2009-07-31

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

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