Orders received after nine months above the previous year, EBIT margin at 5.7 percent
The third quarter of the current 2018 fiscal year was weaker for Vossloh compared to the previous year, as expected. Group sales of €205.1 million in the months from July to September were 11.3 percent below the corresponding figure in the previous year. As in the two previous quarters, this was primarily due to the temporarily weaker sales development in the Fastening Systems business unit in China. Earnings before interest and taxes - EBIT - of the Vossloh Group amounted to €12.5 million in the third quarter of 2018 after €21.0 million in the third quarter of 2017. Along with sales development in China, negative currency translation effects were also responsible for the sales decline compared to the previous year. In addition, EBIT in the previous year was significantly boosted by an impairment loss reversal in the Customized Modules division. The Group’s EBIT margin amounted to 6.1 percent in the third quarter of the current fiscal year (previous year: 9.1 percent).
In the first nine months of 2018, Vossloh achieved Group sales of €623.2 million (previous year: €683.2 million). The Group’s EBIT declined significantly in the three quarters from €56.6 million in the previous year to €35.2 million in the current year. Accordingly, the EBIT margin totaled 5.7 percent (previous year: 8.3 percent). This development was mainly attributable to lower revenues generated in the high-margin China business of Vossloh Fastening Systems compared to prior year, as expected.
The Vossloh Group’s orders received were noticeably higher than in the previous year. After the first nine months of 2018, they amounted to €684.0 million and thereby 4.8 percent above the previous year’s period. The ratio of new orders to sales – book-to-bill – amounted to 1.10 for the reporting period (previous year: 0.96). All divisions reported a figure greater than 1. As of September 30, 2018, the Vossloh Group’s order backlog of €542.7 million was significantly above the figure of €494.8 million as of the previous year’s reporting date. Additional significant orders received from China are anticipated in the Fastening Systems business unit in the fourth quarter.
In the Core Components division, consisting of the two business units Fastening Systems and Tie Technologies, Vossloh generated revenues of €203.3 million after the first nine months (previous year: €268.1 million). Of this, €155.0 million were related to Vossloh Fastening Systems (previous year: €208.9 million), whereby the decline was due exclusively to lower sales in China. Vossloh Tie Technologies contributed sales revenues of €50.1 million in the first nine months of 2018, after €60.3 million in the previous year. The sales decline from the previous year resulted from lower sales in the transit business and in Mexico. In the third quarter of 2018, Vossloh Tie Technologies was able to increase sales to €18.9 million (previous year: €17.3 million). For the full year, sales revenues are expected at the level of the previous year, partly due to the resumption of a project in Florida and the deliveries of concrete ties under the framework agreement with Canadian National (CN).
EBIT in the Core Components division totaled €24.9 million in the first nine months of 2018 (previous year: €39.9 million). As a result, the EBIT margin of the division was 12.2 percent despite the project-related sales decrease (previous year: 14.9 percent). Orders received in the Core Components division increased significantly in the year-on-year comparison by 25.4 percent from €199.2 million to €249.9 million. Most notably, the Fastening Systems business unit achieved higher orders received, totaling €192.3 million, compared to €149.2 million in the first three quarters of 2017. Vossloh Tie Technologies also reported higher orders received of €59.3 million after nine months of 2018, after €51.0 million in the previous year. As a result, the order backlog of the Core Components division of €183.2 million as of September 30, 2018, significantly exceeded the previous year’s figure of €148.7 million.
Compared to the previous year, currency translation effects and changes in the scope of consolidation had a significant adverse impact on the revenues of the Customized Modules division. Nevertheless, sales increased slightly over the previous year in the period from January to September 2018 to €356.0 million (€353.2 million). After the first nine months of 2018, the EBIT of the Customized Modules division amounted to €20.4 million (previous year: €24.2 million). The EBIT margin totaled 5.7 percent (previous year: 6.9 percent). In this context, the EBIT in the previous year was positively affected by the reversal of an impairment loss related to a Chinese investment. Without this effect, Customized Modules would have achieved an increase in profitability compared to the previous year. Orders received by the Customized Modules division were €366.7 million after nine months, or 6.3 percent lower than in the previous year’s period (€391.4 million). The book-to-bill ratio was 1.03. Order backlog in the division amounted to €337.4 million as of September 30, 2018, following €317.7 million as of the same date in the previous year.
In the Lifecycle Solutions division, profitability was significantly increased with slightly higher sales revenues. After the first nine months of 2018, revenues totaled €69.7 million (previous year: €67.7 million). The sales increase was particularly attributable to better utilization of the welding plants in Germany. The division’s EBIT increased from €4.0 million to €4.9 million in the current reporting period. Accordingly, the EBIT margin increased from 5.9 percent to 7.1 percent. Orders received in the period from January to September 2018 similarly improved, rising to €72.6 million, compared to €67.8 million after the first nine months of 2017. The order backlog of Lifecycle Solutions amounted to €25.0 million on September 30, 2018 (previous year: €29.4 million).
On September 30, 2018, the Vossloh Group had 3,779 employees. The number of employees has decreased compared to the previous year’s reporting date (9/30/2017: 3,965 employees) by 186 employees. The reduction is primarily attributable to the two companies within the Customized Modules division that, since early December 2017, are no longer fully consolidated. The total increase from the end of 2017, when the Group had 3,685 employees, is 94 employees.
For the entire 2018 fiscal year, Vossloh expects Group sales to trend toward the lower end of the guidance of €875 million to €950 million. This estimate is based, among other things, on negative currency translation effects. EBIT and the EBIT margin will be below the previous year’s figures, as expected at the beginning of the year. The essential reason for this is the very strong business performance in the high-margin focus market of China in the 2017 fiscal year, which was partially at the expense of the current year. These project-related fluctuations will result in a weaker performance of the Core Components division. In addition, rising material prices as a result of the US tariffs on steel imports are leading to increased margin pressure, particularly in the Tie Technologies business unit. Therefore, Vossloh assumes that the EBIT margin for 2018 will be at the lower end of the estimated range between 6.0 percent and 7.0 percent. For 2019, higher sales in North America are continued to be assumed. The sales development in the high-margin focus market of China will depend in part on the customer’s scheduling of deliveries of the orders expected to be received in the fourth quarter.
An Overview of Key Figures for the Vossloh Group
|Orders received1||€ million||684.0||652.5|
|Order backlog (as of 9/30)1||€ million||542.7||494.8|
|Sales revenues1||€ million||623.2||683.2|
|Value added1||€ million||(8.9)||12.0|
|Net income||€ million||12.6||22.0|
|Earnings per share||€||0.57||0.92|
1Prior-year figures adjusted due to the treatment of the Locomotives business unit as discontinued operations.
Werdohl, October 25, 2018
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Vossloh is active in rail technology markets worldwide. The Company’s core business is rail infrastructure. The Group activities are organized into the three divisions of Core Components, Customized Modules and Lifecycle Solutions. In the 2017 fiscal year, Vossloh achieved sales of about €920 million with over 3,900 employees.