Interim Report 4th Quarter 2004 Group shows annual profit of Euro 5.4 million
Bielefeld, 15 February 2005. In the face of difficult market conditions, GILDEMEISTER has achieved the highest order intake in the 134 year history of the company. The order volume rose by 13% to Euro 1,113.5 million (previous year: Euro 981.8 million). With sales revenues of Euro 1,051.5 million, GILDEMEISTER has once again exceeded the Euro 1 billion mark, thereby achieving an 8% rise (previous year: Euro 977.8 million). According to provisional figures, the GILDEMEISTER group recorded an annual profit after tax of Euro 5.4 million (previous year: Euro -3.6 million). EBIT amounted to Euro 41.8 million (previous year: Euro 34.7 million). EBT were Euro 12.0 million (previous year: Euro 10.3 million). However, the development of the results is still not satisfactory. In the last financial year, extraordinary gains and additional expenditure had to be taken into account. We will propose to the general meeting of shareholders, to be held on 20 May 2005, not to distribute a dividend for the financial year 2004.
At GILDEMEISTER, 2005 will be dominated by the EMO (Hanover), the worldwide most significant of machine tool trade fairs. All our innovations are directed towards this industry event that will take place in September.
The increased demand for machine tools had a positive impact on our sales development. The greater demand for more complex technology machines with longer production processing times has continued. Sales revenues increased by 8% to Euro 1,051.5 million (previous year: Euro 977.8 million). In the fourth quarter sales revenues increased by 15% to Euro 316.4 million (corresponding period of the previous year: Euro 276.3 million). In 2004 domestic sales revenues increased by 6% to Euro 502.9 million and international sales revenues by 9% to Euro 548.6 million. Exports were 52% of our total sales revenues (previous year: 51%). “Machine tools” contributed 71% (previous year: 72%) to total sales revenues; the “Services” increased to 29% (previous year: 28%).
Order intake reached Euro 1,113.5 million, which is 13% above both the previous year (Euro 981.8 million) and the record year 2001. In the fourth quarter, order intake of Euro 301.7 million (+7%) continued to rise considerably (corresponding quarter of the previous year: Euro 281.0 million). December was also a good month, since the fresh stimulus emanating from the autumn trade fairs had a partially belated effect. The continued intake of major orders on the other hand also contributed to the positive development of the fourth quarter. At Euro 510.1 million domestic orders exceeded the previous year by 12% (Euro 457.0 million); whilst the intake of international orders increased by 15% to Euro 603.4 million (previous year: Euro 524.8 million). The export share increased to 54%. GILDEMEISTER continued to develop its competitive position both in the domestic market and in Europe. Despite the adverse exchange rate relation between the Euro and the US Dollar, the order intake from America developed particularly well, resulting in a considerable increase in our sales figures and a more than twice as great a volume. Particularly in the USA the demand for innovative technology machines has increased. In Asia on the other hand, demand for standard machines in the lower price sector remains high, with high competitive and pricing pressures. Our order volume in this market region declined.
On 31 December 2004 the group’s order backlog amounted to Euro 321.5 million, which is 24% above the figure for the previous year (Euro 259.4 million). For computing purposes, this corresponds to a production capacity utilisation of a good three months, representing a good basic capacity utilisation for the new financial year.
According to provisional figures, the group recorded an annual profit after tax of Euro 5.4 million (previous year: Euro -3.6 million). EBITDA amounted to Euro 71.2 million (previous year: Euro 71.1 million). Gross yield totalled Euro 499.6 million (previous year: Euro 470.4 million). Increases in personnel costs and other operating expenses that were due primarily to sales-related cost increases and an increased presence at trade fairs in the autumn of 2004, had a negative impact. EBIT amounted to Euro 41.8 million (previous year: Euro 34.7 million). EBT amounted to Euro 12.0 million (previous year: Euro 10.3 million). However, the development of results is still not satisfactory. According to the provisional figures, extraordinary items and additional expenditure incurred by the group’s long-term financial restructuring, and restructuring expenses for the group’s reorganisation, were largely offset in the last financial year by one-off positive effects arising from valuations and the application of IFRS 3.
In the financial year 2004, the free cash flow of Euro 8.1 million was still negative (previous year: Euro -3.7 million). The significant increase in sales revenues towards the end of the year resulted in an increased backlog of receivables.
In anticipation of a better business development from 2005, GILDEMEISTER increased its share capital at a 2:1 ratio in the previous financial year, in order to strengthen its financial basis. The subscription price per share was Euro 4.15; gross proceeds amounted to Euro 59.9 million. Following the issuing of 14.4 million new shares the number of shares increased to 43.3 million, and the company’s share capital from Euro 75.1 million to Euro 112.6 million. To further improve its financial structure, GILDEMEISTER has placed a long-term corporate bond with a volume of Euro 175.0 million and a term of seven years. In addition, a syndicated loan in the amount of Euro 141.0 million has been extended until June 2007.
