Check against delivery
Speech at the balance sheet press conference of GILDEMEISTER Aktiengesellschaft on March 13, 2008, at 11 a.m. in Bielefeld-Sennestadt
Ladies and gentlemen,
before the Executive Board reports on GILDEMEISTER Aktiengesellschaft’s financial year 2007 and on the current financial year, we would first of all like to present the development of the machine tool industry in the past year.
Industry development 2007
Worldwide demand for machine tools increased once again in the reporting year. Consumption amounted to Euro 51.7 billion; a rise of 8% (previous year: Euro 47.8 billion). Again, China was the largest sales market at Euro 10.9 billion (21%). Japan was in second place at Euro 5.6 billion (11%). Third place was taken by Germany at Euro 5.4 billion (10%), followed by the USA at Euro 4.5 billion and Italy (7%). These five industrial nations account for 58% of the global consumption of machine tools. India (Euro 1.5 billion; +3%) gained in significance as an important sales market and was positioned before Brazil in eighth place.
According to calculations of the German Machine Tool Manufacturer’s Accociation (VDW), global production amounted to Euro 51.7 billion. This reflects an increase in production of 8%. Japan maintained its worldwide leading position with Euro 10.6 billion (20%). Germany claimed second place again with Euro 9.4 billion (18%). China occupied third place with Euro 7.4 billion (14%). Italy was in fourth place with Euro 5.3 billion (10%). South Korea was able to retain its previous year’s place with Euro 3.3 billion (6%). These five industrial nations account for 68% of the global production of machine tools.
German Machine Tool Industry
Order intake of the German machine tool industry increased by 29% to Euro 16.0 billion (previous year: Euro 12.4 billion). Domestic demand grew even stronger at 33% than in the previous year (27%). International demand rose by 26% (previous year: 29%).
Production rose by 16% to Euro 12.5 billion (previous year: Euro 10.8 billion). Thus the German machine tool producers have exceeded the previous record level from 2001 (Euro 10.2 billion). Of the machine tools produced in Germany, 69% were exported. The order backlog capacity amounted to 7.5 production months on average for the year.
Reliable statements on the profitability of the German machine tool industry are not readily available as only a few companies publish the corresponding figures. Therefore the VDW has to rely on estimates. However, it can be determined that profitability within the industry has improved overall due to the positive improvement in the economic cycle.
Financial year 2007 of the GILDEMEISTER Group
The financial year 2007 was the most successful for GILDEMEISTER in its 137 years’ history! From quarter to quarter we were able to revise our forecasts upwards for order intake, sales revenues and income. We have further strengthened our position as a worldwide leading manufacturer of cutting machine tools.
The worldwide rise in demand for machine tools had a positive impact on our sales development. Sales revenues of Euro 1,562.1 million again exceeded the level reached in the previous year (Euro 1,329.0 million); this represents an increase of 18% or Euro 233.1 million. Domestic sales revenues rose by 19% to Euro 730.4 million; international sales increased by 16% to Euro 831.7 million. The export share amounted to 53% (previous year: 54%).
Our business activities include the Machine Tools segment with a sales revenue share of 69% (previous year: 69%) and the Service business with about 31% (previous year: 31%) and Corporate Services with less than 1%.
The Machine Tools segment includes the new machines business. Sales revenues rose by 17% (Euro 160.3 million) to Euro 1,082.7 million. The milling technology of DECKEL MAHO contributed 44% (previous year: 45%), ultrasonic and laser technology contributed 2% (previous year: 2%). The turning technology of GILDEMEISTER amounted to 23% (previous year: 22%). The Services segment once again made a clear contribution to the positive business development. Sales revenues rose by 18% (Euro 72.8 million) to Euro 479.1 million (previous year: Euro 406.3 million). In the reporting year, our customers were served for the first time worldwide 24 hours a day, seven days a week, by DMG Service. Our successfully introduced “24/7“ offer has been well received and has strengthened customer loyalty long-term.
At Euro 1,864.8 million (+29%) order take once again exceeded the previous year’s record (Euro 1,442.9 million). In particular, the success we enjoyed at the EMO contributed to this excellent result. With Euro 162.6 million in orders at the EMO, we were able to record the highest order intake so far in the company’s history from a trade fair. In addition, in the field of renewable energy resources, a+f Sun-Carrier made an appreciable contribution to order intake for the first time with Euro 81.5 million. Both domestic and international orders contributed throughout the year to the increase in order intake: Domestic orders increased by 31% to Euro 847.5 million (previous year: Euro 648.7 million). International orders rose 28% to Euro 1,017.3 million (previous year: Euro 794.2 million). The export share amounted to 55% (previous year: 55%).
