2007-03-16



16 March 2007  

Annual results 2006 - Bekaert posts strong results in increasingly competitive global markets

 

–    5% sales growth

   54% growth for steel cord China

–    Mature markets remain challenging

   8.1% EBIT margin on sales before non-recurring items
7.3% EBIT margin on sales

–    Record EBITDA of € 262 million

–    EPS of € 6.62 compared with € 6.27 (continuing operations)

–    Proposed gross dividend of € 2.50 per share, an increase of the basic amount by 25%

 

 

Sales

 

Bekaert achieved consolidated sales of € 2.0 billion and combined sales of € 3.2 billion in 2006, an increase of 5% and 4%, respectively. [1] [2]

The consolidated sales’ increase was 1% from organic growth and 4% from the net movement in acquisitions and divestments.   


Consolidated and combined sales by business segment   

2006

Consolidated sales

 

Combined sales

 

in millions of €

variance

 

in millions of €

variance

Advanced wire products

 

1 724

+5%

 

2 890

+5%

Advanced materials

 

156

+11%

 

156

+11%

Advanced coatings

136

+3%

 

136

+3%

Intersegment sales and others

-6

 

13

Total

2 010

+5%

 

3 195

+4%

 

 

Consolidated and combined sales by geographical area

2006

Consolidated sales

 

Combined sales

 

in millions of €

variance

 

in millions of €

variance

Europe

977

+4%

 

1 006

-1%

North America

597

-3%

 

637

-4%

Latin America

32

-3%

 

1 113

+6%

Asia

369

+26%

 

386

+30%

Other regions

35

-2%

 

53

-2%

Total

2 010

+5%

 

3 195

+4%

 
 

Advanced wire products

Key figures (in millions of €)

2006

2005[1]

Consolidated sales

1 724

1 640

Operating result (EBIT) before non-recurring items

192

198

Operating result (EBIT)

180

182

Depreciation and amortization

100

91

EBITDA

281

273

EBIT margin on sales

10.4%

11.1%

EBITDA margin on sales

16.3%

16.6%

Combined sales

2 890

2 750

Share in result of  the joint ventures

51

57

 
 

Combined sales of advanced wire products were 5% higher in 2006

(wire Europe +8%, wire North America -6%, wire Latin America +7%, wire Asia +7%,
building products +11%, steel cord China +54%, steel cord others -6 % and
other advanced wire products +7%).

 

Despite the heightened competition, Bekaert was able to advance its position in China significantly and posted a 54% sales growth in steel cord products, mainly for truck tire reinforcement. With an investment program of close to € 100 million Bekaert increased its production capacity in China, by extending the production plant in Weihai (Shandong province) and by building two new plants in very short order, in Jiangyin (Jiangsu province) and in Shenyang (Liaoning province). In 2007, Bekaert will maintain this level of investment as the Chinese market shows strong and sustained growth.   

In the fall, Bekaert acquired a minority interest in Shougang Concord Century Holdings Ltd, a company which is listed on the Hong Kong Stock Exchange and whose activities include steel cord production. A framework was defined for closer cooperation in the provision of services and material supplies, which will further consolidate Bekaert’s position in China and speed up the joint introduction of top-quality products on this growing market.

In Europe, Bekaert recorded a lower demand for steel cord products. In North America, the company acquired Delta Wire Corporation, a major supplier of bead wire for tire reinforcement based in Clarksdale (Mississippi). The strike at Goodyear in the fourth quarter had a severe impact on the level of activity at the steel cord plants in the United States. In anticipation of a sustained downturn trend in demand on the North American market, Bekaert decided to close the plant in Dyersburg (Tennessee).

 

Demand for other wire products for the automotive sector weakened in the mature markets. Bekaert strengthened its position in wires for offshore applications with the acquisition of Cold Drawn Products Limited, a supplier of specialized profile wires in Western Europe. Bekaert also expanded its operations in Central Europe to consolidate its competitive position. In North America, there were clear signs of weakening of several economic sectors in which the company is active.

Helped by the mild winter, Bekaert was able to maintain a high level of activity in building products in Europe and Asia. In the other advanced wire products, the company expanded its carding business with the acquisition of ECC Card Clothing in 2005. The plant in Huddersfield (United Kingdom) was closed and manufacture of the short-staple products for textile machinery was integrated into the new plant in Wuxi (Jiangsu province, China).   

