Check against delivery.
Speech at the 111th Annual General Meeting
of GILDEMEISTER Aktiengesellschaft on 17 May 2013
Ladies and Gentlemen,
On behalf of the Executive Board, I would also like to warmly welcome you to our 111th Annual General Meeting in Bielefeld.
Our business activities saw satisfactory development over the course of 2012: We were successful in surpassing our forecasts. In financial year 2012, GILDEMEISTER achieved the highest order intake, the highest sales revenues and the highest profit in the company's history! Our most important key performance indicators developed as follows: Order intake reached € 2,260.8 million, a gain of 17%. Sales revenues increased by 21% to € 2,037.4 million. We were also able to raise our earnings key performance indicators significantly: EBT rose by 80% to € 120.1 million. We generated an annual profit of € 82.4 million, an increase of 81% and therefore the highest annual profit in the company's history (previous year: € 45.5 million).
To ensure that you, our shareholders, benefit appropriately from this success, under Agenda Item 2 the Executive Board and the Supervisory Board will propose to today's Annual General Meeting that a dividend payment of € 0.35 per share be distributed for financial year 2012 . This equates to a dividend yield of 2.3%.
International Development of the Machine Tools Industry in 2012
The worldwide market for machine tools developed stably overall in 2012. Global machine tools consumption rose in the reporting year by 7.2% to € 66.3 billion (previous year: € 61.8 billion). Once again in 2012, by far the largest volume of machine tools were sold in China : With a 36% share in world consumption, China was once again the largest sales market worldwide (previous year: € 22.1 billion; +8%). The second most important market for machine tools was the USA, with growth of 29% and consumption of € 6.8 billion. Japan'sconsumption rose by 9% and ranked third at € 5.8 billion (previous year: € 5.3 billion). In Germany consumption decreased slightly (-2%) and amounted to € 4.9 billion (fourth position). South Korea (€ 3.6 billion; -4%) ranked fifth, as in the previous year. These five markets account for 67% of world machine tools consumption.
World production likewise reached € 66.3 billion – a rise of 7.2%. The worldwide largest producer of machine tools was again China, for the third time in a row, at € 14.6 billion (share: 22%; +6%). Japan followed with production amounting to € 14.2 billion (21%; +8%), while Germany was the third largest producer with € 10.6 billion (16%; +10%).
German Machine Tools Industry
The German machine tools industry recorded a decline in order intake in 2012, although higher production and increased sales revenues were recorded. At € 15.1 billion, order intake by the German machine tools industry was 10% below the previous year's level (€ 16.9 billion). Domestic demand fell by 10% (previous year: +46%), while international demand decreased by 11% (previous year: +44%). Production rose by 9% to € 14.1 billion and was therefore above the previous year's figure (€ 12.9 billion). Of the machine tools produced in Germany, 68% were exported.
Report on Financial Year 2012 of the GILDEMEISTER Group
In the year under review, GILDEMEISTER achieved the highest order intake, the highest sales revenues and the highest annual profit in the company's history! With 8,155 machines sold, we also set a new record in terms of sales numbers. This success was reflected in our share’s performance over the course of the year: With an increase of 56.4% (year-on-year), the share ranks among the winners in the MDAX for 2012. We succeeded in reaffirming ourcompetitive position in strategically important future markets. At the same time we also asserted our position in the established markets. Our Sales and Service Cooperation with Mori Seiki made a significant contribution to this success.
In the reporting year, we implemented the integration of European sales and service companies in cooperation with Mori Seiki, and thereby created a comprehensive structure. Furthermore, we also strengthened our international production: Capacities in the growth markets are being increased and we are planning a greater concentration on local production according to market needs.
GILDEMEISTER achieved the highest order intake in the company's history: With an increase of 17%, the figure passed the € 2 billion mark for the first time and amounted to € 2,260.8 million (previous year: € 1,927.3 million). In Germany orders dropped by 4% to € 735.8 million (previous year: € 764.2 million). In Europe a growth in order intake was recorded (€ 855.3 million, +31%). In America orders were at 28% above the previous year's figure (€ 176.2 million). In Asia business grew by 32% to € 493.3 million; of which € 231.1 million came from orders in China .
