Earnings Release • Nov 18, 2010
Earnings Release
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NINE MONTHS REPORT AS OF SEPTEMBER 30, 2010
| EUR million | Q1–Q3/2010 | Q1–Q3/2009 | Q3/2010 | Q3/2009 |
|---|---|---|---|---|
| Sales | 459.2 | 316.4 | 171.7 | 103.1 |
| Cost of sales | -371.7 | -263.1 | -139.4 | -84.4 |
| Gross profit | 87.5 | 53.3 | 32.3 | 18.7 |
| Adjusted result for the period | 1.8 | -12.0 | 2.4 | -2.1 |
| Adjusted EPS in EUR1) | 0.09 | -0.58 | 0.12 | -0.10 |
| Adjusted EBITDA | 37.6 | 12.6 | 15.3 | 6.5 |
| Adjusted EBIT | 26.0 | 1.2 | 11.4 | 2.5 |
| Operating cash flow2) | 34.2 | 29.1 | 14.5 | 8.1 |
1) Adjusted net profit of the year/weighted average number of ordinary shares outstanding as of the reporting day.
2) The operating cash flow is the cash flow from operating activities before income tax payments.
| EUR million | Q1–Q3/2010 | Q1–Q3/2009 | Q3/2010 | Q3/2009 |
|---|---|---|---|---|
| Europe | 220.7 | 149.5 | 85.1 | 44.6 |
| North America | 208.4 | 149.6 | 74.7 | 51.3 |
| Other | 30.1 | 17.3 | 11.9 | 7.2 |
| Total | 459.2 | 316.4 | 171.7 | 103.1 |
| EUR million | Q1–Q3/2010 | Q1–Q3/2009 | Q3/2010 | Q3/2009 |
|---|---|---|---|---|
| Trailer Systems | 227.9 | 130.5 | 91.9 | 41.0 |
| Powered Vehicle Systems | 93.6 | 73.0 | 32.1 | 24.1 |
| Aftermarket | 137.7 | 112.9 | 47.7 | 38.0 |
| Total | 459.2 | 316.4 | 171.7 | 103.1 |
| 09/30/2010 | 06/30/2010 | 03/31/2010 | 12/31/2009 | |
|---|---|---|---|---|
| Total assets (EUR million) | 487.9 | 506.0 | 477.9 | 458.1 |
| Equity ratio (%) | 3.7 | 5.4 | 4.9 | 5.2 |
| Q1–Q3/2010 | Q1–Q3/2009 | |||
| Employees (average) | 2,567 | 2,316 | ||
| Sales per employee (kEUR) | 178.9 | 136.6 | ||
GROUP INTERIM MANAGEMENT REPORT
09 II Overview of Business Development
18 IV Risk Report
Dear shareholders, business associates, and employees,
SAF-HOLLAND Group made significant progress in the third quarter of the current fiscal year, backed by increasing global demand for commercial vehicles. And as we expected even at the end of last year, our lean, strong positioning has helped us to benefit extensively from the market development.
There was good news in particular from our largest business unit Trailer Systems, where sales increased from January to September this year by 74.6% to EUR 227.9 million compared to the same period in the previous year. As a result, the operating segment result also improved considerably and almost reached the break-even point in the third quarter. The Aftermarket business unit has continued to grow and has also expanded its service and distribution network via a new cooperative agreement in certain markets with IVECO. And in the Powered Vehicle Systems Business Unit, despite a slight decrease in sales in the third quarter due to the vacation schedules, a continuous upward trend is visible for the full year.
Overall, sales achieved by the SAF-HOLLAND Group in the first three quarters increased by 45.1% over the previous year to EUR 459.2 million. All regions in which we are active – Europe, North and South America and Asia – contributed to this growth.
Adjusted operating earnings saw further improvement, increasing to EUR 26.0 million. With sales now climbing, our numerous individual restructuring measures can take full effect. For example, in inventory management, we have now achieved our target of 45 days inventory outstanding.
Just as encouraging is the fact that we have hired again new employees in order to meet the growing order volumes. This is the case for both Germany and the USA, mainly in the production area.
We are expecting a further boost from the product innovations we presented at the IAA Commercial Vehicles trade fair in Hanover at the end of the third quarter. Having promptly recognized the importance of truck and trailer efficiency in our sector, we steered our research and development in this direction. As a result, we were able to present several weight-reducing products, which enable freight forwarders to reduce fuel consumption or increase payloads with either option resulting in better revenue.
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Our internationalization program is also progressing rapidly. We intend to use our location in Xiamen, China, not only for competitive production of components but also to develop as a central hub for all of Asia. Our business in Brazil is also picking up speed. Here we are predominantly active in the trailer market and intend to quickly move to also supplying truck manufacturers. In October, we set up a distribution subsidiary in Turkey, strengthening our presence in that country and increasing our proximity to our customers. The opening of two new distribution sites in Russia serves the same purpose. Even with globalized logistics, our customers can rely on our promise to have both "a global reach and a local touch".
The capital markets have also increasingly recognized our efforts. SAF-HOLLAND's share price increased from its lowest value of EUR 1.97 in March 2010 to EUR 6.28 and was EUR 5.84 at the end of the quarter. At the same time, we won the confidence of numerous new investors, after our longstanding major shareholder Pamplona Capital Partners sold its 34.5% share.
We are confident that our work will result, as forecast, in significantly improved business figures by the end of the year. We expect sales of between EUR 590 and 610 million for the full year and an adjusted EBIT margin of 5.5% to 5.8%.
After the deep crisis, SAF-HOLLAND is back on track. Our actions have been verified, the market is providing a good tailwind and the reaction from our customers to our new products has been extremely positive. We intend to continue to make progress along this successful path to success.
Rudi Ludwig Chief Executive Officer (CEO)
Shareholder Structure Figures in % Non-free float 14.6 Free float 85.4
The price of SAF-HOLLAND's shares recorded another increase in the third quarter of 2010. Starting at EUR 4.95 on July 1, 2010, it peaked on August 4 at EUR 6.28 (Xetra) and closed out the quarter on September 30, 2010 at EUR 5.84. Compared to the stock's lowest level of EUR 1.97 on March 31 of the current year, the peak value of SAF-HOLLAND's stock is an increase of more than three-fold. Positive momentum in commercial vehicle markets and a change in shareholder structure in May, 2010 have contributed to the Company's share price development. In May 2010, the former major shareholder, Pamplona Capital Partners I, LP, London, sold its 34.5% stake in the Company to 14 institutional investors from Ger many, the United Kingdom and the USA. The free float of SAF-HOLLAND's stock currently stands at 85.4%. Currently, five shareholders, including two members of SAF-HOLLAND's management, hold more than 5.0% of voting shares each. In total, members of the Management Board and Board of Directors hold a total of 20.2% of voting shares.
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09 II OVERVIEW OF BUSINESS DEVELOPMENT
09 II.2 Significant Events in the Third Quarter of 2010
14 II.5 Development in the Business Units
15 II.6 Financing
15 II.8 Liquidity
16 II.11 Research and Development
SAF-HOLLAND S.A., hereinafter also referred to as SAF-HOLLAND, the Group, or the Company, is one of the world's leading manufacturers and providers of premium systems and components for commercial vehicles (trucks and trailers) as well as buses and recre ational vehicles. The product range encompasses axle and suspension systems, fifth wheels, coupling devices, kingpins, and landing legs. The Group, with its three Business Units – Trailer Systems, Powered Vehicle Systems, and Aftermarket – currently utilizes 18 production sites in Europe, North and South America, Australia, China, and India. In addition, the Company benefits from a worldwide service and distribution network.