Although volatility on raw material markets decreased in 2006, wire rod prices generally remained high, driven by the increasing global demand for steel. Prices of other raw materials, such as zinc, rose sharply. Higher energy costs also added to the pressure on margins.

The company recorded a higher level of activity in Latin America, but faced increasing competition from Asian imports and hence sustained pressure on prices. The performance benefited from a positive impact of currency movements, most notably in Brazil and Chile.


Advanced materials   

Key figures (in millions of €)

2006

20054

Sales

156

141

Operating result (EBIT) before non-recurring items

13

13

Operating result (EBIT)

12

6

Depreciation and amortization

6

14

EBITDA

19

20

EBIT margin on sales

7.7%

3.9%

EBITDA margin on sales

12.3%

14.1%

 

Sales of advanced materials recorded growth of 11%

(fiber technologies +15%, combustion technologies +9%, composites +4%).

Bekaert achieved strong organic growth in fiber technologies. Performance also benefited from the acquisition in June 2005 of Southwest Screens & Filters SA (Belgium), which serves the industrial process filtration market.

In combustion technologies, Bekaert continued to advance its position in the market for environment-friendly burners for residential heating systems. The recent acquisition of the Dutch Aluheat B.V., which specializes in the latest technologies for condensing boilers, also contributed to growth, but 2006 was a difficult year for the project-based industrial burner system activities.

In composites, the company maintained its position in an extremely competitive environment.

4 The key figures for the business segments were restated following the introduction of a more refined method of allocating  results to the various business segments. This did not affect the Group’s consolidated figures.


Advanced coatings

Key figures (in millions of €)

2006

20054

Sales

136

133

Operating result (EBIT) before non-recurring items

3

3

Operating result (EBIT)

1

-4

Depreciation and amortization

11

18

EBITDA

12

13

EBIT margin on sales

0.6%

-3.2%

EBITDA margin on sales

8.5%

10.1%

Sales of advanced coatings were up by 3% in 2006

(industrial coatings +1%, specialized films +4%).

After a difficult first half, the industrial coatings business picked up in the second half of the year. In specialized films, Bekaert’s performance was adversely affected by currency movements. By increasing its sales effort, however, the company recorded sustained growth, most notably in North America and Asia.

Other activities

As well as expanding its sales organizations, Bekaert also continued to invest heavily in research and development. In order to be able to offer its customers appropriate technological support as its business in Asia grows, Bekaert is further developing its technology center in Jiangyin (Jiangsu province, China) into an efficient, customer-focused research facility.

The engineering department, which is a major supplier of machinery for the company’s investment programs, maintained a high level of activity.

Bekaert sold its 50% share in the handling business, which had its origin in the Fencing Europe business segment and was no longer considered part of its core business.

4 The key figures for the business segments were restated following the introduction of a more refined method of allocating results to the various business segments. This did not affect the Group’s consolidated figures.


Profitability

Bekaert posted an operating result (EBIT) before non-recurring items of € 163 million, compared with € 168 million. EBIT margin on sales before non-recurring items was 8.1%. Including non-recurring items (€ 17 million, against € 32 million), the operating result (EBIT) amounted to € 146 million, compared with € 136 million. EBIT margin on sales was 7.3%.

Income taxes amounted to € 18 million, compared with € 30 million.

The companies accounted for using the equity method contributed € 51 million to the result for the period, compared with € 57 million.

The result for the period  amounted to € 147 million, compared with € 202 million, which included the contribution of the divestment of Bekaert Fencing NV of € 54 million. The result for the period attributable to the Group amounted to € 142 million, compared with € 190 million.

Balance sheet

As at 31 December 2006, equity represented 51% of total assets. Net debt amounted to € 375 million and the gearing ratio (net debt to equity) was 33%.

Cash flow

EBITDA increased to € 262 million, compared with € 257 million. Cash flow attributable to the Group (continuing operations) amounted to €  261 million, compared with € 257 million.

Cash from operating activities amounted to € 193 million. Depreciation and amortization was € 116 million. Operating working capital amounted to € 452 million.

Investments in respect of the consolidated companies represented a cash outflow of € 157 million. Purchase of property, plant and equipment totaled € 153 million, mainly due to the expansion of production capacity in China.

