Earnings and profitability increased further; sale of Electrical Systems business unit in the near future
Negotiations on the sale of the Electrical Systems business unit, which is not part of Vossloh’s core business, are becoming more substantive. The Executive Board assumes that a contract will, in all likelihood, be signed in the coming months. As of September 30, based on the current status of negotiations, an impairment loss of approximately €9 million was incurred on the carrying amount of the Electrical Systems business unit in accordance with IFRS 5. Vossloh currently expects a net cash inflow in the low to middle double-digit million range from the sale of the business unit. For this reason, the business unit will be presented as “discontinued operations” as of September 30, 2016.
Group sales from continuing operations – not including Vossloh Electrical Systems – were €664.1 million in the first nine months of 2016 (previous year: €694.3 million). The reasons for the 4.3% decrease were, for the most part, with a view to the core business, ongoing weakness in demand in the USA as well as adverse exchange rate developments as compared to the prior year period. In addition, in the Transportation division and thus outside the core business, the number of locomotives delivered was below the corresponding figure from the previous year. In Asia and in Northern Europe, on the other hand, the Group recorded substantial sales growth. Group EBIT from continuing operations were improved despite slightly declining sales revenues due, among other things, to a higher-margin product and project mix as well as an unchanged consistent implementation of cost reduction and efficiency enhancement programs from €29.7 million to €34.7 million. The EBIT margin increased from 4.3% in the previous year to 5.2% in the reporting period.
Orders received in the Vossloh Group (in the new reporting structure) from January through September 2016 were €830.3 million (previous year: €725.1 million) and in the third quarter were driven mainly by an order from French leasing company Akiem. At the end of July of this year, the company ordered 44 DE 18 diesel electric locomotives for about €140 million from Vossloh Locomotives.
The Core Components division also won, among other contracts, a major order for rail fastening systems with a value of approximately €50 million in the important Chinese market. Order backlog for the Group as of September 30, 2016 was thus €748.8 million (previous year: €624.5 million).
In the first nine months sales revenues for the Core Components division were 4.5% lower at €183.1 million (previous year: €191.7 million). Lower sales volumes in Argentina and in Eastern Europe (particularly in the Czech Republic and Poland) were countered by positive sales development in China and Qatar, for example. EBIT in the division rose as a result of a higher-margin project mix and extensive cost reduction measures by 6.8% from €22.5 million to €24.1 million. There was a corresponding further improvement in the EBIT margin to 13.1% (previous year: 11.8%). Orders received in the first nine months of 2016 reached €198.4 million (previous year: €229.1 million). This includes the major order from China as well as further significant orders, e.g. from Italy and Saudi Arabia. Order backlog as of September 30, 2016 amounted to €192.8 million (previous year: €220.0 million).
Sales revenues in the Customized Modules division declined slightly in the first nine months by 3.5% to €374.6 million (previous year: €388.1 million). A significant sales decrease was recorded in the USA in particular. The expiry of projects in Poland also contributed to the sales decrease. On the other hand, in France as well as in Finland and Italy pleasing sales growth was achieved. EBIT of €27.4 million was 15.4% above the prior year’s figure of €23.7 million. The EBIT margin improved further from 6.1% in the previous year to 7.3%. Orders received in the first nine months reached €361.6 million (previous year: €397.4 million). Sizable new orders were received by the division in France, the USA, Sweden, and Morocco. On September 30, 2016, the order backlog for the division was €285.1 million following €318.5 million in the previous year.
In the Lifecycle Solutions division, business activities are becoming increasingly internationalized. After nine months of 2016, more than 40% of revenues were generated outside of Germany. Sales revenues in the division totaled €61.9 million (previous year: €52.2 million). In comparison to the previous year, sales growth was thus at 18.6%. The main reason behind this development was a positive sales development, especially in Sweden and Finland. EBIT improved by 14.8% from €2.8 million in the previous year to €3.2 million. Earnings in the third quarter were burdened by the necessary maintenance work on grinding trains as well as by a lower margin order mix. The EBIT margin in the current reporting period thus decreased slightly to 5.1% (previous year: 5.3%). Orders received increased substantially with significant order wins primarily in Germany, but also in China, Sweden and Finland from €60.2 million in the previous year to €83.8 million in the current year.
