A good start in the 2017 fiscal year: Clear improvement in sales revenues and profitability during first quarter
Sales revenues and earnings in the Vossloh Group have improved year over year in the first quarter of 2017. Revenues grew 18.2 percent to €224.3 million. In the previous year, consolidated sales revenues came to €189.8 million (excluding the Electrical Systems business unit, which has since been disposed of). Revenue growth was achieved in the quarter under review thanks especially to the acquisition of Vossloh Tie Technologies in the USA. Furthermore, the Transportation and Lifecycle Solutions divisions also recorded significantly higher sales, as did the Fastening Systems business unit. Consolidated EBIT significantly improved, reaching €7.1 million (previous year: €2.0 million) thanks especially to a project mix with higher margins in the Fastening Systems business unit. Subsequently, the EBIT margin rose from 1.0 percent in the first quarter of 2016 to 3.1 percent in the first quarter of 2017. Orders received in the Group decreased to €210.8 million (previous year: €249.3 million), while the order backlog amounted to €750.9 million as of March 31 (previous year: €642.2 million). In core business, excluding the Transportation division, the relationship between orders received and sales revenues (book-to-bill ratio) was slightly above one in the first quarter.
The Core Components division, which for the first time comprises two business units – Fastening Systems and Tie Technologies –, achieved sales revenues of €78.2 million (previous year: €51.3 million) in the first three months. Integrating the new business unit is proceeding as planned, and the business performance matched expectations. Vossloh Tie Technologies contributed sales revenues of €19.5 million in the first quarter of 2017. Vossloh Fastening Systems was able to improve sales revenues 15.3 percent year over year to €59.1 million (previous year: €51.3 million). This increase resulted in particular from the high demand in China for fastening systems for the new Peking–Shenyang line being built. The EBIT for Core Components improved from €6.6 million in the first three months of 2016 to €11.6 million in the current reporting period. Higher-margin orders in the Fastening Systems business unit were the primary deciding factor for the increase in earnings. Furthermore, the EBIT was positively influenced by an investment income. The EBIT margin for Core Components improved to 14.8 percent (previous year: 13.0 percent). Orders received in the first three months of 2017 amounted to €71.5 million (previous year: €65.0 million). Of this total, €46.6 million in orders were with Vossloh Fastening Systems and €25.3 million with the Tie Technologies business unit. The order backlog in the division rose to €210.9 million as of March 31, 2017 (previous year: €191.3 million). €170.4 million of the total comes from the Fastening Systems business unit and €40.6 million from Vossloh Tie Technologies.
Revenues for the Customized Modules division decreased to €101.9 million in the first quarter of 2017 (previous year: €111.9 million). The decline was primarily caused by lower sales in Israel and high-speed rail projects in France coming to a close. However, increases in sales were achieved in Africa, particularly in Morocco. Despite lower sales revenues and persistently weak business performance in the USA, EBIT increased from €2.4 million in the previous year to €2.7 million. The EBIT margin correspondingly improved from 2.2 percent in the previous year to 2.6 percent. Orders received in the first quarter came to €109.0 million (previous year: €153.9 million). In the coming quarters, it is assumed that new orders will stabilize. The division expects the orders for the entire year to be the same level as in the previous year. The division’s order backlog had a value of €286.5 million on March 31, 2017, following a value of €340.2 million in the previous year.
In the Lifecycle Solutions division, net sales increased to €17.3 million in the first quarter, which puts it at 25.8 percent over the previous year’s value of €13.7 million. The figure for 2017 includes sales contributions from Alpha Rail Team, a former joint venture accounted for using the equity method. As of the beginning of December 2016, Vossloh acquired all remaining shares of Alpha Rail Team. Furthermore, the division also showed positive sales performance in China. The EBIT remained almost unchanged year over year at €(0.9) million, which is typical for the season (previous year: €(1.0) million). Earnings increased in mobile welding and High Speed Grinding, while rail and switch logistics showed weaker performance. Orders received for the first three months of 2017 amounted to €22.6 million, which is around the same level year over year (€22.2 million). The order backlog rose year over year from €16.3 million to €34.7 million as of March 31, 2017.
In the Transportation division, which is not part of the Vossloh Group’s core business and currently only includes the activities of Vossloh Locomotives, the sales volume increased to €28.1 million in the first quarter (previous year: €15.1 million). The year-over-year increase in sales primarily came from the type DE 18 locomotives. Furthermore, higher revenues with used locomotives and the sale of two prototypes also contributed to the increase. The EBIT improved slightly from €(3.2) million in the first three months of 2016 to €(2.8) million in the period under review. The EBIT margin was (10.0) percent (previous year: (21.1) percent). Orders received in the first three months of 2017 totaled €9.2 million (previous year: €10.9 million), while the order backlog amounted to €219.9 million (previous year: €95.0 million) at the end of March.
The total number of personnel employed in the Vossloh Group has risen from 4,129 employees in the previous year to 4,298 employees as of the reporting date of March 31, 2017. The average number of employees for the first quarter of 2017 was 4,303 (previous year: 4,116 employees). The number of employees in the Customized Modules and Transportation divisions decreased slightly. Core Components showed a significant increase in personnel due to the initial consolidation of Vossloh Tie Technologies. For the Lifecycle Solutions division, the number of employees was slightly higher than in the previous year, which mirrored the increase in business volume.
Vossloh’s sales target for all of 2017 is still between €1.0 billion and €1.1 billion. The sales growth will primarily be driven by the inclusion of Vossloh Tie Technologies and increasing sales revenues in the Transportation division. Given the current situation and portfolio structure, the Executive Board estimates that the company will reach an EBIT margin between 5.5 percent and 6.0 percent. It is assumed that profitability will increase slightly in the Customized Modules division and the earnings position for Lifecycle Solutions will not change much at all. The profitability of Core Components is expected to remain below the previous year’s level due to the current challenging environment in the USA as well as expected integration costs and negative effects from the purchase price allocation in the Tie Technologies business unit. The Executive Board anticipates a significant improvement in margins for the Transportation division. A portfolio structure oriented purely on railway infrastructure in the future is expected to bring in higher profitability. The value added should noticeably improve in the 2017 fiscal year also benefiting from a decrease in the weighted average cost of capital (WACC) to 7.5 percent.
An Overview of Key Figures for the Vossloh Group
|Orders received*||€ million||210.8||249.3
|Order backlog*||€ million||750.9||642.2
|Value added*||€ million||(8.6)||(14.0)
|Net income||€ million||4.7||3.8
|Earnings per share||€||0.18||0.21|
* Previous year’s figures were adjusted due to the disposal of the Electrical Systems business unit.
Werdohl, April 27, 2017
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Dr. Thomas Triska
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Dr. Daniel Gavranovic
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Vossloh is active in railway technology markets worldwide. The company’s core business is railway infrastructure. In addition, the Group is involved in the locomotive business. The Group activities are organized into the four divisions of Core Components, Customized Modules, Lifecycle Solutions and Transportation. In the 2016 fiscal year, Vossloh achieved sales revenues of about €930 million with slightly more than 4,000 employees.