Vossloh increases sales and EBIT (2019 adjusted), performance program extensively implemented
The Vossloh Group published its annual report for the 2019 fiscal year today. Group sales increased significantly compared to the previous year and were within the forecasted target corridor. Sales revenues rose by 5.9 percent from €865.0 million in the previous year to €916.4 million. The background to this positive development is the growth in the Core Components division. This division generated significantly higher sales in the rail fastening systems business, especially in China and North America, and in Australia thanks to the acquisition of the concrete tie manufacturer Austrak. The Lifecycle Solutions division also made a significant contribution to the improved sales performance following the expansion of capacity by acquiring several new milling machines. Despite the sale of a subsidiary during the year, the Customized Modules division recorded sales that are virtually on the same level as the previous year. Against the backdrop of the performance program extensively implemented in 2019, EBIT has been adjusted for one-time effects to reflect the Vossloh Group’s actual operating performance. At €55.7 million, adjusted EBIT exceeded both the figure reported for the previous year of €54.2 million and the recently communicated expectations. The adjusted EBIT margin was 6.1 percent (previous year: 6.3 percent). Adjusting for a positive one-time effect in the previous year related to the acquisition of several milling machines (€5.5 million) a significant increase in both EBIT and the EBIT margin was achieved.
2019 Performance program
The one-time effects from the performance program totaled €93.3 million and had a negative impact on the income statement and value-oriented key figures. €30.2 million was incurred in connection with employee redundancies. The remaining amount of €63.1 million related primarily to allowances and losses on disposals related to the sale of unprofitable activities. Vossloh’s exit from the loss-making American turnout business is of particular relevance in this context. One US company was sold in its entirety, while all relevant operating assets were sold from another. A particularly positive aspect is that the proceeds from these transactions are sufficient to fund the entire performance program in full. This program, and its successful implementation, form the basis for a sustained increase in the Vossloh Group's profitability and self-financing power.
Oliver Schuster, CEO of Vossloh AG, explains: “2019 was an eventful but above all successful year for Vossloh. In addition to higher sales revenues and improved profitability, the high level of orders received and newly concluded framework agreements in particular demonstrate that Vossloh is on the right track. At the same time, we were able to make significant progress in important investment projects, such as the construction of our vertically integrated lead factory for rail fastening systems at our headquarters in Werdohl and a new factory for concrete ties in Canada. No less significant in this context is the establishment of a new joint venture in the important Chinese market and the strategically significant investment in our French foundry for manganese frogs. Our digital strategy entitled ‘The Smart Rail Track by Vossloh’ is increasingly taking shape and is making its mark in some initial projects. We have also taken another important step towards increasing our profitability and our self-financing power with our performance program. On this basis we look ahead to the future with confidence.”
Core Components division
Vossloh’s sales in the Core Components division rose sharply by 20.1 percent to €351.7 million in the 2019 fiscal year, with both business units contributing to this growth. Vossloh Fastening Systems saw a substantial increase in sales of €17.3 million, especially in China and North America. The increase in the Tie Technologies business unit was largely attributable to the acquisition of Austrak, as well as to business in the US. In 2019, the Core Components division achieved an EBIT adjusted for one-time effects of €39.3 million (previous year: €34.5 million) with an adjusted EBIT margin of 11.2 percent (previous year: 11.8 percent). At €382.0 million, orders received in the 2019 fiscal year were slightly below the level of the previous year (€391.3 million). While three major orders were won in China in the previous year (volume of around €85 million), one major order (volume of just over €40 million) was won in the reporting year. Significant growth was achieved in the USA and Australia. The book-to-bill ratio was 1.09. At the same time, the order backlog increased significantly to €267.6 million in 2019 (previous year: €237.3 million).
Customized Modules division
At €473.2 million, sales in the Customized Modules division were down only slightly on the previous year’s figure of €482.6 million, despite the sale of Cleveland Track Material during the year. Sales were lower in Poland as a result of projects being postponed until 2020. This was partially offset by higher sales in Belgium and India. EBIT adjusted for one-time effects of €23.7 million (previous year: €26.1 million) and the resulting adjusted EBIT margin of 5.0 percent (previous year: 5.4 percent) were each only slightly below the corresponding figures for the previous year. In the year under review, adjusted EBIT continued to included losses of some €10 million stemming from the American turnout business. Orders received amounted to €468.2 million in the 2019 fiscal year, a fall of 7.7 percent compared to the previous year. This was attributable to lower levels of orders received in India and Israel as well as the sale of the US subsidiary as part of the performance program. The order backlog declined from €345.7 million in the 2018 fiscal year to €273.0 million, a development driven primarily by the sale of the US subsidiary. The book-to-bill ratio was nevertheless 0.99.
