Earnings Release • Nov 13, 2015
Earnings Release
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Press - Investors Katelijn Bohez T +32 56 23 05 71
www.bekaert.com
Press release Regulated information
13 November 2015
Bekaert achieved strong sales growth in the first nine months of 2015, compared with the same period last year. The company's consolidated top line increased from € 2 423 million to € 2 795 million, up more than 15%. Acquisitive growth boosted sales by almost 10% and the company's improving price-mix delivered 3% organic sales growth. The favorable effect of currency movements, while declining over the course of the third quarter, accounted for almost +10% year-to-date. Organic sales were down on lower volumes (-2%) due to a weak start to the year and on lower wire rod prices, passed on to our customers (-5% over the first nine months of the year).
Bekaert's consolidated quarterly revenues in the three-month period from July to September 2015 were 10% higher than in the third quarter of 2014. Acquisitive growth and currency effects accounted for more than 15%. The organic decline (-5%) was the result of positive price-mix and volume effects (+1%) and significantly lower wire rod prices (-6%).
Combined sales2 totaled € 3 377 million in the first nine months of 2015, up 11% compared with the same period last year. The strong devaluation of the Brazilian real tempered the translation effect of exchange rate movements at the combined level (+5% year-to-date and neutral in the third quarter). The impact of acquisitions accounted for +7% and organic sales were almost 2% down from the same period last year.
Bekaert anticipates continued solid demand from automotive markets in the final quarter of 2015. Global oil and gas markets are projected to remain subdued and the difficult economic environment in Latin America is likely to persist.
We expect the strong performance of our recent acquisitions and investments to continue. As opposed to the final quarter of last year, we do not project a major sales decline in Chinese tire markets. We forecast a neutral effect of currency movements in the fourth quarter. The company's top line will, however, be impacted by lower wire rod prices, similar to the effect of the third quarter (-6%).
Bekaert is implementing a set of actions to drive value creation over time, including a program aimed at optimizing the company's manufacturing cost base and a product portfolio analysis. These actions are expected to continue driving improved margin performance in the second half of the year and going forward.
1 The figures in this press release are provisional and unaudited.
2 Combined sales are sales of consolidated companies plus 100% of sales of joint ventures and associates after intercompany elimination. Press release – Third quarter trading update 2015 – 13 November 2015 1/4
| Consolidated sales | 2014 | 2015 | Variance3 | Share | FX impact4 |
|---|---|---|---|---|---|
| EMEA | 819 | 940 | +15% | 34% | -4 |
| North America | 420 | 458 | +9% | 16% | +76 |
| Latin America | 458 | 580 | +27% | 21% | +43 |
| Asia Pacific | 725 | 817 | +13% | 29% | +117 |
| Total | 2 423 | 2 795 | +15% | 100% | +232 |
| Consolidated sales | 1st Q | 2nd Q | 3rd Q | Q3 y-o-y5 | FX impact6 |
|---|---|---|---|---|---|
| EMEA | 313 | 331 | 296 | +12% | -1 |
| North America | 152 | 160 | 146 | +4% | +21 |
| Latin America | 195 | 205 | 180 | +10% | +6 |
| Asia Pacific | 243 | 297 | 277 | +12% | +33 |
| Total | 904 | 993 | 898 | +10% | +59 |
| Combined sales | 2014 | 2015 | Variance3 | Share | FX impact4 | |
|---|---|---|---|---|---|---|
| EMEA | 807 | 936 | +16% | 28% | -4 | |
| North America | 420 | 458 | +9% | 14% | +76 | |
| Latin America | 1 064 | 1 129 | +6% | 33% | -31 | |
| Asia Pacific | 761 | 854 | +12% | 25% | +123 | |
| Total | 3 052 | 3 377 | +11% | 100% | +163 |
| Combined sales | 1st Q | 2nd Q | 3rd Q | Q3 y-o-y5 | FX impact6 |
|---|---|---|---|---|---|
| EMEA | 311 | 329 | 296 | +14% | -2 |
| North America | 152 | 160 | 146 | +4% | +21 |
| Latin America | 393 | 393 | 343 | -7% | -48 |
| Asia Pacific | 249 | 315 | 289 | +11% | +34 |
| Total | 1 106 | 1 198 | 1 073 | +4% | +6 |
Press release – Third quarter trading update 2015 – 13 November 2015 2/4
3 Comparisons are made relative to the figures for the first nine months of 2014, unless when otherwise indicated.
4 Foreign exchange impact on sales over the first nine months of 2015 – in millions of €.
5 Q3 year-on-year sales: 3rd quarter 2015 versus 3rd quarter 2014.
6 Foreign exchange impact on sales in the 3rd quarter of 2015, computed on the basis of ytd Q3 versus ytd Q2 – in millions of €.
7 Combined sales are sales of consolidated companies plus 100% of sales of joint ventures and associates after intercompany elimination.
