July 30, 2009 - Regulated information: Bekaert: Asia counters global slowdown

Half year results 2009

 

  • strong performance in Asia Pacific
  • low demand in mature markets
  • € 40 million margin impact from decreasing steel prices
  • 7.2% EBIT margin on sales before non-recurring items 

Bekaert maintains solid performance in emerging markets…
In the first half of 2009, Bekaert achieved organic sales in emerging markets comparable to the very strong first half of 2008, while acquisitions and favorable currency movements boosted consolidated revenues there by more than 30%.

Bekaert was ideally positioned to capitalize on the rebound of China's economy following the Chinese New year and was ready to seize opportunities immediately. Favorable currency movements also contributed to the 15% top-line growth in Asia Pacific.

While organic sales remained relatively stable, Bekaert almost doubled its consolidated revenue in Latin America, driven by the integration of Ideal Alambrec (Ecuador) and Prodac (Peru) within the consolidation perimeter. Bekaert remains poised for an expected upturn of Latin American economies.

… while experiencing volume and price pressure in mature markets
Persistent weak demand in mature markets led to a decline in most activities in EMEA and North America, especially in the automotive and construction markets. Sales as well as profits decreased as
a result of a major drop in volume. Bekaert introduced further cost-saving measures and drove up volumes of some basic products to increase capacity utilization.

The overall price decreases in steel-based raw materials witnessed since the end of 2008 affected both Bekaert's revenues and profits. In the first half of 2009, the related margin impact amounted to € 40 million.

Bekaert continues to report a strong balance sheet
Bekaert was able to reduce working capital and restructure and lower net debt, so that even in difficult times, a strong balance sheet has been maintained.

 

Key figures (in millions of €)

1H 2008

1H 2009

Consolidated sales

1 303

1 200

Operating result (EBIT) before non-recurring items

EBIT margin on sales before non-recurring items

Non-recurring items

163

12.5%

-18

86

7.2%

-7

Operating result (EBIT)

EBIT margin on sales

145

11.2%

79

6.6%

Depreciation, amortization and impairment losses

80

66

EBITDA

225

145

EBITDA margin on sales

17.3%

12.1%

Combined sales

1 971

1 615

 

Sales

Compared with an exceptional first half of 2008, Bekaert's consolidated sales were only down 7.9%, with major differences between regions. Weak market demand, notably in the mature markets, drove an organic sales decline of 20.6%. This was partly compensated by the integration of Prodac (Peru) and Ideal Alambrec (Ecuador) in Latin America, which added 5.8%, and the positive effect of currency movements, which contributed 6.9%.
Combined sales  decreased 18.1% in comparison with the first half of last year. This was a result of lower market demand reflected in an organic decline of 20.7%, which was slightly tempered by favorable exchange-rate differences of 2.6%.

Market developments per sector
Bekaert is active in a very wide range of sectors. The largest markets for Bekaert's products are the automotive, construction and energy sectors. In the automotive sector, sales are largely driven by the replacement market which is less sensitive to economic downturns than the original equipment market. Bekaert's automotive-related sales figures nevertheless dropped significantly within mature markets due to heavy destocking throughout the value chain. The economic crisis also affected sales in the construction sector. Bekaert continued to perform well on a global basis across many different applications in the energy-related markets, including petroleum extraction, solar and other renewable energy and energy transportation.

Consolidated and combined sales by segment
First half 2009 consolidated sales in millions of €

 

1H 2008

1H 2009

Variance

Share

EMEA

612

410

-33%

34%

North America

289

263

-9%

22%

Latin America

84

160

+90%

13%

Asia Pacific

318

367

+15%

31%

Total

1 303

1 200

-8%

100%

 

First half 2009 c ombined sales in millions of €

 

1H 2008

1H 2009

Variance

Share

EMEA

608

407

-33%

25%

North America

287

259

-10%

16%

Latin America

751

579

-23%

36%

Asia Pacific

325

369

+13%

23%

Total

1 971

1 615

-18%

100%

 

Segment reports  

EMEA

Key figures (in millions of €)

1H 2008

1H 2009

Consolidated sales

612

410

Operating result (EBIT) before non-recurring items

EBIT margin on sales before non-recurring items

Non-recurring items

53

8.6%

-17

-21

-5.0%

-6

Operating result (EBIT)

EBIT margin on sales

36

5.8%

-27

-6.5%

Depreciation, amortization and impairment losses

39

27

EBITDA

75

0

EBITDA margin on sales

12.3%

0.0%

 

Low economic activity and stock depletion by customers resulted in a 30% drop in sales volumes
across most EMEA activity platforms. The negative operating result mainly reflects the impact of declining raw material prices on profit margins. From the second quarter onwards, Bekaert entered
the market with additional volumes of some basic products, to secure and drive up capacity utilization. 