In Germany we have noticeably increased our order intake. In Europe brisk business ensured further strengthening of our market position. In America orders have remained at the same level of development. In Asia our growth has been higher than average (+17%).
On 31 December 2007, the order backlog amounted to Euro 749.4 million; this was 68% above the previous year’s level (Euro 446.7 million) and represents a production capacity utilisation of about six months.
Profitability continued to develop positively. The group annual profit grew by 85% to Euro 50.1 million (previous year: Euro 27.1 million). EBITDA reached Euro 158.2 million (previous year: Euro 115.1 million), EBIT grew 53% to Euro 125.9 million (previous year: Euro 82.5 million). EBT rose by 76% to Euro 83.4 million (previous year: Euro 47.4 million). Earnings per share increased to Euro 1.16 (previous year: Euro 0.63). The Executive Board and the Supervisory Board will propose to the Annual General Meeting of Shareholders on 16 May 2008 that a 75% higher dividend of Euro 0.35 per share will be distributed (previous year: Euro 0.20).
The GILDEMEISTER Share and Bond
The GILDEMEISTER share gained considerably in value in 2007. The share price gain of 93% performed better than the MDAX (+5%).and the SDAX (-7%). Market capitalisation rose by Euro 385.4 million to Euro 801.1 million. The share started the stock market year 2007 at a quoted price of Euro 9.83 (2 Jan. 2007); the lowest value of the year was Euro 9.20 (18 Jan. 2007). Over the course of the year the share developed positively and reached its highest value of the year at Euro 22.80 on 26 October 2007; the share price quoted at the close of the year was Euro 18.50 (28 Dec. 2007). Since 12 December 2007, GILDEMEISTER has been listed on the MDAX. At the start of 2008, the share followed the general trend of the capital markets. The share is currently quoted at Euro 15.90 (12 March 2008). The current stock market value inadequately reflects the group’s performance.
On 2 January 2007 the GILDEMEISTER bond started trading at Euro 111.80.; at year end it was at Euro 106.97 (28 Dec. 2007). Currently the rate is at Euro 105.90 (12 March 2008). We plan to redeem the bond, which bears interest of 9.75%, prematurely at the first possible date of July 19, 2008.
The following provides some explanatory notes on the GILDEMEISTER Group Consolidated Financial Statements for 2007
The annual profit led to an increase in equity of 14.2% to Euro 329.5 million (previous year: Euro 288.6 million). The equity ratio amounted to 28.7% (previous year: 30.2%). The slight decline results from a one-time expense (Euro 11.8 million) for the planned premature redemption of the bond, as well as from the higher amount of funds tied down in inventories and receivables due to the sales volume, and also from an increase in liquid funds, amongst others. Overall this led to an extension of the balance sheet. Our plans remain unchanged to increase the equity ratio medium-term to about 40%.
Financial and net worth position
The balance sheet total amounted to Euro 1,150.1 million (previous year: Euro 954.9 million). Net indebtedness decreased further by Euro 51.7 million to Euro 165.0 million (previous year: Euro 216.7 million). Inventories increased by Euro 68.0 million to Euro 361.0 million (previous year: Euro 293.0 million). Trade receivables rose by Euro 39.7 million to Euro 292.2 million. The continuous optimisation of our receivables management made a positive contribution to this development.
The free cash flow – the balance of cash flow from running operations and of the cash flow from investment activities excluding financial investments – rose in the reporting year to Euro 84.8 million (previous year: Euro 74.8 million). We have thus clearly surpassed our forecast (Euro 40 million). This increase is due, in particular, to payments received in advance and an increase in provisions. We have mainly used the free cash flow to reduce net indebtedness as well as for the distribution of the dividend.