While the world economy continues to recover, Germany has benefited from the upturn more than most other western industrialized nations. Expectations for the USA, however, have dropped slightly. According to figures from the International Monetary Fund (IMF) from October 2010, world markets are now expected to expand by 4.8%, an improvement over the 4.6% calculated in July. Germany is now expected to grow by 3.3% whereas the original prognosis was 1.4%. Predictions for the Euro zone have been adjusted upwards to 1.7%. The IMF reduced its original forecast of 3.3% for the USA down to 2.6%. Growth levels remain high for emerging markets. China's economy is predicted to grow by 10.5%, India's by 9.7%, Brazil by 7.5%, and Russia's by 4.0%. Global trading volume is also growing faster than originally assumed and is expected to increase by 11.4%. In 2011, growth is expected to decelerate modestly: the IMF now predicts a rise of 4.2% as opposed to 4.3%.
The commercial vehicles sector continued to record overall positive development. In Sep tember, the number of registered trucks (over 16 tons) rose by 20.0% in Europe, and by 29.6% in Germany. During the period from January to August, the number of registered vehicles Europe-wide remained on the decline at minus 6.0%, whereas the figure grew again in Germany at plus 7.3%1). In addition to the Börsen-Zeitung (German financial newspaper) where a headline recently claimed: "Forecasts for the Truck Industry Brighten", analysts from J. P. Morgan Cazenove also view market developments more optimistically than previously indicated. In North America, truck production (class 8) increased by 19%, and trailer production grew by 13%2).
1) ACEA, October 2010
2) ACT, September 2010
SAF-HOLLAND continued its positive business development in the third quarter of 2010. Despite seasonal plant closures from clients in summer months, we were able to slightly increase sales volumes and once again improve Group results. The Trailer Systems Business Unit, in particular, showed a significant increase in sales and earnings as compared to the second quarter of 2010. The business unit approached close to the break-even point for adjusted operating earnings before interest and taxes (EBIT) earlier than expected in the third quarter of 2010.
In the first nine months of 2010, Group sales were EUR 459.2 million (previous year: EUR 316.4 million). Accumulated adjusted EBIT at SAF-HOLLAND Group rose to EUR 26.0 million (previous year: EUR 1.2 million).
SAF-HOLLAND is maintaining its focus on the optimization of inventory management at its production plants worldwide. The figure for days inventory outstanding is key to monitoring the effectiveness of our measures, and this figure improved significantly by 19 days to 45 days as compared to the same period of the previous year. We thus achieved our target earlier than expected. A greater need for inventory stemming from increased sales is so offset by a reduction in days inventory outstanding, which limits the need for increased liquidity. As a consequence, SAF-HOLLAND showed stable development in liquidity and cash flow in the third quarter.
At the largest international fair for commercial vehicles, the IAA in Hanover, SAF-HOLLAND confirmed its pioneering position in innovative weight reduction solutions for components used in truck and trailer combinations. Products such as the new wheel end system "SAF 60 ONE", our new tire inflation system "Tire Pilot", and the disc brake with weight-reduced, "SAF-HOLLAND brake caliper" were all very well received by vehicle manufacturers and consumers. The combined use of the new brake caliper and wheel end system alone succeeded in reducing the weight of a European three-axle trailer by 96 kilograms. The use of aluminum instead of steel rims can reduce the weight of a trailer by a total of more than 200 kilograms. Our clients can now benefit from a greater load capacity in their trailers or from lower operating costs. The environment also benefits significantly. Lighter truck and trailer combinations on the streets contribute to a reduction in CO² emissions.
Two years after the takeover of the former Georg Fischer Verkehrstechnik GmbH, customer reaction at the IAA provided confirmation that the products and brands integrated into the SAF-HOLLAND Group have been welcomed by the market. This was in part indicated by the widespread use of our products in the trucks and trailers on display at the fair.
The establishment and expansion of activities in the growth markets of China and Brazil were also the focus of our attention in the third quarter. The consolidation of the two existing locations in China into an Asian headquarter is proceeding as planned. Due to its modern facilities and logistically advantageous location, we plan to expand the Xiamen location into a central hub for our Asian business. We will equip the location for delivery to Asian markets as well as for export to other markets. The Xiamen location currently produces and distributes landing legs and axle systems for the trailer business.
We deliver axle systems and fifth wheels to trailer producers in the dynamically expanding Brazilian market. We are currently setting up production in Brazil for SAF-HOLLAND products for the truck industry. Our goal is to soon deliver our components to the truck industry as well. In a market influenced by European producers, we particularly benefit from our European know-how and strong contacts to producers.
Turkey counts among regions with a high level of representation in the commercial vehicles industry. This applies to vehicle producers as well as to consumers. In order to further expand our business activities in this market, we founded our own distribution company in Turkey in October.
In Russia, SAF-HOLLAND has opened two distribution sites in Moscow and Chelyabinsk. A third location in the vicinity of St. Petersburg is currently being investigated. The distri bution sites ensure improved and quicker availability of products for customers in the region.
North American axle production has been steadily increasing in volume since it began in February, 2009. Compared to the previous year, the volume of axle production and distri bution will more than triple in the current year.
Positive sales development of the second quarter continued into the third quarter. Despite lower sales due to the yearly effects of the summer vacation season, we moderately in creased sales by 5.9% as compared to the second quarter. The Trailer Systems Business Unit made a particularly strong contribution to this positive development. In total, we generated sales in the third quarter of EUR 171.7 million (previous year: EUR 103.1 million), adjus ted for exchange rate effects, sales were EUR 164.2 million. For the first nine months of 2010, sales rose to EUR 459.2 million (previous year: EUR 316.4 million). Adjusted for ex change rate effects, this figure was EUR 450.9 million. Consistent with positive influences from European markets, the share of our European business grew by 47.6% to EUR 220.7 million (previous year: EUR 149.5 million) in the first nine months compared to the previous year. This represents a share of 48.1% (previous year: 47.2%) of the Group's total sales. In the North American region, we generated EUR 208.4 million (previous year: EUR 149.6 million), which corresponds to a 45.4% share (previous year: 47.3%) of Group sales. With a volume of EUR 30.1 million (previous year: EUR 17.3 million), other regions increased to 6.5% of Group sales (previous year: 5.5%) in the same period of January to September 2010.