At the beginning of 2004, the GILDEMEISTER share traded at an average level of around Euro 8. Following the publication of the capital increase, our share dropped to a value of Euro 5.83 (12 May 2004). On 2 June 2004 the trading of the subscription rights began and the share was quoted ex-rights at Euro 5.39. Following the completion of the capital increase our security recovered and, by the end of the first six months was traded at Euro 5.93 (30 June 2004). Until the end of November its market price developed at a Euro 6 level. The closing price was Euro 5.20 (30 December 2003). Our share is currently quoted at Euro 5.53 (14 February 2005).
At the end of the year, GILDEMEISTER had 4,984 employees (previous year: 4,823) and 190 trainees (previous year: 205). Taking on 161 new employees has strengthened the “Services” particularly, the aim being to better meet the higher customer requirements throughout the world. Staff levels, particularly at our international sales and service companies in Asia and America, but also at locations in Germany and Europe, were reinforced. In the course of its ongoing internationalisation measure, GILDEMEISTER has also increased the number of employees at the Shanghai production site and in the promising ultrasonic/lasertec division. Staff adjustment measures are directly related to business development in the individual group companies. One of the main activities in this respect was the restructuring process at the production site Geretsried. Personnel expense amounted to Euro 282.5 million (corresponding period of the previous year: Euro 270.6 million). However, the staff quota improved only slightly from 27.2% to 26.8%.
Spending on research and development amounted to Euro 38.2 million (previous year: Euro 43.1 million). In the year 2004 GILDEMEISTER was able to maintain its innovative lead. In the reporting year, 16 high-tech machines, all of which are designed with customer satisfaction in mind, were re-developed and presented to the trade. Along with the integration of the technologies and the increase in machine dynamics, our research and development policy focused on the ultrasonic machining of 'advanced materials' and the development of state-of-the-art software products.
According to economic experts, global economic development is likely to continue to improve throughout the current financial year. A key position is still held by the USA, where the economic revival is expected to continue. China has turned into the second major driving force. Latest forecasts for 2005 with regard to mechanical engineering and machine tools (one of the major trade associations) again expect growth. Following a 5% increase in the preceding year the German Mechanical Engineering Association (VDMA) is expecting a 3% increase in production for 2005. The majority of the VDMA's trade units continue to anticipate a positive development. Regarding machine tools, the growth instituted during the previous year, is expected to continue this year, though with a slightly reduced vigour. Based on a forecast by the ifo Institute and the German Association of Machine Tool Factories (VDW), we estimate that the worldwide machine tools market will grow by approximately 6% in 2005. As for the German Machine Tool Industry, we expect an increase in orders (nationally: 5%, internationally: 6%) and in production of 4%. Exports are expected to increase by 5%.
GILDEMEISTER starts the new financial year with confidence. According to our expectations for the first quarter 2005, the intake of new orders could exceed the preceding year's level (Euro 241.0 million). We are planning for an order intake of more than Euro 1,150 million for the entire year. As a result of this and in view of our backlog of orders, we also intend to increase our sales for 2005 to just under Euro 1.1 billion. With regard to the first quarter of 2005, we expect sales revenues to be above the previous year's level (Euro 222.7 million) and an increase in EBT (previous year: Euro -3.5 million). Due to the balancing of loss potentials in the past financial year and the ongoing optimisation of our cost and process management, we expect a noticeable strengthening of our profitability. For the financial year 2005 we expect EBT to exceed Euro 25 million and an annual profit of more than Euro 10 million. Due to the positive business and performance prospects, we are planning to distribute a dividend for the current financial year.
We particularly expect fresh stimulus from the EMO 2005, which will take place between 14 and 21 September in Hanover. This most important of trade fairs worldwide plays a trendsetting role for the industry and its customers. The EMO will be the industry's highlight of the year 2005. We will introduce our new developments on this date. Our prospering technical knowledge and many years' experience are the basis for our company to remain global market leader among the producers of cutting machine tools. Our goal for the future is to also play a leading role in earnings among the machine tool manufacturers. In 2005 we will take an important step in this direction.
The Executive Board
The above figures are subject to audit. The annual financial statements were prepared in accordance with International Financial Reporting Standards (IFRS).
Disclaimer, Forward-looking statement
Statements relating to the future:
This press release contains forward-looking statements, which are based on current estimates of the management of future developments. Such statements are based on the management's current expectations and specific assumptions. They are subject to risks, uncertainties and other factors, which could lead to the actual future circumstances, including the assets, liabilities, financial position and profit or loss of GILDEMEISTER, differing materially from or being more negative than those expressly or implicitly assumed or described in these statements. The business activities of GILDEMEISTER are subject to a series of risks and uncertainties, which may result in forward-looking statements, estimates or forecasts becoming inaccurate. Should one of these factors of uncertainty or other unforeseeable event occur, or should the assumptions on which these statements are based prove incorrect, the actual results may differ materially from the results stated, expected, anticipated, intended, planned, aimed at, estimated or projected in these statements. Forward-looking statements must not be understood as a guarantee or assurance of the future developments or events contained therein.