Investments in the reporting year amounted to Euro 53.1 million (previous year: Euro 37.2 million). Of this amount Euro 37.9 million were allocated to tangible fixed assets (previous year: Euro 27.5 million) – in particular for production optimisation - and Euro 2.3 million to intangible assets (previous year: Euro 2.1 million). Of this, Euro 7.4 million were allocated to capitalised development costs (previous year: Euro 6.0 million). Additions to goodwill accounted for Euro 5.2 million (previous year: Euro 1.6 million) for the acquisition of WKZ Werkzeugmaschinen GmbH, which is now trading under the name DMG Automation GmbH. We have invested Euro 0.3 million in financial assets. Depreciation amounted to Euro 32.3 million (previous year: Euro 32.6 million).
Research and Development
GILDEMEISTER was once again able to increase the efficiency and quality of its products. In the financial year 2007 we presented 19 new developments at a total of 61 trade fairs and exhibitions. A special highlight at the EMO in Hanover was the presentation of our machines in the “New Design”. Moreover, we have extended our range of products to include automation solutions for machine tools With the innovations drive for the EMO 2007, GILDEMEISTER increased its research and development budget. In the reporting period expenditure amounted to Euro 49.5 million, which is 13% more than the previous year (Euro 43.9 million). There are currently 467 employees working on the development of new products and services (13% of the workforce at the plants); this is 11% more than in the previous year (421 employees).
As at 31 December 2007 GILDEMEISTER had 5,998 employees (previous year: 5.558), of whom 226 were trainees (previous year: 191). The increased personnel requirement of 440 employees arose in both the “Services” and in the “Machine Tools” segments. In order to meet the increased service requirements of our customers to an even greater extent, we have further expanded our service capacity in Europe, Asia and in Germany.
On account of the significantly higher sales revenue performance, additional employees were hired at the production sites in Pfronten, Pleszew and Shanghai. Further increases in employee numbers occurred with the integration of DMG Automation.
At year-end, 3,586 employees (60%) worked for our national companies and 2,412 employees for our international companies. In the Services area the number of employees increased by 181 to 2,307 (previous year: 2,126). Thus the percentage of staff in this segment increased to 39% (previous year: 38%).
Personnel expenditure amounted to Euro 366.4 million (previous year: Euro 320.2 million); the personnel expenditure quota decreased to 22.9% (previous year: 24.1%).
Forecast for the business year 2008
Current forecasts for the global machine tool market expect further growth. The Association of German Machine Tool Manufacturers (VDW) expects consumption worldwide and consumption in Germany to increase by 10% in 2008 each.
GILDEMEISTER made a successful start to the new business year. On the basis of forecasts for the markets relevant for us, in the financial year 2008 we are planning to achieve order intake of more than Euro 1.9 billion. In the first quarter of 2008 we are expecting order intake of more than Euro 550 million (previous year’s quarter: Euro 416.1 million) – the SunCarrier is contributing about Euro 100 million of this. a+f GmbH received two major orders worth Euro 105.3 million within two weeks.
Taking into account the high order backlog, we intend to increase sales revenues once again to more than Euro 1.8 billion. For the first quarter we are planning sales revenues of more than Euro 350 million (previous year’s quarter: Euro 320.3 million).
In the first quarter we are expecting a further improvement in EBT (previous year: Euro 8.7 million). On the basis of the planned increase in sales revenues, we again expect a double-digit percentage increase in EBT and in the annual profit in the financial year 2008. If the business continues to develop in line with plans, we will propose a further increase in the dividend to the 2009 Annual General Meeting of Shareholders.
We are expecting further impetus to come from the industry’s national and international highlights: At the METAV in Düsseldorf from 31 March to 4 April, GILDEMEISTER will present 19 machines in the new design. Ladies and gentlemen, see the performance capabilities of our products yourself and visit us in Düsseldorf. Following this, GILDEMEISTER will present 9 exhibitions at the DIE & MOULD in Shanghai from May 12 to 16. The main machine tool trade fair in the USA is the IMTS in Chicago, where GILDEMEISTER will show 28 exhibits from September 8 to 13. We intend to demonstrate our strong focus on innovations once again during the course of the year with 17 new developments.
Our “Strategy 2011” is consistently directed towards profitable growth; it is to be organic and driven by our own innovative strength. Trend-setting concepts in machine technology, services and software products define GILDEMEISTER as a technology group. With our innovative products and services together with our global market presence we are excellently positioned for the challenges that await us. The basis of our performance is our employees’ high qualifications, motivation and identification with our company.
Bielefeld, 13 March 2008
Dr. Rüdiger Kapitza
Chairman of the Executive Board