12/09/2004

After a successful fiscal 2004, Vossloh is planning record results

Groupwide cost-cutting and improvement programs designed to boost productivity

Despite the present malaise manifest throughout the rail industry, fiscal 2004 will prove a successful period for the Vossloh Group. Thereafter, the years 2005 and 2006 will be devoted to incisive changes in corporate structures and processes along with an austerity program dedicated to enhancing efficiency throughout the Group. “Our plans are to raise gross profit from operations per capita by over 30 percent by 2007. Even though the outlay for the necessary programs will takes its toll on 2005 earnings, by 2006 the first fruits will already be reaped and 2007 may well prove a record-breaking year in the history of Vossloh,” stressed Vossloh AG’s CEO Burkhard Schuchmann at the Frankfurt/Main press conference.

Despite the extremely troubled situation in the rail industry, Vossloh intends to achieve for the year now drawing to a close the sales and earnings targeted this summer. Projections indicate that the year-earlier sales of €912.5 million will inch up to around €918 million.

This year’s EBIT is likely to mount to over €105 million, easily up over the year-earlier €100.9 million. The advance is all the more remarkable given that last year’s figure had subsumed tax-free gains from the sale of the VAE Group less provisions for risks together totaling a net €14.5 million. Excluding these prior-year one-off effects, EBIT surged by almost €19 million or around 22 percent. “This creditable performance is due to a more attractive product mix combined with cost-pruning programs which enable us to respond readily to submarket shrinkages,” added Schuchmann.

As to group earnings, Vossloh expects to be able to top the prior year’s €55.5 million to reach around €56 million—despite the absence of any gains from the VAE disposal and a tax burden up by two percentage points. EpS would then amount to €3.85 (down from €3.90).

ROCE is again likely to range around 16 percent (down from 16.3 percent), the equity ratio reaching 32.7 percent (down from €33.9 percent), the pretax return on equity 26.5 percent (down from 29.0 percent).

This year the average headcount will be 4,534 (up from 4,422), the addition mainly attributable to the first-time inclusion of the acquisitions in Serbia and Scandinavia.

2005 budgeted to see another rise in sales

For fiscal 2005, Vossloh is budgeting another increase in sales to just under €1.1 billion which includes an expected €138 million input by the Valencia-based locomotive plant acquired from Alstom and to be contributed to Vossloh España.

Fiscal 2005 will be heavily burdened by the groupwide efficiency program plus the restructuring and integration of locomotive operations (to which the Valencia plant has been added). Nonetheless, the Vossloh Group will still maintain a foremost position on an industry comparison. “Even when times are good for the rail industry, the EBIT margin of 8.5 we have budgeted for 2005 is beyond the reach of most of our rivals,” emphasized Vossloh’s CEO.

Next year’s EBIT is set at €93 million, group earnings budgeted at over €47 million. EpS should then total €3.25 while at 14.5 percent and despite all the obstacles, ROCE should almost touch the group benchmark of 15 percent, with return on equity repeating a presentable 20.3 percent. For 2005, net financial debts are scheduled to shrink from this year’s 186 million to €132 million while net leverage should be slashed from 56.0 to 36.7 percent.

As to headcount, the Group reckons that next year’s average will rise from 4,534 to 5,158, the leap being due to both the Valencia acquisition and growth in the labor-intensive Infrastructure Services business unit. Retrenchments will take effect on workforce averages just slightly since they will impact only later in the year.

Rail technology remains growth sector

Schuchmann: “Next year we intend to sow the seeds for highly successful future periods with much improved profitability ratios. This year and despite all the problems encountered by our sector, we have demonstrated our strength. In this awareness we look forward confidently.” As far as the Group was concerned, nothing at all had changed regarding the basic assessment that the rail technology market both in Europe and elsewhere remained a growth industry, he added.

The CEO indicated that as part of its earnings-driven growth strategy, the Vossloh Group would again be scouting for takeover candidates during the year to come. He was confident of being able to add to the product lineup through further acquisitions and/or stakes and thus sustain the success of the group over the years ahead.

Werdohl / Frankfurt/Main, December 9, 2004

For more information contact
Christiane Konrad, Vossloh AG, phone: (+49-2392) 52-249