ElringKlinger AG — Earnings Release 2014

Aug 7, 2014

News Details

Corporate | 7 August 2014 07:41

ElringKlinger records further growth in revenue and earnings in Q2 2014

DGAP-News: ElringKlinger AG / Key word(s): Half Year Results

07.08.2014 / 07:41

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Dettingen/Erms, August 7, 2014 +++ Despite the adverse currency effects
associated with the strength of the euro, the ElringKlinger Group managed
to expand Group revenue by 12.6% to EUR 333.5 (296.1) million in the second
quarter of 2014. Compared with the second quarter of the previous year,
which had been the company's strongest in terms of earnings performance in
2013, earnings before interest and taxes (EBIT) rose by a further 1.2% to
reach EUR 41.5 (41.0) million. Net income after taxes and non-controlling
interests increased by 8.8% to EUR 28.5 (26.2) million.

The ElringKlinger Group continued to expand at a faster rate than the
global vehicle markets in the first six months of 2014. The expansion in
revenue was underpinned by a modest rise in new vehicle registrations in
Western Europe as well as by buoyant demand in China and North America. At
the same time, new product ramp-ups and structural growth within many of
the product groups helped to drive revenue upwards.

Thus, revenue grew by 13.9% to EUR 657.5 (577.1) million in the first half
of 2014. Expressed in organic terms, i.e. without the effects of
consolidation and foreign exchange rates, revenue grew by 11.7% (10.2% in
the second quarter). Although the second quarter included fewer working
days, revenue generated during this period rose to EUR 333.5 (296.1)
million, which was also up on the figure recorded in the first quarter (EUR
324.0 million). Particularly strong tooling revenue in preparation for
projects focused on lightweight engineering was a key factor in driving
sales forward during this period. The negative effect on consolidated
revenue of translating sales into the Group currency - the euro - was
equivalent to EUR 15.4 million in the first half (EUR 6.8 million in the
second quarter).

Due to the necessary retrospective application of IFRS 11 as regards the
presentation of comparative prior-year figures, the joint venture
ElringKlinger Marusan Corporation, Tokyo, Japan, was no longer accounted
for on a proportionate basis but rather in accordance with the equity
method. As a result, the Group revenue figure originally presented for the
first half of 2013 was reduced by EUR 13.0 mn to EUR 577.1 million (and by
EUR 7.2 million to EUR 296.1 million in the second quarter), the difference
being attributable to this subsidiary's revenue contribution originally
included at a proportionate rate of 50%. In the first half of 2014, by
contrast, the entity was fully consolidated as a result of the assumption
of control effective from December 31, 2013, and was accounted for in Group
revenue with its total revenue of EUR 23.2 million. The additional revenue
contribution in the first half of 2014 thus stood at EUR 11.6 million. When
determining organic revenue growth, the joint venture was accounted for as
if the entity had remained subject to proportionate consolidation, as was
originally the case.

Further year-on-year growth in EBIT in Q2 2014

Despite the up-front and start-up costs incurred in the new E-Mobility
division (minus EUR 4.1 million), the operating result for the first half
of 2014 exceeded the previous year's first-half figure by 13.3% to reach
EUR 83.6 (73.8) million. Full consolidation of ElringKlinger Marusan
Corporation diluted the Group's EBIT margin by around 0.3 percentage
points.

In the second quarter of 2014, the Group achieved earnings before interest
and taxes (EBIT) of EUR 41.5 (41.0) million, thereby slightly exceeding the
figure posted in the prior-year quarter, which had been the strongest in
terms of revenue and earnings. At EUR 4.0 (3.9) million, EBIT generated by
the company's exhaust gas specialist, the Hug Group, was again up on the
previous year's figure. However, due to the nature of its projects and
factors relating to the product mix, the second-quarter figure was down EUR
3.7 million on that recorded in the first quarter of 2014 (EUR 7.7 mn). As
a result of the extremely weak performance of the Brazilian market, the
earnings contribution of ElringKlinger's subsidiary in Brazil was around
EUR 1.0 million short of the original target.
Before purchase price allocation, adjusted EBIT stood at EUR 85.3 million
in the first half of 2014 and EUR 42.3 million in the second quarter. The
adjusted EBIT margin before purchase price allocation was 12.7% in the
second quarter of 2014.

For the purpose of improved comparability, as from January 1, 2014,
ElringKlinger no longer includes foreign exchange effects, which are mainly
attributable to financing activities, in the financial indicator EBIT.
Thus, as is standard, EBIT corresponds to the company's operating result
reported in the income statement. Applying the former method of
calculation, EBIT - which in contrast to the operating result included
foreign exchange gains and losses from financing activities - would have
amounted to EUR 42.7 (38.4) million in the second quarter of 2014.