 

NORTH AMERICA

Key figures (in millions of €)

1H 2008

1H 2009

Consolidated sales

289

263

Operating result (EBIT) before non-recurring items

EBIT margin on sales before non-recurring items

Non-recurring items

21

7.3%

1

-5

-1.7%

0

Operating result (EBIT)

EBIT margin on sales

22

7.6%

-5

-1.8%

Depreciation, amortization and impairment losses

8

9

EBITDA

30

4

EBITDA margin on sales

10.4%

1.5%

 

In North America, nominal sales decreased by almost 20% as a result of a weaker product mix and declining volumes corresponding to low economic activity. This impact was felt particularly strongly in platforms that serve the automotive and construction markets. On a currency-adjusted basis, the revenue decline was limited to 9%. Comparable actions as in EMEA were taken from the second quarter onwards to increase capacity utilization.

Latin America

Key figures (in millions of €)

1H 2008

1H 2009

Consolidated sales

84

160

Operating result (EBIT) before non-recurring items

EBIT margin on sales before non-recurring items

Non-recurring items

11

12.9%

0

9

5.3%

-1

Operating result (EBIT)

EBIT margin on sales

11

12.6%

8

4.7%

Depreciation, amortization and impairment losses

2

4

EBITDA

13

12

EBITDA margin on sales

14.9%

7.8%

Combined sales

751

579

 

Latin America's consolidated sales growth was the result of the integration of Ideal Alambrec (Ecuador) and Prodac (Peru). Also in this region, volume decline and wire rod price fluctuations impacted the profit margins. After a severe slowdown in the first quarter of 2009 and the significant negative currency impact of the Brazilian real, Bekaert's joint ventures in Brazil saw a gradual recovery in demand from the second quarter onwards.

 

Asia Pacific

Key figures (in millions of €)

1H 2008

1H 2009

Consolidated sales

318

367

Operating result (EBIT) before non-recurring items

EBIT margin on sales before non-recurring items

Non-recurring items

107

33.5%

0

128

34.9%

0

Operating result (EBIT)

EBIT margin on sales

107

33.5%

128

34.9%

Depreciation, amortization and impairment losses

31

29

EBITDA

137

157

EBITDA margin on sales

43.2%

42.9%

Bekaert China's platforms started off slowly in the first months of the year. During those months, Bekaert offered extensive training in different components of Bekaert's Operational Excellence programs to its temporarily redundant employees. Consequently, Bekaert was ideally positioned to capitalize on the upturn as the company did not lay off its personnel during the economic standstill that occurred around the turn of the year. Bekaert achieved record volumes and sales from April onwards, operating at very high capacity utilization levels. Sales were further boosted by a favorable product mix and positive exchange-rate movements. The entities in India and Indonesia recorded moderate growth.

OTHER ACTIVITIES

Bekaert further increased its investments in research and development, totaling € 35 million in the first half of 2009 (up 6.7% versus the same period of last year). These R&D expenses applied to the activities of the international technology centers in Deerlijk (Belgium) and Jiangyin (China). The Engineering department, which is the company's main supplier of proprietary machinery, adjusted to the changed market circumstances and the subsequent investment planning.
 
FINANCIAL REVIEW

Financial results

Bekaert achieved an operating result (EBIT) before non-recurring items of € 85.8 million. This equates to an EBIT margin on sales before non-recurring items of 7.2%. Including non-recurring items, EBIT was € 78.7 million, representing an EBIT margin on sales of 6.6%. EBITDA amounted to € 145 million, representing an EBITDA margin on sales of 12.1%.

Bekaert implemented stringent cost saving measures, both at the level of its manufacturing organization as well as in selling and administrative expenses. While expenses increased firstly as a result of the integration of Ideal Alambrec and Prodac (selling and administrative expenses: increase of € 6 million) and secondly due to currency fluctuations (impact of € 3.8 million), the company managed to keep total costs under control. Research and development expenses grew by 6.7% in line with Bekaert's continuous innovation strategy.

