Check against delivery
Speech at the balance sheet press conference of GILDEMEISTER Aktiengesellschaft on 29 March 2007, at 11 a.m. in Bielefeld-Sennestadt
Ladies and gentlemen,
before the Executive Board reports on GILDEMEISTER Aktiengesellschaft’s financial year 2006 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 2006
Worldwide demand for machine tools increased once again in the reporting year. Industrial consumption amounted to Euro 47.4 billion, representing a plus of +10% (previous year: Euro 43.2 million). Again, China was the largest sales market at Euro 10.1 billion (21%). Japan was in second place at Euro 5.9 billion (12%). Third place was taken by the USA at Euro 5 billion (11%), followed by Germany at Euro 4.1 billion (9%) and South Korea (7%). These five industrial nations account for 60% of the global consumption of machine tools. The growth dynamic in the Indian market continued with an increase of 35%; India thus rose for the first time into the top ten consumption countries.
According to calculations of the German Machine Tool Manufacturers’ Association (VDW), global production likewise amounted to Euro 47.4 billion, whereby production rose by 10%. Japan maintained its worldwide leading position with Euro 10.8 billion (23%). Germany claimed second place again with Euro 8.2 billion (17%). China occupied third place with Euro 5.6 billion (12%). Italy was in fourth place with Euro 4.4 billion (9%). South Korea was able to retain its previous year’s place with Euro 3.3 billion (7%). 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 16% to Euro 12.1 billion (previous year: Euro 10.4 billion). Following the previous year’s stagnation, domestic demand picked up strongly at 27%. International demand rose by 10%.
Production increased by 4% to Euro 10.1 billion (previous year: Euro 9.7 billion) - this corresponds to the record level achieved in 2001. Of the machine tools manufactured in Germany, 70% are exported. There was an annual average order backlog of 6.4 production months.
Despite the improved cyclical development, overall for most German companies in the machine tool industry profitability is not completely satisfactory according to assessments of the VDW. It is difficult to give a statement in this respect as very few companies publish their figures. The ongoing concentration process led to further structural changes in the industry.
Financial year 2006 of the GILDEMEISTER Group
GILDEMEISTER has fully achieved its targets for the financial year 2006. We have further strengthened our position in the global competitive market with increases in sales, order intake and results.
The worldwide rise in demand for machine tools had a positive impact on our business development. Sales revenues reached Euro 1,329 million and thus achieved the highest level in the history of the company (previous year: Euro 1,125.9 million); this corresponds to an increase of 18% or Euro 203.1 million. Domestic sales revenues rose by 22% to Euro 612.8 million; international sales increased by 15% to Euro 716.2 million. The export share amounted to 54% (previous year: 55%).
Our business activities include the Machine Tool segment with a sales revenue share of 69% (previous year: 70%), the Services business with about 31% (previous year: 30%) and Corporate Services with less than 1%.
The Machine Tools segment includes the new machines business. Sales revenues rose by 17% (Euro 134.3 million) to Euro 922.4 million. The milling technology of DECKEL MAHO contributed 45% (previous year: 44%), ultrasonic and laser technology contributed 2% (previous year: 2%). The turning technology of GILDEMEISTER amounted to 22% (previous year: 24%). The Services segment continued to develop according to plan and once again made a clear positive contribution to business development. Sales revenues rose by 20% (Euro 68.9 million) to Euro 406.3 million (previous year: Euro 337.4 million). In addition to the service and spare parts business, the innovative service and software products business also recorded positive rates of growth. With our “24/7“ service, we now offer our customers expert service 24 hours a day. Worldwide from our own staff. Seven days a week, 24 hours a day.
At Euro 1,442.9 million (+23%) order take once again exceeded the previous year (Euro 1,170.7 million). In particular the autumn trade fairs played a decisive role in contributing to this positive development: At the AMB in Stuttgart, the BIMU in Milan, the IMTS in Chicago and the JIMTOF in Tokyo we received orders to a value of Euro 87.7 million. Both domestic and international sales contributed to the increase in order intake. Domestic orders increased by 25% to Euro 648.7 million (previous year: Euro 520.7 million). International orders rose by 22% to Euro 794.2 million (previous year: Euro 650.0 million). The export share amounted to 55% (previous year: 56%). In Germany we have noticeably increased our order intake. In Europe brisk business ensured further strengthening of our competitive position. In America orders have developed in line with expectations. In Asia we had above average success.
At year end the order backlog amounted to Euro 446.7 million; this represents a production capacity utilisation of about five months.
Profitability continued to increase. The group annual profit doubled to Euro 27.1 million (previous year: Euro 13.5 million). EBITDA reached Euro 115.1 million (previous year: Euro 90.2 million). EBIT rose to Euro 82.5 million (previous year: Euro 58.8 million). EBT was Euro 47.4 million (previous year: Euro 25.4 million). The tax ratio decreased to 42.8% (previous year: 46.7%). Earnings per share increased to Euro 0.63 (previous year: Euro 0.32). The Executive Board and the Supervisory Board will propose to the Annual General Meeting of Shareholders on 25 May 2007 that a dividend of Euro 0.20 per share be distributed (previous year: Euro 0.10).
The GILDEMEISTER Share and Bond
The GILDEMEISTER share gained 63% and developed better than the SDAX (+31%). Market capitalisation rose by Euro 160.2 million to Euro 414 million. At the start of the 2006 trading year, the share price was quoted at Euro 5.96 (2 January 2006). From mid-year the share price rose continuously. The closing price at the end of the year was Euro 9.56 (29 December 2006). The positive upwards trend continued at the start of 2007. Currently the share price is quoted at Euro 12.26 (27 March 2007).