Low interest rates and positive effects associated with foreign exchange
rates, contributing EUR 1.3 (0.5) million, prompted a reduction in net
finance costs by EUR 0.6 million to EUR 4.7 (5.3) million. Net finance
costs amounted to EUR 2.1 (5.5) million in the second quarter of 2014.
While the same quarter a year ago had been adversely affected by foreign
exchange losses of EUR 2.5 million, the second quarter of 2014 produced
foreign exchange gains of EUR 1.2 million. The difference of 0.6 million
between the net finance costs previously reported for the second quarter of
2013 (EUR 4.9 million) and the figure now disclosed (EUR 5.5 million) for
that period is due to the earnings contribution made by ElringKlinger
Marusan Corporation, which until December 31, 2013, had been accounted for
on the basis of proportionate consolidation and, under the provisions of
IFRS 11, has now been consolidated retrospectively using the equity method.
Thus, earnings before taxes were up 15.4% in the first half of 2014, taking
the total to EUR 78.9 (68.4) million. In the second quarter, the
ElringKlinger Group earned 11.6% more before taxes with earnings before
taxes rising to EUR 39.5 (35.4) million.

Net income after non-controlling interests up 8.8% in second quarter

The significant increase in earnings before taxes resulted in higher income
tax expenses for the Group. In the first half of 2014 the Group's tax rate
rose to 25.2% (22.2%). Net income attributable to non-controlling interests
was lower year on year. Net income attributable to the shareholders of
ElringKlinger AG rose by 13.0% to EUR 56.5 (50.0) million in the first six
months. In the second quarter, net income after non-controlling interests
was up 8.8% at EUR 28.5 (26.2) million.

On this basis, earnings per share for the first half stood at EUR 0.89
(0.79). In the second quarter of 2014, earnings per share amounted to EUR
0.45 (0.41).

Order backlog at record level - Continued rise in order intake from high
base

In the second quarter of 2014, order intake rose by a further 3.5% compared
to the buoyant second quarter of 2013, taking the figure to EUR 380.0
(367.0) million. Compared to the first quarter of the current financial
year, the Group saw order intake expand by 14.7%. Thus the ElringKlinger
Group is supported by a solid order backlog when it comes to achieving
sales growth targeted for 2014. After a figure of EUR 602.6 million
recorded at the end of the preceding quarter, order backlog reached EUR
649.1 (569.9) million as of June 30, 2014 - a new record for the Group.

Annual forecast confirmed - Revenue and earnings growth expected in FY 2014

The company has confirmed its forecast for the full year of 2014. Based on
the assumption that global car production will expand by 2 to 3%, the
ElringKlinger Group has retained its forecast that - on the back of revenue
totaling EUR 1,175.2 million in 2013 (ElringKlinger Marusan Corporation
included on a proportionate basis) - its revenue will grow by 5 to 7%
organically in 2014, thus outpacing the market as a whole in terms of
percentage growth. On top, the full consolidation of ElringKlinger Marusan
Corporation, Japan, is expected to contribute close to EUR 25 million in
additional revenue for the Group. Full inclusion of the lower-margin
subsidiary within the Group's scope of consolidation will have a dilutive
effect on the Group EBIT margin in 2014 (approx. minus 0.3 percentage
points). At the same time, the introduction of Euro VI is expected to lead
to improved capacity utilization with regard to the production of
lightweight components for the truck market over the course of the year.
Additionally, revenue streams attributable to battery technology are
expected to expand and the level of organic growth projected for revenue is
likely to be accompanied by earnings contributions. In total, these factors
will provide a slight boost to the Group's EBIT margin. Adjusted for
non-recurring items, EBIT is to rise to a level of EUR 160 to 165 million.

Contact:
For further information, please contact:

ElringKlinger AG - Investor Relations/Corporate PR
Stephan Haas
Max-Eyth-Straße 2
72581 Dettingen/Erms
Tel.: +49 (0)7123-724-137
E-Mail: stephan.haas@elringklinger.com

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Language: English
Company: ElringKlinger AG
Max-Eyth-Straße 2
72581 Dettingen/Erms
Germany
Phone: 071 23 / 724-0
Fax: 071 23 / 724-9006
E-mail: stephan.haas@elringklinger.de
Internet: www.elringklinger.de
ISIN: DE0007856023
WKN: 785602
Indices: MDAX
Listed: Regulierter Markt in Frankfurt (Prime Standard),
Stuttgart; Freiverkehr in Berlin, Düsseldorf, Hamburg,
Hannover, München

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