The increase in interest expenses (up € 9.7 million) was mainly due to increased interest rates and a higher year-on-year net debt position incurred to finance major capital expenditures. Taxation on profit amounted to € 13.3 million.

The transfer of Ideal Alambrec and Prodac to the consolidated perimeter and lower profits in the Brazilian and Chilean activities reduced the share in the results of joint ventures and associated companies to € 17.4 million.

The result for the period thus reached € 52.4 million. After third-party minority interests (€ 8.2 million), the result for the period attributable to the Group was € 44.2 million.

Strong balance sheet

As at 30 June 2009, shareholders’ equity represented 43.2% of total assets. Net debt (€ 621.8 million) was brought back below the level of year-end 2008, mainly as a result of a reduction of the working capital, which was partly offset by the integration of Ideal Alambrec and Prodac. The gearing ratio (net debt to equity) was 50.7%.

Cash flow statement

Cash from operating activities amounted to € 226.3 million and reflected the major efforts to reduce working capital. As per 30 June 2009, operating working capital amounted to € 610.8 million. The purchase of property, plant and equipment (€ 86.2 million) was in line with the company's investment program.
Cash flow attributable to the Group amounted to € 110.4 million.

NV Bekaert SA (statutory accounts)

The Belgium-based parent entity’s sales amounted to € 176.7 million. Operating loss for the period was € 45.6 million. Stringent cost-control measures could not compensate for the margin loss caused by extreme low activity levels and declining wire rod prices. Net loss amounted to € 37.8 million.
 
Investment update

Bekaert issued two bonds on 17 March 2009, which were fully subscribed for the total maximum amount of € 300 million at the date of the issue. The three-year and five-year bonds were each subscribed for an amount of € 150 million. The bond issue fits in with a debt-restructuring plan that aims to provide a better balance between short- and long-term debts.

OUTLOOK

In line with earlier guidance market visibility remains limited, especially in the mature markets.
At present, raw material price indices point towards stabilization, meaning no further negative margin impact is expected in the coming months. Obviously, the substantially lower raw material prices year-on-year will have a corresponding impact on Bekaert's sales for the second half of 2009.
Notwithstanding the economic circumstances, Bekaert is confident that its broad geographical coverage with a strong presence in emerging markets, as well as its growing portfolio of product innovations and strong balance sheet, will continue to be of strategic importance.

Financial calendar
Third quarter trading update 2009                 13 November 2009
2009 results                                                      26 February 2010
2009 annual report available on the internet 31 March 2010
First quarter trading update 2010                  12 May 2010
General Meeting of Shareholders                  12 May 2010
Dividend payable (coupon nr. 11)                  19 May 2010
2010 half year results                                       30 July 2010

These unaudited and condensed consolidated interim financial statements have been prepared using accounting policies consistent with IFRSs as adopted by the European Union including IAS 34 – Interim Financial Reporting. With the exception of IFRS 8 – Operating Segments, which superseded IAS 14 – Segment Reporting as from 1 January 2009, the consolidated interim financial statements have been prepared using the same accounting policies and methods of computation as in the 31 December 2008 annual consolidated financial statements. The initial accounting for the new business combinations was determined provisionally.

Statement from the responsible persons
The undersigned persons state that, to the best of their knowledge:
- the condensed financial statements of NV Bekaert SA and its subsidiaries as of 30 June 2009 have been prepared
in accordance with the International Financial Reporting Standards, and give a true and fair view of the assets and
liabilities, financial position and results of the whole of the companies included in the consolidation; and
- the interim management report gives a fair overview of the information required to be included therein.
Bruno Humblet                                    Bert De Graeve
Chief Financial Officer                       Chief Executive Officer

Profile
Bekaert (
www.bekaert.com) is a global technological leader in its two core competences: advanced metal transformation and advanced materials and coatings, and a market leader in drawn wire products and applications. Bekaert (Euronext Brussels: BEKB) is a global company with headquarters in Belgium, employing 23 000 people worldwide. Serving customers in 120 countries, Bekaert pursues sustainable profitable growth in all its activities and generates annual combined sales of € 4 billion.
 
