Power division generated H1 sales of €167.5 million in 2006 (up from €143.5 million), the increase being largely due to the contribution by Vossloh España and higher sales by the Electrical Systems business unit. In contrast, sales at the Kiel-based locomotive operation slumped. Thanks to the healthy situation at Vossloh España and the absence of the year-earlier restructuring expenses, EBIT improved from €0.2 million to €3.5 million.
H1/2006 sales at Information Technologies declined by around 30 percent from €20.3 million to €14.1 million. Unexpected problems with complex projects also led to a massive earnings deterioration, EBIT sinking from €0.2 million to a negative €6.5 million. Measures for improving project management and project controlling are presently being reviewed for the purpose of reachieving a sustained performance upgrade on the part of this division.
Vossloh AG’s CEO Dr. Gerhard Eschenröder stated: “In the first half of the year we have shouldered significant one-off burdens. We are now concentrating on a realignment for the Group to become fit for future challenges strategically and operationally.” With this in mind, the Executive Board launched last May two megaprojects: GO 2010! is designed to review and revise strategic focus while Vossloh FIT! targets an improvement in cost structures. These two projects are proceeding according to plan. Details will be announced in September.
The Vossloh Group has ventured into the second half of 2006 in a spirit of guarded optimism. Order backlog and influx are grounds for assuming that over the coming months business will proceed in line with the updated budget. Encouraging signals are being received, especially from a number of major foreign markets. The Executive Board still expects Vossloh this year for the first time to generate sales in excess of €1 billion.
Werdohl, July 27, 2006
Contact:
Christiane Konrad, Vossloh AG, phone: (+49-2392) 52-249
Email: christiane.konrad@ag.vossloh.com