Vossloh AG showed a positive development in the first quarter of the 2020 fiscal year, particularly regarding EBIT and orders received. Orders received increased to €291.9 million compared with the previous year’s quarter (previous year excluding sold U.S. businesses: €252,5 million). There was also an overall positive development in sales. After adjustment for the missing sales due to the disposal of activities in the USA in the previous year, sales of €182.9 million were around 3 percent above the comparable figure for the previous year of €177.5 million (reported: €190.0 million) despite isolated COVID-19 effects. The ratio of new orders to sales (book-to-bill) increased to 1.6 in the quarter under review. EBIT improved significantly to €16.5 million after the previous year’s quarter still showed negative EBIT of €(0.6) million. This unusually high EBIT is due not only to operating improvements but largely also to a €15.6 million gain recognized in profit and loss resulting from a business combination achieved in stages of a joint venture in China, which had been established in the previous year in the Fastening Systems business unit (excluding this effect, EBIT amounted to €0.9 million). As a result, the EBIT margin increased to 9.0 percent (previous year: (0.3) percent). EBITDA increased accordingly to €28.8 million (previous year: €12.2 million). The EBITDA margin of 15.7 percent was also well above the previous year’s margin of 6.4 percent. Net income was still slightly negative due to the burdens from discontinued operations, but also improved significantly to €(2.6) million (previous year: €(22.5) million).
Performance program proves effective
Oliver Schuster, CEO of Vossloh AG, comments: “We are delighted that the performance program we have implemented to a large extent is taking effect, and that it is already making a significant impact in the first quarter of 2020 despite the exceptional situation due to the pandemic. The reorganization of our production landscape and the termination from unfavorable businesses is creating a basis for the significant increase of our future profitability and our self-financing power. This was confirmed by the positive development in the first quarter. With regard to the further development of our business, we can despite the uncertainties related to the COVID-19 pandemic generally look with confidence toward the future, thanks to the good order intake and our industry’s relatively high crisis resistance.”
Core Components division
In the Core Components division, Vossloh increased sales in the first quarter of 2020 to €77.7 million, following €72.0 million in the same period last year. This increase in sales was due solely to revenue growth in the Tie Technologies business unit to €36.5 million (previous year: €28.5 million), which benefited primarily from the ramp-up of several projects in Australia. Sales of €43.9 million in the Fastening Systems business unit were only slightly below the previous year’s level (€46.0 million). The Core Components division achieved an EBIT of €19.4 million in the first quarter of 2020 (previous year: €6.5 million), benefiting from the earnings effect from the business combination achieved in stages of the Chinese joint venture (excluding this effect, EBIT amounted to €3.8 million). By contrast, the Tie Technologies business unit incurred start-up costs tied to the ramp-up of production capacity. In total, the EBIT margin increased to 25.0 percent, following 9.0 percent in the previous year. Orders received in Core Components increased to €107.9 million (previous year: €90.7 million), thanks primarily to the high number of orders received in the USA and Australia in the Tie Technologies business unit. The order backlog in Core Components also increased significantly to €302.8 million (€256.0 million).
Customized Modules division
Sales in the Customized Modules division totaled €87.6 million in the first quarter of 2020 (previous year: €101.0 million). The lower sales volume was due exclusively to the loss of sales from the sold U.S. businesses. Portfolio-adjusted sales were at the previous year’s level despite individual obstacles – for instance in France – because of the COVID-19 pandemic. This resulted in initial burdens on earnings that was outweighed by the absence of losses from the sold U.S. businesses and higher earnings contributions from Italy and Sweden. EBIT increased noticeably to €1.8 million (previous year: €(0.3) million). The EBIT margin amounted to 2.1 percent (previous year: (0.3) percent). Orders received increased portfolio-adjusted by 12.3 percent to €147.7 million compared with the previous year’s high figure of €131.5 million. Larger orders were won in Poland and Serbia in particular. The order backlog was €333.2 million and was thus at about the same level as the previous year (€333.9 million) when portfolio-adjusted.
Lifecycle Solutions division
In the Lifecycle Solutions division, the good development recently observed in the logistics business and in welding plants continued in the first quarter of 2020, so that sales rose to €20.2 million (previous year: €19.1 million). EBIT, which was negative as is typical for the season, improved to €(1.8) million following €(2.6) million in the comparable period. This was particularly due to the sales performance in the areas of logistics and stationary welding. Orders received in Lifecycle Solutions totaled €38.4 million (previous year: €36.4 million). In particular, important orders were won in Sweden (switch maintenance), in Germany (mainly stationary welding and logistics), and in the Netherlands (rail milling). The order backlog was €28.6 million (previous year: €30.2 million).
The Locomotives business unit, the last remaining business unit of the Transportation division, continues to be presented as discontinued operations in the statement on the first quarter of 2020. An agreement was signed in 2019 to sell the business unit to CRRC. The Executive Board expects the sale to be completed shortly, now that all necessary official permits including approval by the Federal Cartel Office (Bundeskartellamt) have been granted.
In the first quarter of 2020, the average number of employees in the Vossloh Group was 3,472 (previous year: 3,868). The considerable decrease is a result of the implementation of the performance program.
Impact of the COVID-19 pandemic
The impact of the COVID-19 pandemic on the business of Vossloh is relatively small with regard to the first quarter of 2020. In particular, the Chinese business in the Core Components division has shown no negative impact up to now, and has even exceeded expectations in the first quarter. Negative sales and earnings effects were mostly seen in the Customized Modules division. Further sales and earnings burdens on the Vossloh Group cannot be ruled out during the course of the year, due to temporary or continuing production shutdowns and other effects of the pandemic. As a result of the current uncertainty surrounding future business developments, the Executive Board and the Supervisory Board determined on April 16 to recommend to the Annual General Meeting of Vossloh AG that dividend payments be suspended for the 2019 fiscal year. This measure will contribute significantly to the strengthening of Vossloh’s balance sheet.
Based on current knowledge and a careful risk assessment, and with reference to the obvious uncertainties regarding the further impact of the COVID-19 pandemic, the Executive Board of Vossloh AG continues to expect sales of between €900 million to €1 billion for the 2020 financial year and an EBIT margin between 7 and 8 percent, thanks to the aforementioned effect of the business combination achieved in stages of a Chinese joint venture. This corresponds to an EBITDA margin of 12 to 13 percent.
|Orders received||€ million||252.51||291.9
|Order backlog as of 3/31||€ million||615.31||663.3|
|Net income||€ million||(22.5)||(2.6)|
|Earnings per share||€||(1.50)||(0.15)|
|Value added||€ million||(17.6)||1.6|
|Net financial debt (before lease liabilities)||€ million||370.7||386.4|
1 For purposes of comparability, values are represented excluding U.S. businesses sold in 2019 (orders received adjusted by €28.5 million and order backlog adjusted by €70.8 million).
Werdohl, April 30, 2020
Contact information for media:
Gundolf Moritz (Mirnock Consulting)
Phone: +49 (0) 2392 52-608
Contact information for investors:
Dr. Daniel Gavranovic
Phone: +49 (0) 2392 52-609
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.