Lifecycle Solutions division
Sales in the Lifecycle Solutions division rose by 6.0 percent to €106.0 million in the 2019 fiscal year with an adjusted EBIT of €6.2 million (previous year: €12.9 million) and an adjusted EBIT margin of 5.9 percent (previous year: unadjusted 12.9 percent). The increase in sales was mostly driven by the expansion of the milling business. EBIT and EBIT margin in the previous year benefitted by €5.5 million in connection with the realization of negative goodwill. Orders received in the Lifecycle Solutions division rose by 14.0 percent to €103.5 million, in particular due to a significant increase in orders in the milling business.
The Locomotives business unit, the last remaining business unit of the Transportation division, is still reported under discontinued operations in the 2019 annual report. A contract was signed in 2019 to sell the business unit to a subsidiary of CRRC. The transaction is yet to receive all regulatory approvals, but it is expected to be finalized in the near future.
The result from discontinued operations came to €(70.4) million (previous year: €(2.1) million), with impairment losses in connection with the sale of €50 million being recorded in the reporting year. Higher operating losses were also incurred, which overall had a significant negative impact on net income.
At the end of the 2019 fiscal year, Vossloh AG employed 3,531 people, representing a 9.2 percent decline over the previous year. This development was due to the implementation of the performance program, which, in addition to reducing the number of employees, also involves the sale of unprofitable activities. The figure includes 126 employees who will remain employed until the end of their notice periods.
The development of sales and earnings in the Vossloh Group has hardly been affected by the COVID-19 pandemic so far this year. Nevertheless, at an early stage Vossloh set up an international and cross-divisional crisis management team, that monitors global developments on a daily basis, identifies potential problems at an early stage and develop proposals for solutions. The main focus of attention is on the health of the Vossloh employees. The organization is regularly informed about the current situation, rules of behavior have been established for responsible interaction with one another and strict travel rules have been issued. Employees in administrative positions now work mainly from home.
On the basis of current knowledge and a careful risk assessment, and with reference to the obvious uncertainties associated with the pandemic and its further consequences Vossloh expects sales of between €900 million and €1 billion in the 2020 fiscal year. The exit from the US turnout market at the end of 2019 should be more than offset by the expected positive developments in other regions. Significantly higher sales are expected in both business units of the Core Components division. The anticipated growth in the sales figures of the Fastening Systems business unit in China is partially due to increased deliveries of rail fastening systems in the high-speed segment. In the Tie Technologies business unit, the Group expects significant sales growth in both North America and Australia. As regards the Lifecycle Solutions division, Vossloh forecasts a slight increase in sales, mainly due to higher service revenues in the milling segment. Divestments in the Customized Modules division mean that significantly lower sales are expected in this area. The decline in the US business is expected to be partially offset by higher sales in other regions.
Assuming the sales development described above, profitability is expected to increase noticeably in fiscal year 2020 compared to the adjusted EBIT margin in 2019, mainly as a result of savings stemming from the performance program. The EBIT margin is currently expected to be between 7 and 8 percent. This corresponds to an EBITDA margin of 12 percent to 13 percent (2019 adjusted: 11.5 percent).
The Annual General Meeting is so far scheduled for May 27, 2020. However, in view of current developments (COVID-19), it is uncertain whether the Annual General Meeting can take place as planned. A decision in this regard will be made and communicated by mid-April at the latest. Depending on further developments, Vossloh AG may convene the Annual General Meeting at a later date. The dividend proposal is also subject to current developments. The Executive Board and Supervisory Board had previously planned to propose to the shareholders a dividend of €1.00 per share, unchanged from the previous year. Depending on further developments, the Executive Board and Supervisory Board reserve the right to review the dividend proposal again and, if necessary, to submit an adjusted dividend proposal.
|Orders received||€ million||938.2||979.2|
|Order backlog||€ million||549.2||541.01|
|Adjusted EBIT||€ million||55.7||54.2|
|Adjusted EBIT margin||%||6.1||6.3|
|Net income||€ million||(136.8)||22.7|
|Earnings per share||€||(8.32)||1.14|
|Value added||€ million||(105.4)||(5.8)|
1 For the purpose of comparability, the figure is shown without the order backlog of the US company Cleveland Track Material (€54.0 million), which was sold in 2019.
Werdohl, March 19, 2020
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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 2019 fiscal year, Vossloh achieved sales of €916.4 million with an average of 3,786 employees.