Vossloh successfully implements new strategy
- Group sales above 1 billion Euros for the first time
- Increase of ROCE to 12.9 percent
- Strategic repositioning milestones reached
- Positive outlook for 2007
With sales of 1,015.2 million Euros, the Vossloh Group exceeded the 1 billion Euros threshold for the first time in fiscal 2006. As the corporation announced when presenting its annual accounts in Düsseldorf, group sales increased by 7.7 percent in comparison to the previous year (942.6 million Euros). The former division, Vossloh Information Technologies (VIT), is no longer included either in the 2006 figures or in the 2005 comparative figures. It was sold in January 2007 and had previously already been separately reported as a “discontinued operation”.
Without taking VIT into account, earnings before interest and taxes (EBIT) in 2006 amounted to 82.7 million Euros, thus falling short of the previous year’s comparative earnings figure of 87.6 million Euros by 5.6 percent. This can be primarily attributed to costs related to the repositioning of the Group, as well as special charges on the business units, including necessary restructuring.
Group earnings decreased from 45.1 million Euros to 20.3 million Euros. Basically this can be attributed to operating losses in the VIT division and losses resulting from the necessary depreciation of related time values.
Unchanged dividend of 1.30 Euros per share proposed
For fiscal 2006 the Executive and Supervisory Boards will propose to the stockholders’ meeting a dividend of 1.30 Euros per share, unchanged from the previous year.
Increase of return on capital employed (ROCE) to 12.9 percent
Although the EBIT margin decreased from the previous year’s level of 9.3 percent to 8.1 percent, return on capital employed (ROCE) at 12.9 percent exceeded the previous year’s comparative figure by 0.6 percentage points. This resulted from a major decrease in capital employed of 69.7 million Euros or 9.8 percent.
At the end of 2006 the Vossloh Group employed 4,867 people, not including VIT. Compared to the previous year the headcount (adjusted for VIT) thus rose by 411 or 9.2 percent. One reason for this was that three Indian subsidiaries were included in the Group’s consolidation basis for the first time.
Rail Infrastructure: ROCE increased to 19.7 percent
In the Rail Infrastructure division Vossloh achieved sales of 613.9 million Euros in 2006. That corresponds to an increase of 5.9 percent compared to the previous year. EBIT decreased in the reporting period by 7.5 percent to 81.2 million Euros. This can be attributed in particular to the fact that the lowest-margin business unit, Infrastructure Services, made an above-average contribution to the growth of the division. EBIT margin at 13.2 percent continued to lie significantly above the Group’s target of 10 percent. The division recorded an increase in return on capital employed (ROCE): at 19.7 percent this was one percentage point higher than in the previous year and thus again well above the group’s target of 15 percent.
Motive Power&Components: ROCE increased to 10.9 percent
The Motive Power&Components division recorded an increase in sales of 9.9 percent to 401.2 million Euros. EBIT rose from 15.3 million Euros in the previous year to 23.6 million Euros in 2006. In 2005 reorganisation of locomotive manufacturing in Kiel depressed earnings by 6.8 million Euros. EBIT margin at 5.9 percent was 1.7 percentage points higher than in the previous year. ROCE also developed positively: it reached 10.9 percent, an increase of 4.1 percentage points compared with the previous year.
First successes in implementation following repositioning
“2006 was a transitional year for Vossloh”, said Gerhard Eschenröder at the presentation of the annual accounts. “We communicated our strategic repositioning in September 2006. Today we can already look back on a number of successes in implementation.”
A cornerstone of the new strategy is a focus on railway infrastructure and components for rail vehicles. “With the sale of VIT we have taken another step forward”, according to Gerhard Eschenröder.
Furthermore Vossloh had announced back in September its intention to increase the proportion of sales outside Europe from 10 to 30 percent. To achieve this goal, Vossloh has already reached two contributory milestones in the 2006 fiscal year and in Q1/2007: major orders from China totalling 185 million Euros and entry into the US market via the acquisition of the switch manufacturer Pohl Corp. “I anticipate that by 2008 we will have achieved a proportion of sales outside Europe of 30 percent“, said Gerhard Eschenröder.
Shares soar
The capital markets have also rewarded implementation of the new corporate strategy. Vossloh shares rose from 41.10 Euros to 57.14 Euros from the end of 2005 to the end of 2006. This corresponds to an increase of 39 percent – significantly more than the increase in the MDAX during the same period. The upward trend has continued in the first three months of the current year.
Positive outlook
The corporation anticipates organic sales growth of almost 7 percent for the current fiscal year 2007. EBIT should increase above average by more than 30 percent, settling at around 108 million Euros. Furthermore, in 2007, Vossloh wants to reach its self-imposed threshold of 15 percent ROCE for the first time in a long time.
Düsseldorf/Werdohl, March 28, 2007
Contact:
Dr. Phoebe Kebbel
Hering Schuppener Consulting
Phone: (+49-69) 92 18 74 77
Mobil: (+49-173) 286 21 10
Email: pkebbel@heringschuppener.com