| EUR million | Q1–Q3/2010 (exchange rate Q1–Q3/2010 adjusted) |
Q1–Q3/2009 | ||||||
|---|---|---|---|---|---|---|---|---|
| Europe | 220.7 | 48.1% | 220.7 | 49.0% | 149.5 | 47.2% | ||
| North America | 208.4 | 45.4% | 200.8 | 44.5% | 149.6 | 47.3% | ||
| Other | 30.1 | 6.5% | 29.4 | 6.5% | 17.3 | 5.5% | ||
| Total | 459.2 | 100.0% | 450.9 | 100.0% | 316.4 | 100.0% |
| EUR million | Q3/2010 | Q3/2010 (exchange rate adjusted) |
Q3/2009 | ||||
|---|---|---|---|---|---|---|---|
| Europe | 85.1 | 49.6% | 85.1 | 51.8% | 44.6 | 43.3% | |
| North America | 74.7 | 43.5% | 67.8 | 41.3% | 51.3 | 49.7% | |
| Other | 11.9 | 6.9% | 11.3 | 6.9% | 7.2 | 7.0% | |
| Total | 171.7 | 100.0% | 164.2 | 100.0% | 103.1 | 100.0% | |
| EUR million | Q1–Q3/2010 | Q1–Q3/2010 (exchange rate adjusted) |
Q1–Q3/2009 | ||||
|---|---|---|---|---|---|---|---|
| Trailer Systems | 227.9 | 49.6% | 225.3 | 50.0% | 130.5 | 41.2% | |
| Powered Vehicle Systems | 93.6 | 20.4% | 90.6 | 20.1% | 73.0 | 23.1% | |
| Aftermarket | 137.7 | 30.0% | 135.0 | 29.9% | 112.9 | 35.7% | |
| Total | 459.2 | 100.0% | 450.9 | 100.0% | 316.4 | 100.0% |
| EUR million | Q3/2010 (exchange rate Q3/2010 adjusted) |
Q3/2009 | ||||||
|---|---|---|---|---|---|---|---|---|
| Trailer Systems | 91.9 | 53.5% | 89.6 | 54.6% | 41.0 | 39.7% | ||
| Powered Vehicle Systems | 32.1 | 18.7% | 29.4 | 17.9% | 24.1 | 23.4% | ||
| Aftermarket | 47.7 | 27.8% | 45.2 | 27.5% | 38.0 | 36.9% | ||
| Total | 171.7 | 100.0% | 164.2 | 100.0% | 103.1 | 100.0% |
SAF-HOLLAND continued its improvement of earnings in the third quarter of 2010. The adjusted EBIT increased from EUR 4.8 million in the first quarter and EUR 9.8 million in the second quarter by another 16.3% to EUR 11.4 million (previous year: EUR 2.5 million) in the third quarter of 2010. In the Trailer Systems Business Unit, the adjusted EBIT improved to EUR -0.1 million in the third quarter and thus almost reached break-even. Most importantly, SAF-HOLLAND Group once again reached break-even for the accumulated adjusted result for the period. It climbed from EUR -0.6 million in the second quarter to EUR 1.8 million in the third quarter (previous year: EUR -12.0 million). For the third quarter, the adjusted result for the period amounted to EUR 2.4 million (previous year: EUR -2.1 million). Sales growth in the Trailer Systems Business Unit and the cost-cutting measures made a substantial contribution to the improved results compared to the second quarter. In com parison to the same period of the previous year, the gross margin rose by 2.3 percentage points to 19.1% (previous year: 16.8%); however, this amounts to a slight decline compared to the second quarter. This is primarily due to increases in the cost of procuring material in North America and Europe. In this case, immediate compensation was not possible. Adjusted earnings per share improved to EUR 0.09 (previous year: EUR -0.58).
| EUR million | Q1–Q3/2010 | Q1–Q3/2009 | Q3/2010 | Q3/2009 |
|---|---|---|---|---|
| Result for the period | -9.5 | -38.6 | -0.6 | -21.7 |
| Taxes on income | 3.6 | -4.2 | 1.7 | -1.4 |
| Finance result | 25.8 | 18.0 | 8.0 | 5.5 |
| Depreciation and amortization from PPA1) | 5.0 | 5.1 | 1.7 | 1.6 |
| Impairment goodwill and intangible assets | – | 16.9 | – | 16.9 |
| Restructuring and integration costs | 1.1 | 4.0 | 0.6 | 1.6 |
| Adjusted EBIT | 26.0 | 1.2 | 11.4 | 2.5 |
| as a percentage of sales | 5.7 | 0.4 | 6.6 | 2.4 |
| Depreciation and amortization | 11.6 | 11.4 | 3.9 | 4.0 |
| Adjusted EBITDA | 37.6 | 12.6 | 15.3 | 6.5 |
| as a percentage of sales | 8.2 | 4.0 | 8.9 | 6.3 |
| Depreciation and amortization | -11.6 | -11.4 | -3.9 | -4.0 |
| Finance result | -25.8 | -18.0 | -8.0 | -5.5 |
| Restructuring and integration costs | 2.4 | – | – | – |
| Adjusted result before taxes | 2.6 | -16.8 | 3.4 | -3.0 |
| Taxes on income2) | -0.8 | 4.8 | -1.0 | 0.9 |
| Adjusted result for the period | 1.8 | -12.0 | 2.4 | -2.1 |
| as a percentage of sales | 0.4 | -3.8 | 1.4 | -2.0 |
| Number of shares3) | 20,702,275 | 20,702,275 | 20,702,275 | 20,702,275 |
| Adjusted earnings per share in EUR | 0.09 | -0.58 | 0.12 | -0.10 |
1) Purchase price allocation (PPA) from the acquisition of the SAF Group and Holland Group in 2006 as well as Austin-Westran Machinery Co., Ltd. and the current SAF-HOLLAND Verkehrstechnik GmbH in 2008.
2) A uniform rate of 30.80% (previous year: 28.59%) was assumed for the adjusted net result for the period.
3) Weighted average number of shares outstanding as of reporting day.
The Trailer Systems Business Unit again recorded significant sales growth in the third quarter of 2010. The positive trend toward recovery, which began early this year, is thus continuing. Overall, sales in the third quarter improved by 15.9% over the second quarter of 2010. The positive development is noticeable in both North America and Europe. As al ready reported in the second quarter, business development has mirrored the trend in the trailer markets and is directly related to increasing transport volumes worldwide. Trailer markets, which absorbed the most serious sales declines in the crisis period of 2008 and 2009, are currently recording the most rapid recovery trend in our core markets. Despite this, the sales level is still comparably low and flexible cost structures therefore remain important for us.
In total, the Trailer Systems Business Unit generated sales of EUR 227.9 million (previous year: EUR 130.5 million) in the first nine months of 2010. This represents an increase of 74.6% compared to the same period in the previous year. Adjusted for exchange rate effects, sales reached EUR 225.3 million. The gross margin improved to 5.7% (previous year: -3.6%). The Business Unit's share of Group sales rose to 49.6% (previous year: 41.2%).
The Powered Vehicle Systems Business Unit had a slight decrease in sales in the third quarter of 2010 compared to the second quarter. This was due to the usual July plant closures by several major customers. Apart from this effect, a steady upward trend is visible in both North America and Europe. This development, however, is also accompanied by a shift in the product mix in favor of standard products over specialty products.
With sales of EUR 93.6 million in the first nine months of 2010 (previous year: EUR 73.0 million), the Business Unit achieved a sales increase of 28.2% compared to the same period in the previous year. Adjusted for exchange rate effects, sales stood at EUR 90.6 million. The gross margin reached 24.3% (previous year: 22.1%). Overall, the Business Unit's share of the Company's total sales volume amounted to 20.4% (previous year: 23.1%).
At EUR 47.7 million, sales in the Aftermarket Business Unit were largely stable in the third quarter compared to the second quarter of 2010. In addition to expanding its international service and distribution network, the business unit is focusing on continually improving product availability. Warehouse locations continue to be set up and expanded for this purpose. We opened new logistic sites at two locations in Russia in the third quarter. In North America, we are reviewing the possibility of establishing an independent warehouse for replacement parts. SAF-HOLLAND is planning to set up a subsidiary in the Middle East in order to improve access of our customers in this area to replacement parts. We also reached a cooperative agreement with truck manufacturer IVECO to sell SAF-HOLLAND products via its distribution network. This will further strengthen our market position, particularly in North Africa and Italy. The first step will involve marketing primarily replacement parts for axle systems.