Under the authority vested by the General Meeting of Shareholders in the Board of Directors, a total of 636 656 Bekaert shares were repurchased in 2006 at an average price of € 88.72 per share. Of these, 8 890 were transferred to the individuals who had exercised options under the SOP2 stock option plan and the remainder were cancelled, both to compensate for potential dilution due to the future exercise of 70 766 subscription rights granted under the current SOP 2005-2009 stock option plan and to further optimize the company’s debt structure. Bekaert purchased, at an average price of € 94.20 per share, and subsequently cancelled 546 779 shares in early 2007, as a consequence of which the company’s share capital of € 173 300 000 is represented as at 26 February 2007 by 20 400 000 shares.

NV Bekaert SA (statutory accounts)

Sales amounted to € 574 million. The result for the period was € 60 million, compared with € 131 million. The decrease mainly reflects the extraordinary profit generated in 2005 by the sale of Bekaert Fencing NV.

Dividend

In the light of the company’s strong performance in 2006 and its confidence in the future, the Board of Directors will propose that the General Meeting of Shareholders approve the distribution of a gross dividend of € 2.50 per share, which represents an increase of the basic amount by 25%. If this proposal is accepted, the net dividend per share will amount to € 1.875 and the net dividend on shares with VVPR strip, giving entitlement to reduced withholding tax of 15%, will be € 2.125 per share. The dividend will be payable as of 16 May 2007.

Outlook

Bekaert has made a good start in 2007, but expects raw material prices to become more volatile again this year. Bekaert will continue to step up the pace of investment in order to strengthen its market and technological leadership and to participate in the growth in the BRIC countries.

 

Financial calendar

2006 annual report available on the Internet                                        24      April             2007

First quarter trading update 2007                                                            9     May              2007

General Meeting of Shareholders                                                           9      May              2007

Dividend payable (coupon nr. 8)                                                           16      May              2007

2007 half year results                                                                              31     July               2007

Third quarter trading update 2007                                                           9     November   2007

Fourth quarter trading update 2007                                                       15     February     2008

2007 results                                                                                             14      March          2008

 

 

The statutory auditor has confirmed that his audit procedures, which have been substantially completed, have revealed no material adjustments that would have to be made to the accounting information included in this press release.

The consolidated financial statements have been prepared in accordance with IFRS as adopted by the European Union.

 

Annex 1: Press release 16 March  2007

Consolidated income statement

 

(in thousands of €)

2006

2005

 

 

 

CONTINUING OPERATIONS

 

 

Sales

Cost of sales

Gross profit

2 009 587

-1 614 703

394 884

1 914 259

-1 521 969

392 290

 

 

 

Selling expenses

Administrative expenses

Research and development expenses

Other operating revenues

Other operating expenses

Operating result (EBIT) before non-recurring items 

-96 697

-95 314

-49 562

23 279

-13 862

162 728

-92 445

-99 593

-44 975

28 080

-15 490

167 867

Non-recurring items

Operating result (EBIT)

-16 794

145 934

-31 601

136 266

 

 

 

Interest income
Interest expense

Other financial income and expenses

Result from continuing operations before taxes

3 735

-28 867

-6 557

114 245

5 859

-32 791

11 661

120 995

 

 

 

Income taxes

Result from continuing operations (consolidated companies)

-18 125

96 120

-30 269

90 726

 

 

 

Share in the results of joint ventures and associates

Result from continuing operations

50 991

147 111

56 939

147 665

 

 

 

DISCONTINUED OPERATIONS

 

 

Result from discontinued operations

-

54 187

 

 

 

RESULT FOR THE PERIOD

147 111

201 852

Attributable to :

-          the Group

-          minority interests

 

142 340

4 771

 

189 875

11 977

 


Annex 2 : Press release 16 March 2007

Consolidated balance sheet

 

(in thousands of €)

31 Dec. 2006

31 Dec. 2005

Non-current assets

1 302 581

1 239 214

Intangible assets

Goodwill

Property, plant and equipment

Investments accounted for using the equity method

Other non-current assets

Deferred tax assets

57 510

76 965

824 158

237 747

90 591

15 610

45 524

79 879

799 762

238 366

67 920

7 763

Current assets

914 269

992 458

Inventories

Trade receivables

Other receivables

Short-term deposits

Cash and cash equivalents

Other current assets

Assets classified as held for sale

368 764

398 928

53 814

29 019

52 139

9 918

1 687

348 330

354 225

54 401

90 453

132 248

8 999

3 802

TOTAL ASSETS

2 216 850

2 231 672

 