Annex 1: Press release 31 July 2009

Consolidated income statement

(in thousands of €)

1H 08

1H 09

 

 

 

CONTINUING OPERATIONS

 

 

Sales

Cost of sales

Gross profit

1 303 112

-995 065

308 047

1 199 920

-972 954

226 966

 

 

 

Selling expenses

Administrative expenses

Research and development expenses

Other operating revenues

Other operating expenses

Operating result (EBIT) before non-recurring items 

-58 662

-53 315

-32 879

6 980

-7 300

162 871

-53 040

-56 586

-35 067

8 515

-4 941

85 847

Non-recurring items

Operating result (EBIT)

-17 554

145 317

-7 130

78 717

 

 

 

Interest income
Interest expense

Other financial income and expenses

Result from continuing operations before taxes

2 426

-19 566

-5 227

122 950

2 175

-29 304

-3 386

48 202

 

 

 

Income taxes

 

Result from continuing operations (consolidated companies)

-25 511

 

97 439

-13 266

 

34 936

 

 

 

Share in the results of joint ventures and associates

Result from continuing operations

35 742

133 181

17 442

52 378

 

 

 

DISCONTINUED OPERATIONS

 

 

Result from discontinued operations

-

-

 

 

 

RESULT FOR THE PERIOD

133 181

52 378

Attributable to :

-          the Group

-          minority interests

 

126 046

7 135

 

44 195

8 183

 

Annex 2: Press release 31 July 2009

 

Consolidated statement of comprehensive income

(in thousands of €)

1H 08

1H 09

Result for the period

133 181

52 378

Other comprehensive income

Exchange differences

Cash flow hedges

Remeasurement of net assets held prior to acquiring control

Available-for-sale investments

Actuarial gains and losses (-) on defined benefit plans

Share of other comprehensive income or joint ventures and associates

Other

Deferred taxes relating to other comprehensive income

Other comprehensive income for the period, net of tax

 

 

5 196

-1 538

-

-11 319

-8 559

18

9

4 116

-12 077

 

 

3 911

5 381

4 881

6 153

1 891

426

301

-1 559

21 385

Total comprehensive income for the period

121 104

73 763

Attributable to

the Group

minority interests

 

113 869

7 235

 

67 305

6 458

 

Annex 3: Press release 31 July 2009

Consolidated balance sheet

(in thousands of €)

31 Dec. 2008

30 June 2009

Non-current assets

1 408 708

1 500 280

Intangible assets

Goodwill

Property, plant and equipment

Investments accounted for using the equity method

Other non-current assets

Deferred tax assets

52 332

59 133

1 070 667

199 869

17 960

8 747

52 617

58 846

1 137 038

206 088

29 407

16 284

Current assets

1 258 456

1 336 116

Inventories

Trade receivables

Other receivables

Short-term deposits

Cash and cash equivalents

Other current assets

Assets classified as held for sale

510 541

483 176

52 982

13 560

104 761

72 300

21 136

393 405

491 170

50 197

163 253

132 894

85 719

19 478

TOTAL ASSETS

2 667 164

2 836 396

 

 

 

Equity

1 172 332

1 225 239

Share capital

Retained earnings

Other reserves

Equity attributable to the Group

Minority interests

174 668

1 098 816

-142 902

1 130 582

41 750

174 668

1 090 943

-118 960

1 146 651

78 588

Non-current liabilities

513 684

795 743

Employee benefit obligations

Provisions

Interest-bearing debt

Other non-current liabilities

Deferred tax liabilities

143 375

32 237

288 099

10 663

39 310

153 542

32 478

560 107

4 618

44 998

Current liabilities

981 148

815 414

Interest-bearing debt

Trade payables

Employee benefit obligations

Provisions

Income taxes payable

Other current liabilities

Liabilities associated with assets classified as held for sale

503 128

253 824

117 566

30 271

18 150

53 502

4 707

415 579

190 438

104 538

17 258

21 164

62 106

4 331

TOTAL EQUITY AND LIABILITIES

2 667 164

2 836 396

 

Annex 4: Press release 31 July 2009

 

Consolidated statement of changes in equity

(in thousands of €)