In the reporting year the GILDEMEISTER bond was quoted above its issue price of Euro 100. On 2 January 2006 the bond started trading at Euro 113.60; at year end it was at Euro 111.90. Currently it is being traded at Euro 111.00 (27 March 2007).
The following provides some explanatory notes on the GILDEMEISTER Group Consolidated Financial Statements for 2006.
The annual profit led to an increase in equity of 8.6% to Euro 288.6 million (previous year: Euro 265.8 million). At the same time the equity ratio increased to 30.2% (previous year: 27.6%).
Net worth and financial position
Despite the significant sales revenues expansion, the balance sheet total decreased to Euro 954.9 million (Euro -6.5 million; previous year: Euro 961.4 million). Net indebtedness decreased by Euro 88.4 million to Euro 216.7 million (previous year: Euro 305.1 million). Inventories recorded an increase of a mere Euro 4.2 million to Euro 293 million (previous year: Euro 288.8 million). Trade receivables decreased by Euro 34.7 million to Euro 253.4 million.
The free cash flow – the balance of cash flow from running operations and of the cash flow from investment activities excluding financial investments - amounted to Euro 74.8 million (previous year: Euro 3.2 million), which is Euro 71.6 million more than in the previous year. This improvement is primarily due to the positive impact of the results (EBT) and from reducing trade receivables.
In the reporting year investments amounted to Euro 37.2 million (previous year: Euro 26.8 million). Of this amount Euro 27.5 million were accounted for by tangible fixed assets (previous year: Euro 17.8 million) and Euro 9.7 million by intangible assets (previous year: Euro 9 million). Depreciation of fixed assets, taking into account capitalised development costs and finance leases, amounted to Euro 32.6 million (previous year: Euro 31.3 million). Thus investments exceeded depreciation again for the first time in four years.
Research and development
GILDEMEISTER was able to extend its lead in innovations and technology. In the financial year 2006 we presented 13 new developments at 67 national and international trade fairs and exhibitions. A special highlight was the “DMG Virtual Machine“, which for the first time provides the customer with a system for the complete simulation of the machine, the control behaviour and workpiece processing. This is one example of the many innovations by which we demonstrate our technical expertise daily for the benefit of our customers. We are proud of our innovative strength, which creates sustained values for our customers. In the reporting period expenditure on R&D amounted to Euro 43.9 million (previous year: Euro 45.7 million). There are currently 421 employees working on the development of new products (12% of the workforce at the plants); they ensure the continuity of our innovations know-how.
On 31 December 2006 GILDEMEISTER had 5,558 employees (previous year: 5,272), of which 191 were trainees (previous year: 189). The increased personnel requirement of 286 employees arose in both the “Services” and in the “Machine Tools” segments. In order to meet the increased service requirements of our customers, we have particularly increased staffing levels at our companies in Asia and Europe. Due to higher capacity utilisation, the Pfronten and Shanghai production sites took on additional employees.
At year-end 3,329 employees (60%) were working at the domestic companies and 2,229 at the companies abroad, which represents 40% of the workforce as in the previous year. In the Services area the number of employees increased by 191 to 2,126 (previous year: 1,935). Thus this segment accounted for 38% of the workforce (previous year: 37%). Personnel costs amounted to Euro 320 million (previous year: Euro 295.9 million). The personnel costs quota decreased to 24.1% (previous year: 25.8%).
Outlook for the business year 2007
Current forecasts for the global machine tool market anticipate further growth. The German machine tool manufacturers’ association (VDW) expects an increase in worldwide consumption of 5% and in Germany of 8%.
GILDEMEISTER made a successful start to 2007. We assume that the positive development in the business and the results will continue throughout the year. Based on the excellent business development in the first two months of the year, we are planning to achieve order intake of approximately Euro 1.5 billion for the whole year. In the first quarter of 2007 we are expecting order intake of more than Euro 375 million (previous year’s quarter: Euro 339.2 million).
Taking the order backlog into account, we anticipate being able to achieve sales revenues of more than Euro 1.370 billion. In the first quarter of 2007 we are expecting sales revenues of more than Euro 300 million (previous year’s quarter: Euro 274.1 million).
In the first quarter we expect EBT to be positive. For the financial year 2007 we anticipate a double-digit percentage increase in EBT and in the annual profit. We plan a further increase in the dividend for the current financial year.
We will continue our value and growth-focused strategy and continuously improve the quality of our results. We intend for our growth to be organic and to be strongly driven by our own innovative strength.
The year 2007 is marked for GILDEMEISTER by the EMO, which takes place from 17 to 22 September in Hanover. The most important trade fair worldwide for machine tools is important for our industry and its customers in setting the trends. The EMO will be the industry highlight of the year 2007. This exhibition offers GILDEMEISTER an ideal platform for presenting our innovations and nearly our entire range of products. We intend to demonstrate our strong focus on innovations once again during the course of the year with 17 new developments.
Moreover we will expand our service orientation as full service supplier and complement our “Advanced Technologies”: Apart from the ultrasonic and laser technology we will strengthen our appearance as supplier of components in the area of alternative energy. Our technical know-how combined with our many years’ experience provide the basis for further growth at GILDEMEISTER.
Bielefeld, 29 March 2007
Dr. Rüdiger Kapitza
Chairman of the Executive Board