Vossloh streamlines portfolio and concretizes the effects of the performance program
Vossloh AG has made additional important progress with the implementation of the performance program that was adopted in April 2019. The objective of this program is, among other things, the divestment of loss-generating or underperforming activities. In this connection, a contract was signed today with a strategic buyer for the sale of the largest U.S. Group company in the Customized Modules division, Cleveland Track Material Inc. (CTM), Cleveland, Ohio. Translated into euros, the purchase price and net inflow of funds amount to approximately €35 million. The Supervisory Board has already approved the sale. The closing of the transaction does not depend on regulatory approvals and is still expected in 2019.
“Our performance program is aimed at strengthening Vossloh in terms of profitability and self-financing power. With the sale of CTM, we have reached an important milestone in this respect. Now it is time to systematically implement further measures within the Group in order to further strengthen our competitive position”, says Oliver Schuster, CEO of Vossloh AG.
The Executive Board of Vossloh AG has at the same time adopted additional measures to streamline the portfolio in the Customized Modules division. This affects all current activities of this division in the USA and South America. The companies affected, including CTM, generated sales in the 2018 fiscal year of around €65 million and negative EBIT or significantly below-average profitability over several years. Vossloh currently expects exceptional noncash charges in connection with these transactions of around €40 million in the current fiscal year and overall in connection with the disposal of loss-making activities special charges of around €55 million which are largely noncash effective.
With a view to the target of reducing the number of employees worldwide by around 5 percent compared with the end of 2018, Vossloh has initiated necessary measures in recent months and will achieve this target. Expenses for staff reductions in the order of around €30 million are currently expected for 2019. The corresponding cash outflows and employee departures will affect the years 2019 and 2020.
From today’s perspective, total expenses of around €85 million in connection with the performance program are consequently expected in the 2019 fiscal year.
“The one-time expenses this year are overwhelmingly booking effects that do not lead to an increase in net financial debt. Taking into consideration the proceeds from the sale of Cleveland Track Material alone, we even expect the performance program to already have a positive cash effect in 2019”, explains Oliver Schuster. “The yearly savings through the program will bring us considerably closer to our goal of securing double-digit EBIT margins sustainably, in all divisions and noticeably expand the financial room for maneuver.” From today’s view, overall savings through the performance program will total around €15 million to €20 million per fiscal year, of which a large proportion will already take effect for the first time in the 2020 fiscal year.
The Executive Board confirms the outlook for the operational business for the 2019 fiscal year. Vossloh expects sales of between €900 million and €1 billion. The EBIT expected for the operational business will probably be in the lower third of the forecast range of between €50 million and €60 million, in particular due to the weak business development of CTM, the company sold today. As a result of the streamlined portfolio, Vossloh now also expects Group sales of between €900 million and €1 billion but a significantly improved EBIT between €65 million and €80 million in the 2020 fiscal year. This reflects a considerable improvement in the EBIT margin of about 2 percentage points in 2020 compared with the adjusted EBIT margin in 2019.
Werdohl, October 22, 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.