 

 

Equity

1 121 347

1 130 278

Share capital

Share premium

Hedging and revaluation reserves

Retained earnings

Cumulative translation adjustments

Equity attributable to the Group

Minority interests

173 300

11 032

-1 553

1 000 473

-110 755

1 072 497

48 850

172 900

9 271

1 582

976 141

-80 679

1 079 215

51 063

Non-current liabilities

501 006

533 558

Employee benefit obligations

Provisions

Interest-bearing debt

Other non-current liabilities

Deferred tax liabilities

135 589

26 664

274 373

3 845

60 535

139 848

35 154

288 293

12 412

57 851

Current liabilities

594 497

567 836

Interest-bearing debt

Trade payables

Employee benefit obligations

Provisions

Income taxes payable

Other current liabilities

Liabilities associated with assets classified as held for sale

217 952

227 827

76 042

13 379

16 270

43 027

-

245 588

187 369

73 475

9 414

10 182

41 808

-

TOTAL EQUITY AND LIABILITIES

2 216 850

2 231 672


 

Annex 3 : Press release 16 March 2006

Changes in Equity

(in thousands of €)

2006

2005

Opening balance

Result for the period as reported

Result recognized directly in equity

Creation of new shares

Acquisitions of own shares

Dividends to shareholders of NV Bekaert SA

Dividends to minority interests

Other

Closing balance

1 130 278

147 111

-32 323

2 161

-56 078

-64 591

-7 613

2 402

1 121 347

958 539

201 852

61 719

10 922

-35 190

-43 747

-8 558

-15 259

1 130 278


 

Annex 4 : Press release 16 March 2007

Consolidated cash flow statement  

(in thousands of €)

2006

2005

Operating result (EBIT)

Non-cash and investing items included in operating result

Income taxes paid

145 934

103 934

-16 822

136 266

105 815

-25 516

Gross cash from operating activities

233 046

216 565

Change in operating working capital

Other operating cash flows

-31 947

-8 429

-32 283

-5 479

Cash from operating activities

192 670

178 803

New portfolio investments

Proceeds from disposals of investments

Dividends received from joint ventures and associates

Purchase of intangible assets

Purchase of property, plant and equipment

Other investing cash flows

-42 725

-

35 171

-8 555

-152 781

11 429

-21 190

86 456

43 590

-9 730

-141 886

6 495

Cash from investing activities

-157 461

-36 265

Interest received

Interest paid

Gross dividend paid

Other financing cash flows

3 735

-25 773

-74 140

-16 992

5 859

-20 626

-52 196

-3 717

Cash from financing activities

-113 170

-70 680

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

-77 961

71 858

Cash and cash equivalents at the beginning of the period

132 248

57 059

Effect of exchange rate fluctuations

-2 148

3 331

Cash and cash equivalents at the end of the period

52 139

132 248

 

 


Annex 5 : Press release 16 March 2007

Additional key figures

 

(in € per share)

2006

2005

Number of existing shares at 31 December

Book value

Share price at 31 December

Weighted average number of shares

Basic

Diluted

Result for the period attributable to the Group

Continuing and discontinued operations

Basic

Diluted

Continuing operations only

Basic

Diluted

Cash flow attributable to the Group

Continuing operations only

Basic

Diluted

20 946 779

53.53

94.70

 

21 491 565

21 596 843

 

 

6.62

6.59

 

6.62

6.59

 

 

12.18

12.12

21 530 195

52.50

78.95

 

21 633 346

21 707 875

 

 

8.78

8.75

 

6.27

6.25

 

 

11.87

11.83

 

(in thousands of €)                                                                             

Cash flow attributable to the Group (continuing operations)

EBITDA

Depreciation and amortization

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

261 855

262 156

116 222

1 411 968

451 647

374 744

8.1%

7.3%

13.0%

50.6%

33.4%

22.0%

256 857

257 434

121 168

1 359 941

430 975

271 692

8.8%

7.1%

13.4%

50.6%

24.0%

20.6%

 

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

574 078

47 695

63 429

111 124

-48 643

62 481

-2 313

60 168

600 542

21 507

56 674

78 181

54 581

132 762

-1 296

131 466

 

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