Vossloh AG published its annual report for the 2018 fiscal year today. Sales and earnings were in line with the Group’s forecasts and were satisfactory overall in a challenging market environment. Group sales came to €865.0 million in 2018, which was 5.8 percent down on the previous year’s figure of €918.3 million. The reason for the year-on-year decline was the weaker sales development of the rail fastening system business in China, due to project-related reasons. The resulting lower sales and earnings contributions could only be partially offset in other areas of the Group. EBIT in the Customized Modules division was also lower than in 2017 due to the absence of a positive effect from the reversal of a write-down of an investment in a Chinese joint venture. In contrast, the Lifecycle Solutions division recorded a significant increase in EBIT in 2018, partly due to income from a favourable acquisition. Overall, the Group’s earnings before interest and taxes – EBIT – came to €54.2 million compared with €70.3 million for 2017. The EBIT margin for the Vossloh Group in 2018 was 6.3 percent, compared with 7.7 percent in the previous year.
Encouraging performance in orders received
Orders received by the Vossloh Group performed strongly in fiscal year 2018, rising by 12.9 percent from €867.2 million to €979.2 million. This increase can primarily be attributed to positive development in the Core Components division. Among other things, three major orders were won for the delivery of rail fastening systems for the expansion of China’s high-speed rail network, with an overall volume of roughly €85 million. The Group’s book-to-bill ratio (ratio of orders received to sales revenues) came to 1.13 at the end of fiscal year 2018. The order backlog as of the reporting date was significantly higher than the previous year’s figure. Growth of 25.4 percent to €595.0 million (previous year: €474.4 million) was recorded in the order backlog, mainly due to a strong increase in the Core Components division.
CEO of Vossloh AG, Andreas Busemann, explains: “Vossloh is on the right track. Our encouraging order situation gives us confidence for the years ahead and also impressively underlines the unchanged strong market position, for instance with rail fastening systems in the Chinese high-speed segment. We were also able to further develop our business in North America in 2018, for example by winning multi-year framework agreements with CN (Canadian National). However, the market environment remains challenging, particularly in the US and some other regions. We are monitoring these developments very closely and will intensify the implementation of suitable measures to sustainably improve profitability.”
Significant increase in earnings per share
Earnings before taxes (EBT) were also down on the year due to the EBIT performance and in view of a slightly lower net interest result of €(13.4) million (previous year: €(12.5) million). Income taxes came to €16.0 million in the reporting year, which is less than the previous year (€21.7 million). The result from discontinued operations of €(2.1) million marked a clear improvement relative to the previous year's value of €(35.8) million. Net income attributable to shareholders of Vossloh AG was €18.2 million for the year 2018, compared with a loss of €(8.0) million in 2017. With the average number of shares outstanding unchanged at 15,967,437, the earnings per share for the 2018 fiscal year improved significantly to €1.14 (previous year: €(0.50)).
The Executive Board and Supervisory Board of Vossloh AG will again propose a dividend of €1.00 per share to the shareholders at the Annual General Meeting scheduled for May 22, 2019.
Business performance of the divisions
Sales in the Core Components division fell sharply over the reporting year, down by 16.8 percent from €351.4 million to €292.6 million. While the Tie Technologies business unit reported sales of €78.1 million, almost matching the previous year’s level of €79.2 million, sales for Vossloh Fastening Systems declined substantially from €273.4 million to €216.9 million due to temporarily weaker business in China. As expected, it was therefore not possible to repeat the previous year’s strong EBIT for the Core Components division. EBIT for the reporting year was €34.5 million (previous year: €51.2 million); the EBIT margin fell from 14.6 percent to 11.8 percent, but remained in the double-digit percentage range. Orders received by the Core Components division developed very encouraging. They rose from €285.0 million in the previous year to €391.3 million in 2018, particularly thanks to the high volume of orders received from China. The book-to-bill ratio for the Core Components division was a strong 1.34 as a result (previous year: 0.81). The order backlog at year-end 2018 was €237.3 million, significantly above the previous year’s figure of €151.2 million.