In the first nine months of the year, the Business Unit generated sales totaling EUR 137.7 million (previous year: EUR 112.9 million) or EUR 135.0 million when adjusted for exchange rate effects. The gross margin reached 37.8% (previous year: 37.6%). After the significant recovery in the truck and trailer markets, the share of the replacement part business in total Company sales decreased as expected to 30.0% (previous year: 35.7%). With the increasing number of installed axles in the market, this segment will continue to grow, particularly in Europe, and gain importance for the Group as a stabilizing factor on sales and earnings.
| Business Unit Trailer Systems |
Business Unit Powered Vehicle Systems |
Business Unit Aftermarket |
Adjust ments/ elimini nations |
Total | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| EUR million | Q1–Q3/ 2010 |
2009 | Q1–Q3/ Q1–Q3/ 2010 |
2009 | Q1–Q3/ Q1–Q3/ 2010 |
2009 | Q1–Q3/ Q1–Q3/ 2010 |
2009 | Q1–Q3/ Q1–Q3/ Q1–Q3/ 2010 |
2009 |
| Sales | 227.9 | 130.5 | 93.6 | 73.0 | 137.7 | 112.9 | – | – | 459.2 | 316.4 |
| Cost of sales Gross operating result |
-215.0 12.9 |
-135.2 -4.7 |
-70.9 22.7 |
-56.9 16.1 |
-85.7 52.0 |
-70.4 42.5 |
-0.1 -0.1 |
-0.6 -0.6 |
-371.7 87.5 |
-263.1 53.3 |
| as a percentage of sales |
5.7 | -3.6 | 24.3 | 22.1 | 37.8 | 37.6 | – | – | 19.1 | 16.8 |
At the end of the reporting period, interest bearing collateralized bank loans amounted to EUR 298.5 million (December 31, 2009: EUR 314.3 million). As previously reported, SAF-HOLLAND has access to secured financing until September 2014. Over the course of the year to date, the Group made interest payments with a margin of 1.6%, which will rise to 3.0% as of October 2010. The remaining margins of 4.35% and 2.95% respectively are deferred over the course of the year and fall due at the end of the financing period. As of the reporting date on September 30, 2010, accrued interest totaled EUR 10.1 million (December 31, 2009: EUR 0.1 million).
For the full year 2010, investments are expected to reach a maximum of EUR 7.9 million. As previously announced, SAF-HOLLAND is focusing its investments in the current year on the dynamic markets in Brazil and China. This includes, for example, setting up axle production in China, which started in the third quarter of 2010, serving both the domestic and international markets.
Cash flow from operating activities before income tax payments totaled EUR 34.2 million in the reporting period (previous year: EUR 29.1 million). Cash flow from investing activities amounted to EUR -4.8 million (previous year: EUR -5.2 million). Cash flow from financing activities totaled EUR -33.6 million (previous year: EUR -19.5 million). Net working capital
reached EUR 55.0 million (December 31, 2009: EUR 52.7 million), corresponding to 8.0% of sales (December 31, 2009: 12.8%).
With the improvement in sales, total assets rose to EUR 487.9 million (December 31, 2009: EUR 458.1 million). In particular, inventories increased to EUR 69.7 million (December 31, 2009: EUR 55.5 million). Despite this, we succeeded in improving the turnover period to 45 days in the third quarter of 2010. Trade receivables increased by EUR 29.8 million to EUR 87.0 million (previous year: EUR 57.2 million). Trade payables amounted to EUR 76.6 million (December 31, 2009: EUR 40.9 million). We have given high priority to consistently monitoring and improving our net working capital management. In addition to continuously improving the inventory turnover period, we ensure balanced management of payables and receivables. Equity decreased to EUR 18.2 million (December 31, 2009: EUR 23.8 million). As of the reporting date, the equity ratio was 3.7% (December 31, 2009: 5.2%). Non-current liabilities amounted to EUR 363.0 million (December 31, 2009: EUR 364.7 million). Current liabilities totaled EUR 106.7 million (December 31, 2009: EUR 69.6 million).
Thanks to increasing demand in the commercial vehicles market, SAF-HOLLAND was able to hire new employees again. As of the reporting date of September 30, 2010, the Group employed 2,742 people worldwide including temporary staff (December 31, 2009: 2,331). In Germany, for example, 86 employees were hired in production during the summer months, primarily for dual-shift operations in one of our locations near Aschaffenburg. In North America, thanks to good demand, the number of industrial employees alone rose by 234 in the first nine months.
In addition, the Group hired 20 new trainees in Germany. In total, there are 67 young people in training at SAF-HOLLAND, this represents an outstanding training rate in Germany of 7.8%. On completion of their training, all trainees were hired as employees.
The most important issue for freight forwarders and fleet operators is the improvement of efficiency in their fleets, as even after the crisis, price pressure and intensity of competition remain high. Since vehicle manufacturers focus on fuel efficiency, weight reduction is at the top of SAF-HOLLAND's agenda. The positive reception at the IAA Commercial Vehicles Trade Fair in September 2010 demonstrated that this is exactly what our customers need. Our products help end users to be more efficient. With lighter trucks and trailers, they can either increase load capacities or reduce their operational costs. Our new wheel end system was met with particular interest due to its lighter weight achieved by means of a reduced diameter that does not compromise performance or stability. SAF-HOLLAND's new brake caliper, developed in cooperation with Haldex, was also well received. SAF-HOLLAND has always aimed to be a driving force and trendsetter in the development of new products. We want to continue to meet this goal. In the context of growing business volumes and the expansion of our international activities, we will therefore gradually expand our commitment to research and development in the coming months and years.
Expenditure for research and development amounted to EUR 10.7 million in the first three quarters (previous year: EUR 9.1 million); of that amount, EUR 0.5 million was capitalized as development costs (previous year: EUR 0.7 million).
SAF-HOLLAND announced the following information on November 16, 2010:
Sam Martin (65), COO of SAF-HOLLAND Group and President of the American subsidiary SAF-HOLLAND Inc., will resign from his operating activities at the end of 2010 at his own request. He will remain available to the Company. He is expected to be nominated to join the Board of Directors at the Annual General Meeting on April 28, 2011. His responsibilities in the Management Board will be re-distributed. Jack Gisinger (62) will succeed him as President of the American subsidiary SAF-HOLLAND Inc. effective January 2, 2011. At the same time, Detlef Borghardt (48) will assume the position of Deputy CEO of the entire Group and will take over the responsibility for the strategic planning. The COO function will therefore be dropped in the future. Mr. Borghardt and Mr. Gisinger have been members of the Management Board of SAF-HOLLAND since June 2007. Mr. Gisinger is Head of the Powered Vehicle Systems business unit and Mr. Borghardt is responsible for the Trailer Systems Unit.
A further change to the Management Board of SAF-HOLLAND involves the resignation of Dr. Martin Kleinschmitt (50) as Chief Restructuring Officer (CRO). Consistent with the completion of the Company's restructuring program that was introduced two years ago, he has concluded his function of CRO as planned. Dr. Martin Kleinschmitt was appointed as an additional member of the Management Board on August 1, 2009 and played a crucial role in securing the Group's financing at the end of last year. He is also a member of the Executive Board of Noerr Consulting AG, Berlin, and will continue to act as a consultant to SAF-HOLLAND on a selective basis.
At its regular meeting on November 16, 2010, the Board of Directors of SAF-HOLLAND S.A., Luxembourg, decided to convene an Extraordinary General Meeting for December 14, 2010. The Board of Directors will use the opportunity to propose to the Company's shareholders increasing the SAF-HOLLAND S.A.'s authorized share capital from its current amount of EUR 112,000.- to EUR 224,000.- consisting of 22,400,000 shares having a par value of EUR 0.01 each (of which EUR 18,649.- represented by 1,864,900 shares have been used on September 4, 2008). The decision was made in order to provide the Company with more flexibility and the ability to react swiftly when the market conditions are favourable to the issue of new shares. The Board of Directors will further propose to the General Meeting that it authorizes the Board of Directors to limit and/or suppress all or any preferential subscription rights of existing shareholders when the Board uses the authorized share capital. This is to be able to attract new and to motivate existing investors and to strengthen the Company's equity base. SAF-HOLLAND S.A. currently holds 20,702,275 ordinary shares with a subscribed share capital of EUR 207,022.75. Invitations to the Extraordinary General Meeting will be made available to the shareholders in accordance with applicable laws.
Compared with the risk profile at the end of fiscal year 2009, as outlined in the annual report, the Group has recorded no changes. Overall, the risks are manageable and sufficient provisions have been made for known risks.
Recovery in the commercial vehicles industry is continuing as expected. The year saw a small increase in the number of newly registered vehicles in Germany. Standard trailer producers in particular are once again showing good growth rates. In Germany, the current recovery trend is more pronounced in the trailer industry than in the truck industry. Production levels continue to rise in North America, too. Market research institute ACT expects (according to October estimates) production increases in the truck segment (class 8) of 26.0% for the full year 2010. The number of deliveries in the USA are expected to increase by 46.2% in the trailer segment.
