Second quarter of 2018 characterized by renewed high orders received and an EBIT margin of almost 9 percent
After a seasonally driven slow start to the new fiscal year, Vossloh’s second quarter of 2018 was encouragingly strong with Group sales of €239.8 million and earnings before interest and taxes (EBIT) of €21.2 million. Despite the expected lower contributions to sales from the high-margin business in China, the EBIT margin was 8.8 percent (previous year: 10.2 percent). As during the first three months of the current fiscal year, orders received in the second quarter amounting to €268.3 million significantly exceeded the comparable figure of the previous year (+14.1 percent).
With regard to the entire first half of 2018, this leads to Group sales of €418.1 million after €452.0 million in the previous year, whereby about 40 percent of this decline was attributable to negative impacts of exchange rate developments. EBIT of the Vossloh Group amounted to €22.8 million in the first half of the current fiscal year (previous year: €35.6 million). In the first half of 2018, the EBIT margin accordingly came to 5.4 percent compared to 7.9 percent in the same period of 2017. Orders received by the Vossloh Group climbed significantly in the first six months of 2018 to €479.7 million (previous year: €437.1 million). This corresponds to an increase of 9.7 percent or a book-to-bill ratio of 1.15. As of June 30, 2018, the order backlog of the Vossloh Group totaled €543.5 million, thereby significantly above the comparable figure of the previous year (€510.6 million). The development of free cash flow (FCF) was also encouraging. At €31.8 million in the second quarter, it significantly exceeded the figure in the same quarter of the previous year (€(32.6) million). Despite substantially higher investments, FCF of €(2.8) million in the first half of 2018 displayed a major improvement from the corresponding figure of the previous year (€(61.8) million). A further substantial improvement in FCF is expected in the second half of the year.
The Core Components division, which along with the Fastening Systems business unit also includes the activities of the Tie Technologies business unit, generated sales revenues of €141.0 million in the first six months of the current year (previous year: €174.8 million). Sales at Vossloh Fastening Systems with €110.6 million fell short of the high figure of €133.0 million in the previous year, particularly due to orders brought forward into 2017 by Chinese customers. Sales at Vossloh Tie Technologies declined in the USA to €31.1 million after €43.0 million in the previous year above all as a result of project delays on the customer side in the transit area. Furthermore, the sales decline was reinforced by the negative effects of exchange rate developments particularly between the euro and US dollar. EBIT in the Core Components division totaled €16.1 million in the first six months of 2018 (previous year: €26.7 million), corresponding to an EBIT margin of 11.4 percent (previous year: 15.3 percent). Orders received by the Core Components division climbed by significant 22.5 percent to €181.6 million in the first six months of 2018 (previous year: €148.3 million). Of this, €148.6 million related to the Vossloh Fastening Systems business unit, which recorded a gain in new orders of 39.4 percent from the previous year (€106.6 million). The sharp increase in orders received was partially attributable to the new major order from China won in April, in the amount of €30 million. In the Tie Technologies business unit, orders received totaled €33.9 million in the first half of the current year (last year: €42.8 million). The primary explanation for the decline is that the volume of orders received by Vossloh Tie Technologies fluctuates to major extent in the course of the year as the customers award their contracts at irregular intervals and for several months at a time. As a result, orders received turned out to be very weak in the first quarter, but they recovered significantly in the second quarter: Total new orders of about €26.3 million were recorded from April to June. In the previous year’s quarter, by contrast, the figure was €17.5 million. The order backlog of the entire Core Components division as of the reporting date of June 30, 2018, amounted to €177.2 million (previous year: €191.1 million).
The Customized Modules division generated sales of €234.1 million in the first six months of 2018, approximately reaching the previous year’s level (€237.9 million). Lower sales in Morocco were offset primarily by higher revenues in Poland, France, Italy and Australia. EBIT in the Customized Modules division declined slightly from €14.7 million in the same period of the previous year to €12.6 million in the first half of 2018. Accordingly, the EBIT margin fell from 6.2 percent in the first six months of the previous year to 5.4 percent in the current reporting period. At €247.8 million, orders received in the first half of 2018 were nearly at the level of the previous year (€248.2 million) and above the generated sales revenues. The order backlog as of the mid-year reporting date amounted to €340.4 million (previous year: €289.8 million).
The performance of the Lifecycle Solutions division was very encouraging in the first half of the year. Sales revenues of €46.1 million rose by a total of 7.7 percent from the €42.8 million that had been generated in the previous year’s period. The sales increase from the comparable period of the previous year resulted primarily from better utilization of the welding plants in Germany and higher sales in HighSpeed Grinding. The degree of internationalization of the Lifecycle Solutions division’s activities, measured in terms of the proportion of sales outside Germany, was 46.1 percent in the first half of 2018. The good sales development contributed accordingly to a significant improvement in the earnings situation: EBIT increased significantly to €3.1 million compared to €1.8 million in the previous year. As a result, the EBIT margin of 6.8 percent was also well above the previous year’s margin of 4.2 percent. Orders received in the Lifecycle Solutions division also developed positively: The order volume in the first half of 2018 was €53.1 million, an increase of 18.9 percent from the previous year (€44.7 million). The increase came primarily from Germany and Northern Europe. Order backlog amounted to €29.1 million as of June 30, 2018, following €31.2 million as of the same date in the previous year.
As of June 30, 2018, the number of employees at the Vossloh Group totaled 3,778. As a result, the headcount declined from 3,903 on June 30, 2017, by 125 or 3.2 percent. The primary reason for this is that since the end of 2017 two Group companies have no longer been fully consolidated in the financial statements. Compared to the end of 2017 with 3,685 employees, a total increase of 93 employees is evident.
Vossloh is forecasting Group sales for 2018 as a whole at the level of the 2017 fiscal year. EBIT and therefore the EBIT margin are expected to fall short of the previous year’s figures. A key reason for this is the very strong business performance in the high-margin focus market China in the 2017 fiscal year, which is partially to the detriment of business performance in the current year. These project-related fluctuations will result in a temporarily weaker performance of the Core Components division as a whole in 2018. We continue to assume that the forecasted higher operating results in the other divisions will not be able to fully offset this development on Group level. In sum, Vossloh is expecting Group sales of between €875 million and €950 million and an EBIT margin between 6.0 percent and 7.0 percent in 2018. For 2019, higher sales are being assumed particularly in the focus markets China and North America – along with a corresponding improvement in profitability.
An Overview of Key Figures for the Vossloh Group
|Orders received1||€ mill.||479.7||437.1|
|Order backlog (as of 6/30)1||€ mill.||543.5||510.6|
|Sales revenues1||€ mill.||418.1||452.0|
|Value added1||€ mill.||-6.3||6.0|
|Net income||€ mill.||11.2||13.4|
|Earnings per share||€||0.53||0.56|
1 Prior-year figures adjusted due to the treatment of the Locomotives business unit as discontinued operations.
Werdohl, August 1, 2018
Contact information for media:
Dr. Thomas Triska
Phone: (+49-23 92) 52-608
Contact information for investors:
Dr. Daniel Gavranovic
Phone: (+49-23 92) 52-609
Vossloh is active in rail technology markets worldwide. The Company’s core business is rail infrastructure. The Group activities are organized into the three divisions of Core Components, Customized Modules and Lifecycle Solutions. In the 2017 fiscal year, Vossloh achieved sales of about €920 million with over 3,900 employees.