Bekaert's activities in EMEA reported solid third quarter sales driven by acquisitive growth and continued firm demand in the region. Compared with a strong third quarter last year, the activities in the region achieved flat organic growth driven by higher volumes, normal seasonality and an adverse impact of passed-on lower raw materials prices.
Demand from European markets has been robust throughout the first nine months of 2015. This was particularly apparent in the automotive sector and construction markets. Energy-related markets showed a slowdown in demand due to a downturn in the oil and gas sector.
Bekaert anticipates continued solid demand and performance for the balance of the year, particularly driven by automotive markets, while taking into account the usual seasonal effects at year-end.
Bekaert's North American activities reported 4% sales growth in the third quarter of 2015, compared with the same period last year. Currency effects accounted for +15% while the volume loss from the fire damage in Rome (Georgia, US) was the main driver of the organic decline.
Demand from automotive and construction markets has been solid throughout the year while tough conditions in other industrial steel wire markets have been weighing on the segment's top line.
Bekaert projects fourth quarter demand to remain stable in its key sectors.
In Latin America, Bekaert's consolidated top line was up 10% in the third quarter, compared with the same quarter last year. Acquisitions, organic volume growth and an improved price-mix drove up sales significantly. Currency effects were almost neutralized as various devaluations (versus USD) in the region offset the impact of a weaker euro. The segment's top line was, moreover, adversely impacted by declining raw materials prices.
Consolidated sales were up 27% over the first nine months of the year as a result of acquisitive growth (+16%), positive currency effects (9% year-to-date), stable volumes and an improved price-mix which was cancelled out by the effect of the passed-on lower wire rod prices.
The currency effects were negative on the combined sales level due to a significant devaluation of the Brazilian real in the third quarter of 2015.
Bekaert anticipates continued adverse effects from economic evolutions in the region as well as negative effects from exchange rate movements and raw materials prices. The company expects to maintain the benefits from its strong market positions and improved business portfolio.
In Asia Pacific, Bekaert achieved 12% sales growth in the third quarter, compared with the same period last year. Acquisitions boosted sales by 7% and currency effects accounted for +13%. The price erosion which made up most of the organic sales decline was mainly the result of passed-on lower wire rod prices.
Bekaert kept pace with growing demand in the solar sector and has regained market share in the Chinese tire cord markets. The company's other activity platforms in the region continued to be affected by an overall industrial slowdown.
We expect the higher run rate in our tire markets to continue into the final quarter of the year, as opposed to the very weak last quarter of 2014.
Net debt was € 906 million as at 30 September 2015, € 117 million down from 30 June 2015 thanks to a decrease of working capital and healthy cash generation. Bekaert projects a year-end net debt closing balance at the current level (€ 900 million).
On 29 September 2015, Bekaert acquired Southern Steel's 45% stake in Bekaert Southern Wire Pte Ltd, the holding company with entities in Malaysia and Indonesia. The holding has become a wholly owned subsidiary of Bekaert.
On 1 October 2015, Bekaert exited the stainless steel wire business. This decision has an impact on the Zwevegem (Belgium) and Lonand (India) manufacturing sites and on the related sales organization. Bekaert took this decision as a result of the continued weak performance and outlook for this business activity.
On 7 October 2015, the bead wire production plant in Rome, Georgia (US) was officially reopened. The plant is poised to return as the preferred bead wire supplier to US tire makers who have all qualified Bekaert Rome's production from the new manufacturing lines.
5 700 stock options under the management Share Option Plan 2010-2014 were exercised since June 2015. As a result, the company held an aggregate 4 269 310 treasury shares at the end of September 2015.
| 2015 results | 26 | February | 2016 |
|---|---|---|---|
| 2015 annual report available on the Internet | 25 | March | 2016 |
| First quarter trading update 2016 | 11 | May | 2016 |
| General Meeting of Shareholders | 11 | May | 2016 |
| 2016 half year results | 29 | July | 2016 |
| Third quarter trading update 2016 | 18 | November | 2016 |
This press release may contain forward-looking statements. Such statements reflect the current views of management regarding future events, and involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Bekaert is providing the information in this press release as of this date and does not undertake any obligation to update any forward-looking statements contained in this press release in light of new information, future events or otherwise. Bekaert disclaims any liability for statements made or published by third parties and does not undertake any obligation to correct inaccurate data, information, conclusions or opinions published by third parties in relation to this or any other press release issued by Bekaert.
Bekaert (www.bekaert.com) is a world market and technology leader in steel wire transformation and coating technologies. We pursue to be the preferred supplier for our steel wire products and solutions by continuously delivering superior value to our customers worldwide. Bekaert (Euronext Brussels: BEKB) is a global company with approximately 30 000 employees worldwide, headquarters in Belgium and € 4 billion in annual revenue.
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