SAF-HOLLAND will continue to participate in the positive market developments. In the wake of increasing international transport volumes, the demand for vehicles such as trucks and trailers can only grow. At the same time, the need for increasingly efficient and environmentally-sound transport solutions also continues to grow. Our new products take advan tage of the current trends, and we believe in their potential for further development and expansion. SAF-HOLLAND also sees important growth opportunities for the coming years in the BRIC countries. For this reason, we are investing in particular in the markets of China and Brazil. The requirements for successful business in these regions include locally producing and marketing products that are relevant for these markets. We have made good progress towards this objective.
In summary, the recovery of our core markets continues. Against this background, we be lieve that sales in fiscal year 2010 will reach EUR 590 to 610 million. We expect the adjusted EBIT margin will fall between 5.5% and 5.8%. It is our mid-term goal to achieve sales of EUR 1 billion while generating an adjusted EBIT margin of 10%. In addition, we will align our net working capital to under 10% of sales. We are well equipped to continue on our growth path. SAF-HOLLAND is highly efficient and able to react flexibly to increasing demand.
| kEUR | Notes Q1–Q3/2010 Q1 –Q3/2009 | Q3/2010 | Q3/2009 | |
|---|---|---|---|---|
| Result for the period | ||||
| Sales (5) |
459,241 | 316,363 | 171,717 | 103,083 |
| Cost of sales | -371,713 | -263,094 | -139,357 | -84,449 |
| Gross profit | 87,528 | 53,269 | 32,360 | 18,634 |
| Other income | 1,141 | 913 | 246 | 41 |
| Selling expenses | -31,493 | -28,283 | -10,965 | -9,127 |
| Administrative expenses | -27,029 | -25,400 | -8,875 | -7,452 |
| Research and development costs | -10,232 | -8,402 | -3,678 | -2,597 |
| Impairment goodwill and intangible assets | – | -16,903 | – | -16,903 |
| Operating result (5) |
19,915 | -24,806 | 9,088 | -17,404 |
| Finance income | 666 | 2,543 | 204 | 1,364 |
| Finance expenses (6) |
-26,513 | -20,584 | -8,236 | -6,865 |
| Share of net profit of investments accounted for using the equity method |
-24 | -17 | 8 | -248 |
| Result before tax | -5,956 | -42,864 | 1,064 | -23,153 |
| Income tax (7) |
-3,551 | 4,222 | -1,652 | 1,415 |
| Result for the period | -9,507 | -38,642 | -588 | -21,738 |
| Other comprehensive income | ||||
| Exchange differences on translation of foreign operations | 8,139 | 465 | -7,979 | -1,260 |
| Changes in fair values of derivatives designated as hedges, recognized in equity (12) |
-5,965 | 1,317 | -679 | 874 |
| Income tax effects on items recognized directly | ||||
| in other comprehensive income (9) Other comprehensive income |
1,769 3,943 |
-4,155 -2,373 |
246 -8,412 |
-278 -664 |
| Comprehensive income for the period | -5,564 | -41,015 | -9,000 | -22,402 |
| Attributable to equity holders of the parent | -5,564 | -41,015 | -9,000 | -22,402 |
| Basic and diluted earnings per share in EUR (10) |
-0.46 | -1.87 | -0.03 | -1.05 |
| kEUR | Notes | 09/30/2010 | 12/31/2009 |
|---|---|---|---|
| Assets | |||
| Non-current assets | 313,761 | 318,096 | |
| Goodwill | 45,670 | 44,251 | |
| Intangible assets | 135,686 | 137,651 | |
| Property, plant, and equipment | 104,184 | 108,625 | |
| Investments accounted for using the equity method | 6,994 | 6,804 | |
| Financial assets | (12) | 24 | – |
| Other non-current assets | 4,430 | 4,079 | |
| Deferred tax assets | 16,773 | 16,686 | |
| Current assets | 174,163 | 140,002 | |
| Inventories | 69,718 | 55,508 | |
| Trade receivables | 86,962 | 57,210 | |
| Income tax assets | 244 | 821 | |
| Other current assets | 5,733 | 5,721 | |
| Cash and cash equivalents | (8) | 11,506 | 20,742 |
| Total assets | 487,924 | 458,098 | |
| Equity and liabilities | |||
| Equity attributable to equity holders of the parent | (9) | 18,192 | 23,756 |
| Subscribed share capital | 207 | 207 | |
| Share premium | 106,454 | 106,454 | |
| Legal reserve | 21 | 21 | |
| Retained earnings | -79,108 | -69,601 | |
| Accumulated other comprehensive income | -9,382 | -13,325 | |
| Non-current liabilities | 363,070 | 364,732 | |
| Pensions and other similar benefits | 12,497 | 12,364 | |
| Other provisions | 4,700 | 4,736 | |
| Interest bearing loans and borrowings | (11) | 309,609 | 304,500 |
| Finance lease liabilities | 67 | 171 | |
| Other financial liabilities | (12) | 8,848 | 9,006 |
| Other liabilities | 330 | 260 | |
| Deferred tax liabilities | 27,019 | 33,695 | |
| Current liabilities | 106,662 | 69,610 | |
| Pensions and other similar benefits | 1,996 | 1,914 | |
| Other provisions | 6,422 | 8,156 | |
| Interest bearing loans and borrowings | (11) | 1,526 | 5,530 |
| Finance lease liabilities | 153 | 336 | |
| Trade payables | 76,570 | 40,874 | |
| Income tax liabilities | 4,579 | 3,129 | |
| Other liabilities | 15,416 | 9,671 | |
| Total equity and liabilities | 487,924 | 458,098 |
| 2010 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Attributable to equity holders of the parent | ||||||||
| Subscribed | Share | Legal | Retained earnings |
Accumulated other com prehensive income |
Total | |||
| kEUR | share capital | premium | reserve | (Note 9) | (Note 9) | equity | ||
| As of 01/01/2010 | 207 | 106,454 | 21 | -69,601 | -13,325 | 23,756 | ||
| Comprehensive income for the period |
– | – | – | -9,507 | 3,943 | -5,564 | ||
| As of 09/30/2010 | 207 | 106,454 | 21 | -79,108 | -9,382 | 18,192 |
| 2009 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Attributable to equity holders of the parent | ||||||||
| Subscribed | Share | Legal | Retained earnings |
Accumulated other com prehensive income |
Total equity |
|||
| 207 | 106,454 | 19 | -20,686 | -13,924 | 72,070 | |||
| – | – | – | -38,642 | -2,373 | -41,015 | |||
| – | – | 2 | -2 | – | – | |||
| 207 | 106,454 | 21 | -59,330 | -16,297 | 31,055 | |||
| share capital | premium | reserve | (Note 9) | (Note 9) |
| Cash flow from operating activities Result before tax -5,956 - Finance income -666 + Finance expenses 26,513 + Share of net profit of investments accounted for using the equity method 24 + Amortization, depreciation, impairment of intangible assets and property, plant, and equipment 16,663 + Allowance of current assets 491 + Loss on disposal of property, plant, and equipment 189 + Dividends from investments accounted for using the equity method 11 Result before change of net working capital 37,269 - Change in other provisions and pensions -2,722 -/+ Change in inventories -12,054 -/+ Change in trade receivables and other assets -28,669 +/- Change in trade payables and other liabilities 40,378 Cash flow from operating activities before income tax paid 34,202 -/+ Income tax paid/received (7) -5,598 Net cash flow from operating activities 28,604 Cash flow from investing activities + Acquisition of subsidiaries net of cash acquired – - Purchase of property, plant, and equipment -4,334 - Purchase of intangible assets -579 - Purchase of investments accounted for using the equity method -58 + Proceeds from sales of property, plant, and equipment 177 Net cash flow from investing activities -4,794 Cash flow from financing activities + Proceeds from Management and Board of Directors loan – - Repayments of Management and Board of Directors loan (11) -109 - Payments for finance lease -215 - Interest paid -10,027 |
kEUR Notes |
Q1-Q3/2010 | Q1-Q3/2009 |
|---|---|---|---|
| -42,864 | |||
| -2,543 | |||
| 20,584 | |||
| 17 | |||
| 33,397 | |||
| 762 | |||
| 150 | |||
| 706 | |||
| 10,209 | |||
| -4,758 | |||
| 27,837 | |||
| 8,541 | |||
| -12,740 | |||
| 29,089 | |||
| 251 | |||
| 29,340 | |||
| 7571) | |||
| -6,189 | |||
| -577 | |||
| -11 | |||
| 767 | |||
| -5,253 | |||
| 1,244 | |||
| – | |||
| -306 | |||
| -18,430 | |||
| - Reduction of current and non-current financial liabilities (11) |
-23,498 | -12,385 | |
| + Proceeds from current and non-current financial liabilities (11) 183 |
10,516 | ||
| Net cash flow from financing activities -33,666 |
-19,361 | ||
| Net decrease/increase in cash and cash equivalents -9,856 |
4,726 | ||
| Net foreign exchange difference 620 |
276 | ||
| Cash and cash equivalents at the beginning of the period (8) 20,742 |
8,557 | ||
| Cash and cash equivalents at the end of the period (8) 11,506 |
13,559 |
1) Cash inflow in the amount of kEUR 1,103 generated from the Jinan SAF AL-KO Axle Co., Ltd. and SAF AL-KO Vehicle Technology Yantai Co., Ltd. share swap. Also included are payments in the amount of kEUR 346 in connection with the purchase of SAF-HOLLAND Verkehrstechnik GmbH in 2008.