As of the end of the reporting period, order backlog at Lifecycle Solutions totaled €29.7 million (previous year: €18.4 million).
The Transportation division which, in the new reporting structure, consists of only the Locomotives business unit, generated sales revenues of €52.9 million in the first nine months of 2016 (previous year: €68.7 million). Due to the lower number of locomotives delivered in the first nine months of the reporting year, sales revenues decreased as compared to the previous year by 23.0%. EBIT and EBIT margin were negative after nine months as expected. EBIT, however, improved slightly from −€10.7 million after nine months in 2015 to −€9.0 million in the current reporting period. Delivery of a large number of locomotives is planned for the fourth quarter of 2016 with substantial sales revenues and significantly positive earnings contributions being expected. Due to the major contract win for locomotives, orders received in the first nine months of 2016 surpassed the prior year figure of €44.2 million substantially: it increased to €195.8 million. Delivery of the ordered vehicles will begin in 2018. Order backlog as of September 30, 2016 increased accordingly to €242.1 million (previous year: €68.3 million).
Including the employees of Vossloh Electrical Systems, 4,768 people were employed by the Vossloh Group on September 30, 2016 (previous year: 4,866 employees). The number of employees at Core Components increased as a result of the first-time inclusion of an Indian Group company to 625 employees (previous year: 595 employees). At Lifecycle Solutions, the number of employees increased as compared to the same period in the previous year from 433 employees to 451 employees, while at the Customized Modules division the number of employees decreased by 87 to 2,521 (previous year: 2,608 employees). At Vossloh Locomotives, too, the number of employees declined by 13 to 396 people (previous year: 409 employees). Not including the staff of the Electrical Systems business unit which is held for sale, the number of employees in the Group was 4,047 on September 30, 2016 (previous year: 4,101 employees).
On the basis of the business development in the first nine months, the Executive Board expects sales revenues from continuing operations for full-year 2016 between €930 million and €970 million. Excluding the Electrical Systems business unit, in financial year 2015 sales of about €950 million were achieved. The EBIT margin from continuing operations is projected to be between 4.5% and 5.0%. Originally, an EBIT margin of between 4.0% and 4.5% was planned – including the activities of Vossloh Electrical Systems.
For the core divisions Core Components, Customized Modules and Lifecycle Solutions, profitability is expected, from today’s perspective, to be at about the previous year’s level. For Transportation, the Executive Board anticipates a significant improvement in sales and earnings in the fourth quarter of 2016 and thus for the full year a margin improvement as compared with the previous year. Following the successful completion of the sale of the Electrical Systems business unit, an EBIT margin at the upper end of the forecasted corridor of between 5.5% and 6.0% is projected for 2017. Further details on the expectations for financial year 2017 will be announced by the Executive Board at a later date once updated budget planning is available.
Overview of the most important key figures of Vossloh Group (continuing operations)
|Vossloh Group||9M/ 2016||9M/2015||Δ %|
|Orders received*||€ million||830.3||725.1||+14.5
|Order backlog*||€ million||748.8||624.5||+19.9
|Value added*||€ million||−13.3||−25.8||-|
|Net income||€ million||6.0||7.0||−14.8|
|Earnings per share||€||0.13||0.20||−35.0|
* Reported figure not including the Electrical Systems business unit that is held for sale. The financial information reported for the Group here are therefore not comparable with the reports issued to date.
Werdohl, October 27, 2016
Contact information for the media:
Dr. Daniel Gavranovic
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Contact information for investors:
Dr. Daniel Gavranovic
Phone: (+49-23 92) 52-608
Vossloh is a global player in the rail technology market. Our core business is rail infrastructure. In addition, the Group is active in the areas of rolling stock and electric buses. The activities of the Group are divided into the four divisions Core Components, Customized Modules, Lifecycle Solutions and Transportation. In financial year 2015, Vossloh (including the Electrical Systems business unit which is held for sale) generated sales of €1.2 billion with approximately 4,900 employees.