1H 08

1H 09

Opening balance

Total comprehensive income for the period

Gross increase or decrease in minority interests

Share-based payment plans

Acquisitions of own shares

Dividends to shareholders of NV Bekaert SA

Dividends to minority interests

Closing balance

1 146 586

121 104

544

860

-16 019

-54 289

-7 796

1 190 990

1 172 332

73 764

34 742

788

-

-55 240

-1 147

1 225 239

Annex 5: Press release 31 July 2009

 

Consolidated cash flow statement

(in thousands of €)

1H 08

1H 09

Operating result (EBIT)

Non-cash and investing items included in operating result

Income taxes paid

145 317

72 701

-7 182

78 717

40 964

-14 527

Gross cash from operating activities

210 836

105 154

Change in operating working capital

Other operating cash flows

-171 674

5 032

95 236

25 926

Cash from operating activities

44 194

226 316

New business combinations

Proceeds from disposals of investments

Dividends received

Purchase of intangible assets

Purchase of property, plant and equipment

Other investing cash flows

-869

452

28 512

-1 977

-94 190

5 233

-2 117

-

19 229

-4 024

-86 206

430

Cash from investing activities

-62 839

-72 688

Interest received

Interest paid

Gross dividend paid

Other financing cash flows

2 426

-20 059

-48 471

142 625

2 175

-30 036

-56 288

-39 547

Cash from financing activities

76 521

-123 696

 

Net increase or decrease (-) in cash and cash equivalents

 

57 876

 

29 932

 

Cash and cash equivalents at the beginning of the period

 

58 063

 

104 761

Effect of exchange rate fluctuations

-697

-1 799

Cash and cash equivalents at the end of the period

115 242

132 894

Annex 6: Press release 31 July 2009

 

Additional key figures

(in € per share)

1H 08

1H 09

Number of existing shares at 30 June

Book value

Share price at 30 June

Weighted average number of shares

Basic

Diluted

Result for the period attributable to the Group

Basic

Diluted

Cash flow attributable to the Group

Basic

Diluted

19 670 000

60.55

98.05

 

19 692 333

19 853 743

 

6.40

6.35

 

10.46

10.37

19 783 625

61.93

73.21

 

19 728 625

19 748 214

 

2.24

2.24

 

5.60

5.59

 

(in thousands of €)                                                                             

Cash flow attributable to the Group (continuing operations)

EBITDA

Depreciation, amortization and impairment losses

Capital employed

Operating working capital

Net debt

EBIT on sales before non-recurring items

EBIT on sales

EBITDA on sales

Equity on total assets

Gearing (net debt on equity)

Average working capital on sales

205 961

225 232

79 915

1 699 185

651 664

534 149

12.5%

11.2%

17.3%

46.1%

44.8%

22.0%

110 413

144 935

66 218

1 859 307

610 806

621 790

7.2%

6.6%

12.1%

43.2%

50.7%

26.3%

 

NV Bekaert SA – Statutory Profit and Loss Statement (in thousands of €)

Sales

Operating result

Financial result

Profit from ordinary activities

Extraordinary results

Profit before income taxes

Income taxes

Result for the period

322 236

3 396

17 549

20 945

2 257

23 202

419

23 621

176 665

-45 631

11 211

-34 420

-3 762

-38 182

385

-37 797

 

 

 

 

 

Contact info

Katelijn Bohez
Chief Communications Officer

President Kennedypark 18
8500 Kortrijk - Belgium

Telephone: +32 56 23 05 11
Telefax: +32 56 23 05 48

Contact Us

better together

  • transmission-cable

    Situation

    Alcan and Bekaert joined forces to install 210 miles of transmission cable

    Solution

    Bekaert seamlessly adjusted the lengths of the reels to help Alcan’s trucks drive through mountainous terrain

    Result

    Alcan could meet their customer’s delivery requirements

  • Algeciras-port

    Situation

    Optimal reinforcement required for the concrete pavement of the Algeciras port terminal in Spain.

    Solution

    Concrete strengthened with Dramix steel fibers, offering high fatigue resistance and load bearing capacity.

    Result

    The solution largely exceeds the Spanish standard for the design and construction of port pavement set at a durability of at least 25 years.

  • ski

    Situation

    Skiers count on safety when they go up the mountain

    Solution

    In close cooperation Bekaert developed superior quality wires that meet the technical customer requirements of ropeway constructors

    Result

    The customer handles the production of the cables, but also on-site weaving (or splicing) and installation. The cables have a life expectancy up to 40 years

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