At € 2,037.4 million, we achieved the highest sales revenues in the company's history. They surpassed the previous year's figure by € 349.7 million or 21% (previous year: € 1,687.7 million). Domestic sales revenues reached € 722.1 million (+14%), foreign sales revenues rose to € 1,315.3 million (+25%).
Segment Reporting 2012
We manage our business activities according to segments: The "Machine Tools" segment includes the group’s new machines business with the divisions of Turning and Milling, as well as ECOLINE, Ultrasonic / Lasertec and Electronics. The "Industrial Services" segment covers Services and Energy Solutions. This segment offers our customers all sales and services from one source.
The segments developed as follows:
The "Machine Tools" segment is our core segment and contributed a share of 58% (previous year: 64%) to the group sales revenues. The sales revenues grew by 8% to € 1,175.0 million (previous year: € 1,088.1 million). The milling technology of DECKEL MAHO accounted for 36% of sales revenues (previous year: 39%). The turning technology of GILDEMEISTER contributed 14% (previous year: 16%). 6% can be accorded to the ECOLINE division (previous year: 7%), while figures for Ultrasonic / Lasertec remained unchanged at 2%.
The "Industrial Services" segment contributed a share of 42% (previous year: 36%) to sales revenues and developed positively in the year under review amounting to € 862.2 million (previous year: € 599.4 million). The Services division played a considerable role in this with significant increases in order intake, sales revenues and earnings.
As in the previous year, "Corporate Services" contributed less than 1% to sales revenues.
As of 31 December 2012 the order backlog within the group amounted to € 1,003.5 million; it was thus 24% above the previous year's figure (€ 811.2 million). In "Machine Tools" it rose by € 78.6 million compared to the same date in the previous year, to € 570.7 million (31 Dec. 2011: € 492.1 million). This signifies a calculated production capacity utilisation of aproximately six months – a good basic capacity utilisation for the current financial year.
Results of Operations 2012
GILDEMEISTER was able to raise its earnings key performance indicators markedly again in financial year 2012. EBITDA increased to € 173.8 million (previous year: € 146.1 million); EBIT amounted to € 132.9 million (+18%, previous year: € 112.5 million). EBT rose by 80% to € 120.1 million (previous year: € 66.9 million) and the annual profit within the group reached its highest value in company history at € 82.4 million (+81%; previous year: € 45.5 million).
Earnings per share amount to € 1.32 (previous year: € 0.85).
GILDEMEISTER Aktiengesellschaft has management and holding functions. The earningsof GILDEMEISTER Aktiengesellschaft were mainly determined by income from financial investments (€ 92.3 million; previous year: € 64.7 million), which comprise profit transfers from DMG Vertriebs und Service GmbH (€ 32.8 million), from GILDEMEISTER Beteiligungen GmbH (€ 58.3 million) and income from investment in Mori Seiki of € 1.2 million (previous year: € 1.0 million). GILDEMEISTER Aktiengesellschaft closes financial year 2012 with a net income for the year of € 44.9 million (previous year: € 13.8 million). The allocation to revenue reserves amounted to € 22.4 million (previous year: € 0.0 million). Taking into account the profit carried forward from the previous year, the net profits were € 24.7 million (previous year: € 16.8 million).
The Executive Board and the Supervisory Board will propose to today's 111th Annual General Meeting of Shareholders, pursuant to Agenda Item 2, to allocate the net retained profits as follows:
- to distribute € 20,427,118.25 to the shareholders by payment of a dividend of € 0.35 per share,
- to carry the remaining net retained profits for financial year 2012 of € 4,220,654.91 forward to new account.
The following contains some explanations of the Annual Report 2012 of the GILDEMEISTER group:
- The balance sheet total rose to € 1,615.3 million (previous year: € 1,371.8 million). The balance sheet extension results from the inclusion of the European Mori Seiki sales and service companies.