SAF-HOLLAND S.A. (the "Company") was incorporated on December 21, 2005 under the legal form of a "Société Anonyme" according to Luxembourg law. The registered office of the Company is in Luxembourg. The shares of the Company are listed in the Prime Standard of the Frankfurt Stock Exchange.
The consolidated financial statements of SAF-HOLLAND S.A. and its subsidiaries (the "Group") have been prepared in accordance with the International Financial Reporting Standards (IFRS), as adopted by the European Union and in effect as of the closing date.
The consolidated interim financial statements for the third quarter of 2010 have been prepared in accordance with IAS 34 "Interim Financial Reporting". As a rule, the same accounting policies and consolidation methods were applied as in the Group's annual financial statements for the fiscal year 2009. Therefore, the consolidated interim financial statements should be read in conjunction with the Group's annual financial statements as of December 31, 2009. Exceptions to the accounting principles stated there are new or revised standards and interpretations, whose application is required beginning in fiscal year 2010 and which have not been adopted early (see annual report 2009). The new regulations, however, have no significant impact on the consolidated interim financial statements.
During the preparation of the consolidated interim financial statements, management must make assumptions and estimates which affect the reported amounts of assets, liabilities, income, expenses, and contingent liabilities as of the reporting date. In certain cases, actual amounts may deviate from these estimates.
Expenses and income incurred irregularly during the fiscal year were brought forward or deferred if it would also be appropriate to do so at the end of the fiscal year.
The consolidated interim financial statements and the Group Interim Management Report have neither been audited nor reviewed by an auditing firm.
Seasonal effects during the year can result in variations in sales and the resulting profits. Please see the Group Interim Management Report for further details regarding earnings development.
SAF-HOLLAND Slovakia s.r.o., Slovakia, was liquidated and has therefore been deconsolidated as of April 1, 2010. The profit from deconsolidation in the amount of kEUR 149 is reported under "other income".
For management purposes, the Group is organized into customer-oriented Business Units based on their products and services. The three reportable operating segments are the Business Units Trailer Systems, Powered Vehicle Systems, and Aftermarket. There has been no change in the division of operating segments since December 31, 2009. For more information, please see the notes of the 2009 annual report.
Management assesses the performance of the operating segments based on adjusted EBIT. A reconciliation from operating result to adjusted EBIT is provided as follows:
| Adjusted EBIT | 25,961 | 1,212 |
|---|---|---|
| Restructuring and integration costs | 1,064 | 4,005 |
| Impairment | – | 16,903 |
| Additional depreciation and amortization on PPA | 5,006 | 5,127 |
| EBIT | 19,891 | -24,823 |
| Share of net profit of investments accounted for using the equity method | -24 | -17 |
| Operating result | 19,915 | -24,806 |
| kEUR | Q1–Q3/2010 | Q1 –Q3/2009 |
Information on segment sales and earnings for the period from January 1 to September 30:
| 2010 | |||||
|---|---|---|---|---|---|
| Business Units | |||||
| kEUR | Trailer Systems |
Powered Vehicle Systems |
Aftermarket | Adjustments/ eliminations |
Consolidated |
| Sales | 227,913 | 93,572 | 137,756 | – | 459,241 |
| Adjusted EBIT | -9,514 | 17,025 | 20,646 | -2,196 | 25,961 |
| 2009 | |||||
|---|---|---|---|---|---|
| Business Units | |||||
| kEUR | Trailer Systems |
Powered Vehicle Systems |
Aftermarket | Adjustments/ eliminations |
Consolidated |
| Sales | 130,503 | 72,996 | 112,864 | – | 316,363 |
| Adjusted EBIT1) | -22,204 | 11,588 | 14,677 | -2,849 | 1,212 |
1) Internal allocations between the Business Units were adjusted in December, 2009, due to changes in the market situation. To allow a better comparison to the current reporting period, the comparative figures for the adjusted EBIT of each Business Unit have been adjusted accordingly.
Adjustments and eliminations include expenses of the parent company as well as other expenses and income which are not allocated to any Business Unit.
Please see the Group Interim Management Report regarding earnings development.
Finance expenses consist of the following:
| Total | -26,513 | -20,584 |
|---|---|---|
| Other | -1,209 | -797 |
| Finance expenses due to derivatives | -3,037 | -1,862 |
| Finance expenses due to pensions and similar benefits | -584 | -912 |
| Amortization financing costs | -1,519 | -450 |
| Transaction costs | – | -589 |
| Interest expenses due to interest bearing loans and borrowings | -20,164 | -15,974 |
| kEUR | Q1–Q3/2010 | Q1–Q3/2009 |
The increase in interest expenses and in amortization of financing costs results from the refinancing agreement newly concluded on November 29, 2009 (see Note 11). Finance expenses relating to derivative financial instruments include EUR 2.4 million from the change in the market values of the prolongation options for the old swaps for the period of January 1 to the day of termination, March 19, 2010, as well as EUR 0.6 million from the ineffective share of the swaps (see Note 12).
27
The major components of income taxes are as follows:
| Income tax reported in the result for the period | -3,551 | 4,222 |
|---|---|---|
| Deferred income taxes | 4,221 | 4,713 |
| Current income taxes | -7,772 | -491 |
| kEUR | Q1–Q3/2010 | Q1–Q3/2009 |
The effective tax rate in the third quarter of 2010 was -59.62%, compared to 9.85% in the corresponding period in the previous year.
| Total | 11,506 | 20,742 |
|---|---|---|
| Short-term deposits | 940 | 13,355 |
| Cash at banks and on hand | 10,566 | 7,387 |
| kEUR | 09/30/2010 | 12/31/2009 |
On May 12, 2010, Pamplona Capital Partners I, LP, sold its 34.5% of voting shares, or 7,149,958 shares, to 14 institutional investors from the United Kingdom, Germany and the USA. The free float of SAF-HOLLAND's stock currently stands at 85.4%. Currently, five shareholders, including two members of SAF-HOLLAND's management, hold more than 5% of voting shares each. At the same time, members of the Management Board and Board of Directors hold a total of 20.2% of voting shares.
