05/31/2007

Vossloh expecting its best-ever year in 2007

2006—a year of successful transition
Sales and earnings targets for 2007 reconfirmed
Financial scope for acquisitions

The Vossloh Group is expecting 2007 to turn out to be its best-ever year, said CEO Dr. Gerhard Eschenröder at this year’s annual general meeting in Düsseldorf. He thus reconfirmed the budgeted figures stated in April on the publication of the Q1 results. According to this, sales in 2007 will rise by around 10 percent to €1,120 million and in 2008 by another 7 percent to around €1.2 billion. In terms of earnings, the Group reckons with growth rates that are even steeper: EBIT in 2007 to surge by 35 percent to around €112 million and in 2008 by another 13 percent to about €127 million. “This means that we will have achieved our ambitious targets as early as this year,” stated Gerhard Eschenröder.

The figures budgeted already take into account the input from the acquiree, the US switch manufacturer Pohl Corp. Not included is that from Cleveland Track Material since Vossloh is in the process of integrating these two corporations for the purpose of generating synergies as quickly as possible. Neither included are the effects on sales and EBIT of the acquisition of the remaining 50-percent stake in the French ETF Group (Européenne de Travaux Ferroviaires SA) since the transaction has yet to be closed.

2006: “A year of successful transition“

Just as at last year’s general meeting, Gerhard Eschenröder described 2006 as a year of transition and added: “Today I may add, a year of successful transition.” To prove his point he mentioned that Vossloh had meanwhile opened the door to the growth markets of China and the USA, disposed of its loss-making Information Technologies division, and improved its key operational indicators. Eschenröder also emphasized: “The Group has been galvanized into a more efficient organization willing to take on more.”

Prospects of higher dividends

For fiscal 2006, the Executive Board proposed to the stockholders’ meeting a dividend of €1.30 (just as the year before). The target, however, was to allow the stockholders to share in the rising success of the Group, a higher dividend being the avowed aim. “Until then, however, we have plenty of work ahead of us,” said Eschenröder. The keys to success were cost leadership as well as further growth—both organic and through acquisitions.

Financial latitude for acquisitions

Vossloh has the financial latitude to fund possible acquisitions. At the end of 2005, net financial debt was still over €220 million, then by the end of 2006 down to around €62 million thanks to the steep rise in cash flow from operating activities and at the end of March 2007, a mere €27 million. Net leverage at the close of 2005 had still been over 61 percent but was then whittled down to just under 17 by the end of 2006 and at the end of March 2007 amounted to only 7 percent. The funding of the Pohl Corporation acquisition, the dividend payout, and the budgeted outlays will lift net leverage to around 22 percent by the end of 2007. When including Cleveland Track Material, the second takeover in the United States, and the targeted increase in the ETF Group stake, net leverage is estimated to hike up to about 38 percent.

“These are figures that go to prove we have enough financial latitude in order to fund even sizable takeovers without having to resort to capital increases,” commented Gerhard Eschenröder.

Contact:
Dr. Phoebe Kebbel
Hering Schuppener Consulting
Phone: (+49-69) 92 18 74 77
Mobil: (+49-173) 286 21 10
Email: pkebbel@heringschuppener.com