- Under assets , fixed assets rose by € 96.8 million to € 500.7 million (+24%; previous year: € 403.9 million). Long-term receivables and other assets fell to € 58.6 million (-1.2%; previous year: € 59.3 million). Short-term receivables and other assets rose compared to the previous year by 12.8% to € 396.4 million. At the end of the reporting period, cash or cash equivalents amounted to € 173.3 million (previous year: € 105.2 million) or 10.8% of the balance sheet total (previous year: 7.7%).
- Under equity and liabilities, equity rose by € 132.7 million or 20.3% to € 787.9 million (previous year: € 655.2 million). The annual profit of € 82.4 million increased equity, while the dividend distribution in May 2012 of € 14.6 million resulted in a reduction. The equity ratio therefore rose to 48.8% (previous year: 47.8%). Non-current borrowings decreased by € 20.4 million to € 63.8 million.
- As at the same date in the previous year, we have a surplus of liquid funds (€ 161 million) and therefore no gearing.
- The group’s financial position developed positively in the reporting period: Free cash flowamounted to € 99.1 million (previous year: € 95.2 million).
- Investments of € 74.5 million in property, plant and equipment, and intangible assets were consistent with the previous year (€ 74.9 million). Depreciation of fixed assets, taking into account capitalised development costs and finance lease, amounted to € 40.9 million (previous year: € 33.6 million).
- A focus of our investment activities was the expansion of capacities at our Seebach site: We introduced the new style of cluster assembly and reduced through-put times of machines by up to 60%. Furthermore, a technology centre for prototype construction and a computer-controlled logistics centre with high racks and large parts store for optimising materials flow have been set up.
- On 26 September 2012 GILDEMEISTER opened the Energy Solutions Park. Thanks to this development our site in Bielefeld is now supplied with power from self-produced emissions-free energy. Since the end of September its storage technology and solar and wind power installations with an installed capacity of about 1 megawatt have been generating up to 15% of the site's energy requirement! This amount of energy would be enough to provide full, uninterrupted supply to an average of 220 households.
- On 23 October we held a ground-breaking ceremony in Ulyanovsk, Russia, for our new production and assembly plant including a training and technology centre. In this new facility, with a building surface area of 21,000 square metres, we intend to manufacture up to 100 machines per month destined for the local market.
- At the industry highlight in Germany in 2012, the AMB in Stuttgart, DMG and Mori Seiki together presented a total of 40 high-tech exhibits – including eight world premieres. In the USA, at the IMTS in Chicago, as many as 45 pioneering high-tech products with the latest software and automation solutions were displayed. At the JIMTOF in Tokyo we presented 30 high-tech machines as the largest exhibitor. In the reporting period, GILDEMEISTER presented a total of 17 new developments at 65 national and international trade fairs and open house exhibitions.
- GILDEMEISTER has a tradition of prioritising research and development and we set global trends with our leading technologies. Our research and development costs amounted € 55.9 million (previous year: € 54.6 million). The focus in the reporting year was on developing new products: With our efficient linear drive technology, we are able to support our customers in increasing their productivity. Thanks to the DMC 60 H linear, for example, a productivity increase of 25% is possible.
When it comes to the energy efficiency of its machines, GILDEMEISTER has been setting benchmarks in the industry for years. We are constantly increasing the proportion of products developed with a particular focus on energy-saving operation. We are co-initiators of the VDW Initiative "Blue Competence", the aim of which is to significantly reduce energy requirements in production machines.
Our portfolio in the "Industrial Services" segment was also extended in the reporting year: With DMG / MORI SEIKI LifeCycle Services we offer our customers a unique service portfolio for maximising the productivity of their machines. The solutions cover the entire life cycle, from commissioning to training and innovative software products, as well as competent, fast on-site service, all the way to trade-in of used machines.