No dividend payment was approved for 2009.
| Q1–Q3/2010 | Q1–Q3/2009 | |||||
|---|---|---|---|---|---|---|
| kEUR | Before tax amount |
Tax income |
Net of tax amount |
Before tax amount |
Tax expenses |
Net of tax amount |
| Exchange differences | ||||||
| on translation of foreign operations |
8,139 | – | 8,139 | 465 | -3,702 | -3,237 |
| Changes in fair values of derivatives designated as hedges, recognized in equity |
-5,965 | 1,769 | -4,196 | 1,317 | -453 | 864 |
| Total | 2,174 | 1,769 | 3,943 | 1,782 | -4,155 | -2,373 |
Basic earnings per share is calculated by dividing the result for the period attributable to shareholders of SAF-HOLLAND S.A. by the average number of shares outstanding. Earnings per share can be diluted by potential ordinary shares. No dilutive effects occurred during the period under review or in the comparison period for 2009.
| Basic and diluted earnings per share | EUR | -0.46 | -1.87 |
|---|---|---|---|
| Weighted average number of shares outstanding | thousands | 20,702 | 20,702 |
| Result for the period | kEUR | -9,507 | -38,642 |
| Q1–Q3/2009 | |||
| Ergebnis je Aktie | Q1–Q3/2010 |
| Non-current | Current | Total | ||||
|---|---|---|---|---|---|---|
| kEUR | 09/30/2010 | 12/31/2009 | 09/30/2010 | 12/31/2009 | 09/30/2010 | 12/31/2009 |
| Interest bearing collateralized | ||||||
| bank loans | 298,138 | 313,969 | 407 | 379 | 298,545 | 314,348 |
| Financing costs | -10,083 | -11,033 | – | – | -10,083 | -11,033 |
| Bank overdrafts | 182 | 178 | 825 | 519 | 1,007 | 697 |
| Success fee | 1,730 | 47 | – | – | 1,730 | 47 |
| Accrued interests | 9,807 | – | 244 | 132 | 10,051 | 132 |
| Management and Board of | ||||||
| Directors loans | 1,325 | 1,339 | – | – | 1,325 | 1,339 |
| Other loans | 8,510 | – | 50 | 4,500 | 8,560 | 4,500 |
| Total | 309,609 | 304,500 | 1,526 | 5,530 | 311,135 | 310,030 |
On November 29, 2009, an agreement was signed with a bank syndicate that restructures the financing existing up to this point, extends the existing credit lines until September 2014 and ensures supply of short and long-term finance. The refinancing agreement was approved by the shareholders on December 18, 2009. The agreed credit line has a volume of EUR 316.6 million. It consists of a Euro tranche (Facility A1), a US dollar tranche (Facility A2), a multi-currency revolving credit line (Facility B) and a credit line in China which is separately collateralized. The regulations resulting from the restructuring of the financing as well as the collateral granted are described in the annual report as of December 31, 2009.
The increase in accrued interest results from the agreed PIK structure, which means that a portion of the interest is not payable until a later point.
The existing management loan including interest due to Dr. Reiner Beutel was repaid due to his resignation.
The decrease in other current loans of EUR 4.5 million results from the scheduled repayment of the customer loan. The increase in other non-current loans of EUR 8.5 million results from the reclassification of the liability due to the refinancing of the old-swaps (see Note 12).
Determination of overall liquidity as the total of available credit lines plus cash:
| Total | 298,545 | 292,904 | 316,571 | 11,506 | 35,173 | |
|---|---|---|---|---|---|---|
| Bank overdraft China | 407 | 407 | 660 | – | 253 | |
| Facility B | 165,386 | 165,386 | 188,800 | 11,506 | 34,920 | |
| Facility A2 | 60,841 | 55,200 | 55,200 | – | – | |
| Facility A1 | 71,911 | 71,911 | 71,911 | – | – | |
| kEUR | exchange rate | exchange rate | exchange rate | equivalents | liquidity | |
| Amount drawn valued as at the period-end |
Amount drawn valued as at the borrowing date |
Agreed credit lines valued as at the borrowing date |
Cash and cash | Total | ||
| 09/30/2010 |
| Total | 314,348 | 311,778 | 316,525 | 20,742 | 25,489 | |
|---|---|---|---|---|---|---|
| Bank overdraft China | 379 | 379 | 614 | – | 235 | |
| Facility B | 184,288 | 184,288 | 188,800 | 20,742 | 25,254 | |
| Facility A2 | 57,770 | 55,200 | 55,200 | – | – | |
| Facility A1 | 71,911 | 71,911 | 71,911 | – | – | |
| kEUR | valued as at the period-end exchange rate |
valued as at the borrowing date exchange rate |
valued as at the borrowing date exchange rate |
Cash and cash equivalents |
Total liquidity |
|
| 12/31/2009 Amount drawn Amount drawn Agreed credit lines |
| kEUR | |
|---|---|
| ------ | -- |
| Fair value as of 01/01/2010 | – |
|---|---|
| Changes recognized in profit or loss (before tax) | 24 |
| Fair value as of 09/30/2010 | 24 |
| Old interest rate swaps | ||||
|---|---|---|---|---|
| Prolongation options for |
||||
| Interest rate | interest rate | New interest | ||
| kEUR | swaps | swaps | rate swaps | Total |
| Fair value as of 01/01/2010 | -1,477 | -7,529 | – | -9,006 |
| Changes recognized in equity (before tax) | 2,313 | – | -8,278 | -5,965 |
| Changes recognized in profit or loss (before tax) | -859 | -1,600 | -578 | -3,037 |
| Foreign currency translation | 23 | -291 | 8 | -260 |
| Reclassification to interest bearing loans | ||||
| and borrowings | – | 9,420 | – | 9,420 |
| Fair value as of 09/30/2010 | – | – | -8,848 | -8,848 |
As a result of the extended credit line in November 2009, the interest rate hedgings were also realigned. Effective March 19, 2010, the existing interest rate hedging instruments were replaced and new instruments were concluded with the banks.
The hedging ratio, which is the ratio between current basic interest rate payments and contracted interest rate hedgings, was increased from approx. 50% to 82%. Following the reorganization, the hedging structure consists of Euribor-/Libor-swaps with maturities until June 2014 as well as interest rate caps which take effect when the interest rate exceeds 2.5%. The development of the notional amounts of the swaps and caps are matched as to constantly reach the target hedging ratio of 82% over the course of the term until June 2014. The new interest rate hedging instruments, classified as cash flow hedges, meet the criteria for hedge accounting. Changes in market values must therefore be recorded directly in equity upon initial recognition, if the hedging relationship is effective.
The compensatory payment from replacing the existing old swaps is financed by the former contractual partner of these swaps over a period until June 30, 2014. The resulting liability of kEUR 9,420 was reclassified to "Interest bearing loans and borrowings" as of March 19, 2010 (see Note 11).
Contractual maturities of interest rate swaps and caps:
| Start | End | Nominal volume | Reference rate |
|---|---|---|---|
| March 19, 2010 | June 30, 2014 | EUR 143.8 million to EUR 187.0 million |
Euribor |
| March 19, 2010 | June 30, 2014 | USD 77.6 million | Libor |
| March 19, 2010 | December 30, 2012 | EUR 61.6 million to EUR 10.0 million |
Euribor |
Compared to December 31, 2009, the composition of the Management Board has not changed.
At the Annual General Meeting on April 22, 2010, it was decided to extend the Board of Directors mandates of Ulrich Otto Sauer (Deputy Chairman) and Rudi Ludwig until April 2013 and April 2012 respectively. At his request, Dr. Siegfried Goll left the committee for personal reasons when his contract expired on June 18, 2010. As part of the reduction in the size of the committee, resulting from the corporate restructuring, the Company will not appoint a successor to Dr. Siegfried Goll in the Board of Directors.