Sales revenues in the Customized Modules division in fiscal year 2018 were more or less unchanged on 2017. They came to €482.6 million (previous year: €483.3 million). EBIT for the division fell by 14.6 percent from €30.5 million to €26.1 million. The EBIT margin declined accordingly from 6.3 percent to 5.4 percent. EBIT in fiscal year 2017 was boosted by the reversal of an impairment on an investment in a Chinese company. Without this non-recurring effect, the EBIT margin of Customized Modules would have improved slightly year on year in 2018. The French management company performed less well in the reporting year, particularly due to some switch projects coming to an end. By contrast, earnings improved at the companies in Luxembourg, Finland, Poland and the UK. The US business also performed slightly better than the previous year operationally. Orders received in the Customized Modules division were virtually unchanged at €504.6 million in 2018 and were therefore only 1.6 percent lower than the previous year’s high figure of €513.0 million. The division’s order backlog at year-end 2018 was €345.7 million (previous year: €309.2 million).
Sales revenues in the Lifecycle Solutions division increased again substantially in 2018, reaching the €100 million mark for the first time (previous year: €91.0 million). Better year-on-year utilization of the welding plants in Germany contributed to the good performance, as did higher demand for switch grinding services in Sweden. The division also generated higher sales than in the previous year for high-speed grinding. EBIT in the Lifecycle Solutions division almost doubled from €6.6 million to €12.9 million. The EBIT margin improved significantly from 7.3 percent in the previous year to 12.9 percent. This positive development was primarily the result of income from the realization of a negative goodwill arising from the acquisition of the rail milling business of STRABAG Rail GmbH. Even without this non-recurring valuation effect, both EBIT and the EBIT margin would have been slightly higher than in the previous year. The volume of orders received in the Lifecycle Solutions division was also higher in 2018. They improved to €90.8 million (previous year: €79.6 million). The order backlog as of December 31, 2018, amounted to €12.9 million (previous year: €17.9 million).
The Locomotives business unit, the last remaining business unit of the Transportation division, is still reported under discontinued operations in the annual report for the 2018 fiscal year. Negotiations for the disposal of Vossloh Locomotives are still ongoing. Management expects the planned sale to be completed shortly and a good solution for the future development of these activities under a new owner.
The average number of people employed by the Vossloh Group in the last fiscal year was 3,773, compared with 3,934 in the previous year. The decline in the average number of employees is due to the fact that the average figures as of December 2017 included employees from two companies in the Customized Modules division. Since these companies are no longer fully consolidated as of December 2017, their employees are not included in the Group’s employees for 2018. By contrast, two acquisitions by the Vossloh Group were only completed as of year-end 2018, namely that of the Australian company Austrak Pty Ltd. and the rail milling business of STRABAG Rail GmbH. The new employees were therefore not included in the calculation of the average workforce for the full year. As of the reporting date December 31, 2018, the Vossloh Group had 3,937 employees, i.e. 252 or 6.8 percent more than the previous year (3,685 employees).
Outlook for 2019 and 2020
Given the much better visibility for business in China beyond 2019, the Executive Board has decided on an exceptional basis also to provide a preview of the key financial figures for the following fiscal year 2020. The background is that the bulk of the contracts won in China in 2018 are due for delivery from fiscal year 2020 onwards.
For the 2019 fiscal year, management is therefore assuming a range of €900 million to €1 billion for Group sales. The first quarter of 2019 is expected to be seasonally weak. In the Core Components division, substantially higher sales revenues are expected in the Tie Technologies business unit compared to 2018, primarily due to the acquisition of Austrak. Sales revenue increases are also anticipated for the Fastening Systems business unit, but not yet in China. The expansion of the high-speed rail network in China is expected to continue at the same pace. The intention is to expand the high-speed network from its current size of roughly 25,000 kilometers to approximately 38,000 kilometers by 2025. Vossloh has maintained a strong market position in this segment as a supplier of rail fastening systems. Vossloh also expects sales to be higher in 2019 compared with 2018 for the Customized Modules and Lifecycle Solutions divisions.
A further increase in sales is forecast for the Vossloh Group in 2020, driven by, amongst others, strong orders from China and other factors. For the 2020 fiscal year, management is currently planning Group sales of between €950 million and €1.05 billion. Higher sales and earnings contributions in the focus market North America will also play a key role, as will growth in the milling business in the Lifecycle Solutions division. Under these conditions and from a current perspective, the management anticipates EBIT in 2019 to be between €50 million to €60 million, and forecast an increase to €65 to €80 million for 2020.
|Orders received||€ million||979.2||867.2|
|Order backlog||€ million||595.0||474.4|
|Sales revenues||€ million||865.0||918.3|
|Net income||€ million||22.7||0.3|
|Earnings per share||€||1.14||(0.50)|
|Value added||€ million||(5.8)||11.1|
Werdohl, March 28, 2019
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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 2018 fiscal year, Vossloh achieved sales of €865 million with approximately 3,800 employees.