Energy Solutions comprises the five business areas of Energy Efficiency, Cellstrom, SunCarrier, Service and Components. We have geared Energy Solutions towards a stronger focus on new markets, industrial customers and investors, with an enhanced product and service portfolio for the areas of production, storage and usage. We are making targeted investments in energy storage technology with pioneering vanadium-redox flow batteries, and are therefore keeping abreast of the increasing demand.
GILDEMEISTER created 464 new jobs in the reporting year. As of 31 December 2012, GILDEMEISTER had 6,496 employees (previous year: 6,032), of whom 229 were trainees (previous year: 222). In the "Machine Tools" segment we have hired new staff at our sites in Pleszew, Seebach and Pfronten. The increase in personnel in the "Industrial Services" segment is primarily due to the combining of our sales and services activities with those of Mori Seiki in Europe and the accompanying integration of 227 employees. In addition, further staff were hired at our companies in the growth markets of China, Russia and India.Employee expenses rose by € 55.7 million to € 440.4 million (previous year: € 384.7 million). The personnel expenses ratio decreased as a consequence of the higher gross revenue to 21.4% (previous year: 22.1%).
At this point, and on behalf of the management directors, too, the Executive Board would like to thank all our employees for their commitment. GILDEMEISTER must continue to develop a global orientation and maintain its technological leadership together with Mori Seiki through market-relevant innovations. I am certain that we will be able to achieve this together.
The GILDEMEISTER share was able to record a clearly positive performance in the 2012 financial year despite turbulence in the international capital markets resulting from the euro debt crisis. Since the start of the year it gained 56.4% (year-on-year). In the 2012 stock market year, the share started at € 10.23 (2 January 2012) and reached its highest value of € 16.11 on 18 December 2012.
The lowest value of the year was € 9.74 (09 January2012). The share closed the year on 28 December 2012 at € 15.25. The share is currently quoted at € 18.01 (XETRA closing rate of 16 May 2013).
The Executive Board has presented an explanatory report to you on the disclosures made in the Management and Group Management Report in accordance with Section 289(4) and (5) and Section 315(4) HGB (German Commercial Code), which we have also made publicly available via the Internet. The Executive Board’s report explains GILDEMEISTER Aktiengesellschaft disclosures under company law, such as the amount of the current share capital, authorisations for share buyback etc.
Likewise explained are the significant features of the risk management system described in the management report with respect to the accounting process. Further details can be found in the written report which has been made available for you at the information booth directly in front of the entrance to the hall.
Deepening of Cooperation with Mori Seiki
Important milestones were reached in the long-term and successful cooperation with Mori Seiki. To further deepen the strategic cooperation established in 2009, both companies took a further major step together on 20 March 2013 with the signing of the Cooperation Agreement. The trusting cooperation with Mori Seiki is a central pillar of corporate strategy at both GILDEMEISTER and Mori Seiki. It allows the implementation of a global growth strategy and also offers our customers considerable advantages. The goal is to further strengthen the global sales and service network and to expand worldwide production as well as to establish a greater cooperation in the area of research and development to use synergies and to meet the increasing challenges of global competition.
An increase in mutual company shareholdings should demonstrate this deepening of cooperation between the companies to the capital market. An increase in Mori Seiki's existing stake in GILDEMEISTER to up to 24.9% of voting shares is planned in the short term. In return, GILDEMEISTER can increase its stake in Mori Seiki to 10.1%.
Mori Seiki's increased stake will be achieved by a combination of capital increases for cash and contributions in kind. In a first step, Mori Seiki will contribute shares in two of its companies in the USA and Japan, for which it will receive new GILDEMEISTER shares. This will increase the stake to up to 24.9% of voting shares. In a second step, a capital increase for cash with subscription rights will offer you, our shareholders, the opportunity to continue to participate in the future development of your company. Mori Seiki plans to exercise all of its subscription rights in the capital increase for cash. The funds from the cash capital increase will be used to realise GILDEMEISTER's global growth strategy. The total volume of the two capital increases will not exceed 30% of the current share capital.