Further details regarding loans granted in February 2009 by members of management and the Board of Directors are provided in Note 11.
| Q1–Q3/2010 | 09/30/2010 | |||
|---|---|---|---|---|
| kEUR | Sales to related parties |
Purchases from related parties |
Amounts owed by related parties |
Amounts owed to related parties |
| SAF-HOLLAND Nippon, Ltd. | 354 | – | 58 | 187 |
| Lakeshore Air LLP | – | 74 | – | 17 |
| FWI S.A. | – | 4,026 | – | 272 |
| Irwin Seating Company1) | 1,140 | – | 82 | – |
| Madras SAF-HOLLAND Manufacturing (I) P. Ltd. | 7 | – | – | – |
| Total | 1,501 | 4,100 | 140 | 476 |
1) The Irwin Seating Company is a company in which a member of the Group's management holds a key management position.
| 2) Due to the reciprocal sale of shareholdings, |
|---|
| SAF AL-KO Vehicle Technology Yantai Co., |
| Ltd. and Jinan SAF AL-KO Co., Ltd. are |
| included in the disclosures on revenue and |
| expenses on a pro-rata basis until |
| March 31, 2009. |
| Q1–Q3/2009 | 12/31/2009 | |||
|---|---|---|---|---|
| kEUR | Sales to related parties |
Purchases from related parties |
Amounts owed by related parties |
Amounts owed to related parties |
| Jinan SAF AL-KO Axle Co., Ltd. | 582) | – | – | – |
| SAF AL-KO Vehicle Technology Yantai Co., Ltd. | – | 572) | – | – |
| SAF-HOLLAND Nippon, Ltd. | 192 | – | 68 | 182 |
| Lakeshore Air LLP | – | 85 | 28 | – |
| FWI S.A. | – | 8,604 | – | 3 |
| Irwin Seating Company1) | 1,118 | – | 56 | – |
| Total | 1,368 | 8,746 | 152 | 185 |
Please see the Group Interim Management Report for further explanations of the cash flow statement.
Sam Martin, COO of SAF-HOLLAND Group and President of the American subsidiary SAF-HOLLAND Inc., will resign from his operating activities at the end of 2010 at his own request. He will remain available to the Company. He is expected to be nominated to join the Board of Directors at the Annual General Meeting on April 28, 2011. His responsibilities in the Management Board will be re-distributed. Jack Gisinger will succeed him as President of the American subsidiary SAF-HOLLAND Inc. effective January 2, 2011. At the same time, Detlef Borghardt will assume the position of Deputy CEO of the entire Group and will take over the responsibility for the strategic planning. The COO function will therefore be dropped in the future.
A further change to the Management Board of SAF-HOLLAND involves the resignation of Dr. Martin Kleinschmitt as Chief Restructuring Officer (CRO). Consistent with the completion of the Company's restructuring program that was introduced two years ago, he has concluded his function of CRO as planned.
At its regular meeting on November 16, 2010, the Board of Directors of SAF-HOLLAND S.A., Luxembourg, decided to convene an Extraordinary General Meeting for December 14, 2010. The Board of Directors will use the opportunity to propose to the Company's shareholders increasing the SAF-HOLLAND S.A.'s authorized share capital from its current amount of EUR 112,000.- (of which EUR 18,649.- represented by 1,864,900 shares have been used on September 4, 2008) to EUR 224,000.- consisting of 22,400,000 shares having a par value of EUR 0.01 each. The decision was made in order to provide the Company with more flexibility and the ability to react swiftly when the market conditions are favorable to the issue of new shares. The Board of Directors will further propose to the General Meeting that it authorizes the Board of Directors to limit and/or suppress all or any preferential subscription rights of existing shareholders when the Board uses the authorized share capital. This is to be able to attract new and to motivate existing investors and to strengthen the Company's equity base. SAF-HOLLAND S.A. currently holds 20,702,275 ordinary shares with a subscribed share capital of EUR 207,022.75. Invitations to the Extraordinary General Meeting will be made available to the shareholders in accordance with applicable laws.
No further material events have occurred since the reporting date.
Adjusted EBIT: Earnings before interest and taxes (EBIT) is adjusted for special items, such as depreciation and amortization from purchase price allocations, impairment of goodwill and intangible assets as well as restructuring and integration costs.
Business Units: For management purposes, the Group is organized into customer-oriented Business Units (Trailer Systems, Powered Vehicle Systems, and Aftermarket).
Days inventory outstanding: Inventory / cost of sales per day.
Equity ratio: Equity / total assets x 100.
Fair value: Amount obtainable from the sale in an arm's length transaction between knowledgeable, willing parties.
Gross margin: Gross profit / sales x 100.
IFRS/IAS (International Financial Reporting Standards/International Accounting Standards): The standard international accounting rules are intended to make company data more comparable. Under the EU resolution, accounting and reporting at exchange-listed companies must be done in accordance with these rules.
Net working capital: Current assets minus cash and cash equivalents minus other provisions minus income tax liabilities minus trade payables minus other current liabilities.
Prime Standard: Prime Standard is a market segment of the German Stock Exchange that lists German companies which comply with international transparency standards.
Sales per employee: Sales / average number of employees.
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Mounts with the kingpin and serves to secure the semi-trailer to the tractor unit. In addition to its traditional products, SAF-HOLLAND manufactures technical specialties such as a lubricant-free fifth wheel and especially lightweight aluminum designs.
The suspension creates the link between the axle and the ve hicle in order to compensate for road irregularities and improve maneuv era bi lity. The SAF-HOLLAND suspension system with its modular design can be used for up to three interlinked powered axles. Each axle is suspended individually. Suitable for gross vehicle weights of between 10 and 40 tons.
Mounts on the semitrailer and couples with the tractor fifth wheel. SAF-HOLLAND products are sold around the world and are among the safest on the market.
Retractable legs that support the front of a semi-trailer when it is not secured to the tractor unit. SAF-HOLLAND landing legs have a special coating that increases their ser vice life significantly.
INTRADISC plus INTEGRAL is a unique axle system for trailers, which consists of the axle itself fitted with a disk
brake and the air suspension system. Under certain pre-
conditions, and taking into account the existing warranty terms, SAF-HOLLAND
provides maintenance free of charge for a period of 72 months or 1 million kilometers for the INTRA ALL-IN axle system.
39
March 17, 2011 Full-Year 2010 Results, Financial press and analyst conference April 28, 2011 Annual General Meeting May 19, 2011 Publication of Q1 Report, Analyst conference August 18, 2011 Publication of H1 Report, Analyst conference November 17, 2011 Publication of Q3 Report, Analyst conference
Barbara Zanzinger SAF-HOLLAND Group GmbH Hauptstraße 26 63856 Bessenbach Germany
Tel.: +49 (0)6095 301-617 Fax: +49 (0)6095 301-200
Email: [email protected] Web: www.safholland.com
Responsible: SAF-HOLLAND S.A. 68 –70, Boulevard de la Pétrusse 2320 Luxembourg Luxembourg
Editorial deadline: November 17, 2010 Date of publication: November 18, 2010
Editorial office: Cortent Kommunikation AG, Frankfurt am Main Design and realization: wagneralliance Werbung GmbH, Offenbach am Main Translated by: MBETraining & Translation, Wiesbaden
This report is also available in German.
This report contains certain statements that are neither reported financial results nor other historical information. This report contains forward-looking statements, which as such are based on certain assumptions and expectations made at the time of publication of the report. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Many of these risks and uncertainties relate to factors that are beyond the Group's ability to control or estimate precisely, such as future market and economic conditions, the behavior of other market participants, the ability to successfully integrate acquired businesses and achieve anticipated synergies, and the actions of government regulators. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this presentation. SAF-HOLLAND S.A. does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of these materials.
www.safholland.com
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