The Cooperation Agreement also allows for the establishment of a Joint Committee, which will be responsible in future for the coordination of further moves to strengthen the partnership between GILDEMEISTER and Mori Seiki. The further deepening of the cooperation and the measures this involves are subject to approval by the relevant competition authorities.
GILDEMEISTER Aktiengesellschaft and Mori Seiki Co., Ltd., Nagoya (Japan) plan to further deepen their successful partnership established in 2009. This should be reflected in the two companies' names in future: We plan to rename the companies "DMG MORI SEIKI AKTIENGESELLSCHAFT" respectively "DMG MORI SEIKI Co., Ltd." in the future. We would like to present ourselves consistently to our clients, suppliers, shareholders and at the capital market. Our worldwide clients know us under one name already: DMG / MORI SEIKI is an internationally established brand.
Under Item 6 of today's agenda the Executive Board and Supervisory Board will therefore suggest a rewriting of § 1 Para. 1 of the articles of association as follows: "The Company operates under the firm name DMG MORI SEIKI AKTIENGESELLSCHAFT." Mori Seiki will submit the name change to its annual shareholders' meeting on 17 June.
The proposed amendment of the articles of association will be submitted for entry in the commercial register once both planned capital increases laid out in the Cooperation Agreeement have been completed.
Now to the figures for the first quarter 2013 and the forecast for the current financial year:
The financial year 2013 began as expected for GILDEMEISTER: We started out in the new year with the IMTEX in Bangalore, India. Our traditional open house exhibition at DECKEL MAHO in Pfronten was a successful event with an order intake of € 150.5 million and 574 machines sold.
At its meeting on 12 March 2013, the Supervisory Board appointed Dr Maurice Eschweiler as a deputy member of the Executive Board of GILDEMEISTER Aktiengesellschaft. As of 1 April 2013 he is responsible for the newly created board division Industrial Services, which comprises the areas of Services and Energy Solutions.
Order intake in the first quarter amounted to € 518.7 million and was therefore below the record value of the previous year (€ 605.1 million), which had been marked by several major orders. In the "Machine Tools" segment, order intake was € 284.1 million; in "Industrial Services" the figure was € 234.5 million (previous year: € 245.1 million).
Sales revenues in the first quarter amounted to € 466.1 million and were therefore € 14.3 million above the previous year value (€ 451.8 million). In the "Machine Tools" segment, sales revenues rose by € 10.8 million to € 270.4 million (previous year: € 259.6 million). In "Industrial Services", sales revenues amounted to € 195.6 million, slightly above the previous year value (€ 192.1 million).
Order backlog in the group totalled € 1,056.1 million on 31 March 2013 (31 Dec. 2012: € 1,003.5 million). Of the existing orders, 75% are international. The backlog is equal to a calculated capacity utilisation of an average period of approximately six months.
The GILDEMEISTER group’s profitability developed consistently in the first quarter: EBITDAamounted to € 28.1 million (previous year: € 28.6 million), EBIT reached € 17.0 million (previous year: € 18.8 million) and EBT totalled € 15.1 million (previous year: € 15.0 million). As of 31 March 2013, the group reports earnings after taxes of € 10.4 million (previous year: € 10.3 million).
Forecast for the Current Financial Year 2013
Development in the global economy was fairly stable in the first months of the year. The unresolved state debt crisis in the eurozone continued to put strain on the economy. In their most recent forecast (April 2013), the VDW and Oxford Economics predict only 2.4% growth in global machine tools consumption (forecast of October 2012: +7.6%).
We predict that the development of individual markets over the course of 2013 will vary markedly and competitive pressure will grow. The continued stagnation on the European market and restraint in capital investment in Germany are having a negative impact also on our business. The positive development in the Asian and American markets, as well as in Russia has a compensating effect.
In April DMG and Mori Seiki presented together for the first time at the CIMT in China: From 22 to 27 April 2013, we showcased 33 machines live in operation in Beijing, including 8 premieres in Asia, making us the largest foreign exhibitor present. With an order intake of € 56.6 million and 237 machines sold, GILDEMEISTER took positive stock of the most important machine tools trade fair in Asia. Cooperation between DMG and Mori Seiki on the Chinese market is currently in progress. Together, DMG / MORI SEIKI will employ nearly 1,000 staff members in China.
As already reported, we are currently constructing a modern production and assembly plant in Ulyanovsk , Russia, which will include a training and technology centre. The site in the emerging industrial region on the Volga will take up production at the end of 2014. In this new facility, with a building surface area of 21,000 square metres, we intend to manufacture up to 100 turning and milling machines per month destined for the Russian market. The particular advantages of the new production site include shorter delivery time and faster availability of spare parts for our customers.
At the end of the month – from 27 to 31 May – we will present 18 high-tech machines on the Russian market at the Metalloobrabotka in Moscow.
At the Pfronten site we are planning to expand production facilities within the current business year with a new XXL Center for manufacturing large machines.
We anticipate new impetus from the leading trade fair for the machine tools industry in four months: At the EMO in Hanover from 16 to 21 September 2013, we will present 14 world premieres together with Mori Seiki as the largest exhibitor (whole year: 20 new developments).
All this shows that we are thoroughly committed to expanding our technological leadershipin all important core markets. Once again, our consistent, customer-orientated and innovative company strategy creates the basis for strengthening our profitability and therefore the future of the company. The planned expansion of the cooperation with Mori Seiki will play a central role in this.
The aim for the current financial year is to maintain our course. For 2013 GILDEMEISTER is planning to achieve an order intake of around € 2 billion. Based on these expectations and the existing order backlog, sales revenues should total around € 2 billion. Under the assumption that market development will continue in line with our expectations, we plan to achieve EBT of around € 120 million and a resulting annual net profit of around € 82 million. Subject to these developments, we are planning to make a dividend payout for financial year 2013.
Future Business Development 2014
The general conditions for 2014 are difficult to predict from today's perspective. For 2014, the VDW and Oxford Economics are forecasting further growth in worldwide machine tools consumption. If the global economy develops according to current predictions, we expect to achieve further growth in financial year 2014. We are constantly working towards increasing the flexibility of our cost structure and production processes, in order to be able to respond to the eventuality of a cyclical downturn.
And now a few words to mark a particular occasion:
As of today's Annual General Meeting, Hans Henning Offen is to hand over his position of Chairman of the GILDEMEISTER Supervisory Board to Professor Dr.-Ing. Raimund Klinkner after nine years in the role.
Thus we are once again reminded of the continuity in personnel and stable leadership at GILDEMEISTER: Mr. Offen became a member of the Supervisory Board on 18 January 1994 and after ten years – on 15 April 2004 – he was elected Chairman. Mr. Offen, will transitionally remain with the company after today as a member of the Supervisory Board.
On behalf of the Executive Board and all GILDEMEISTER employees, I wish to thank him for his committed and competent service as Chairman of the Supervisory Board of GILDEMEISTER Aktiengesellschaft.
We want to create sustainable value, so that we can ensure you a lasting, steady, acceptable return on your invested capital. In the financial year under review the value of our shares gained 56% and achieved a dividend yield of 2.3%. Analysts of international banks see further potential for the development of our share. In order to sustain this positive development we are following a clear strategy based on cooperation and a global orientation. We are continuing to expand the foundations for our success. Your trust in us and in our work is an incentive, obligation and motivation for us. We will do everything we can to remain worthy of this trust. This holds true as much for our customers, suppliers and business partners as it does for our employees and investors. My Executive Board colleagues and I are leading GILDEMEISTER with the aim of increasing its value – continually and in the long-term. We can assure you that we will do everything to ensure that GILDEMEISTER remains an attractive capital investment for you.
And now I would like to thank you all for your attention!
Dr Rüdiger Kapitza
Chairman of the Executive Board
17 May 2013