First Quarter 2009 Sales Decline Cushioned by Restructuring Efforts
* Group sales reach EUR 112.1 million
* Adjusted EBIT of EUR -0.5 million
Luxembourg, May 28, 2009 - In spite of the negative market trend,
SAF-HOLLAND S.A. is realizing initial positive effects from the cost
reduction program. As a result, even in light of the decline in sales, it
was possible in the first quarter of 2009 to maintain the gross margin at
nearly the previous year's level and to achieve an adjusted operating
result (EBIT) close to the profit threshold. In the process, the Company
has solidified its market position.
Dr. Reiner Beutel, CEO of SAF-HOLLAND GROUP GmbH, explained, 'The demand
for trucks and trailers continued to decline in the first quarter of 2009.
Therefore, we are continuing our course of reducing capacity and costs as
well as preserving liquidity. These measures will pay a double dividend
when the market recovers. The commercial vehicles industry stands to be one
of the first to benefit when the economy improves.'
Sales Decline Puts Pressure on Earnings
In the first quarter, sales declined by almost half to EUR 112.1 million
(previous year: EUR 219.3 million) as a result of globally weak demand. On
an exchange rate-adjusted basis, sales decreased by 52%. The European
business' contribution to total sales fell to 50.9% (previous year: 71.4%),
driven by a particularly strong market downturn, due mainly to high
inventories and under-utilized equipment at fleets, particularly for
trailers. In North America, where SAF-HOLLAND generated 45.1% (previous
year: 25.9%) of its sales, demand had already dropped significantly in 2007
and 2008. The remaining regions contributed 4.0% (previous year: 2.7%) of
Cost savings for materials as well as personnel and non-personnel expenses
cushioned the impact of the sales decline on earnings. The gross margin of
16.9% almost reached the previous year's value of 17.5%. Adjusted earnings
before interest and taxes (EBIT) were EUR -0.5 million (previous year: 18.1
million), and the adjusted profit for the period totaled EUR -5.3 million
(previous year: EUR 9.4 million). Adjusted earnings per share amounted to
EUR -0.26 (previous year: EUR 0.50).
Powered Vehicle Systems Significantly Improves Results
The Powered Vehicle Systems Business Unit benefited from the business of
SAF-HOLLAND Verkehrstechnik GmbH, which was acquired in the fall of 2008,
and a government contract in the USA. Sales increased by 50.8% to EUR 26.7
million (previous year: EUR 17.7 million); exchange rate-adjusted it
increased by 35.6%. The adjusted gross margin rose to 20.6% (previous year:
13.1%). With these good results, the Business Unit is increasingly proving
itself to be an important sales and earnings contributor for the Group. It
now accounts for 23.8% (previous year: 8.1%) of total sales.
Trailer Systems Particularly Affected by the Decline in Sales
The Group's previous growth engine is suffering from weak demand triggered
by high inventories of new trailers and under-utilized equipment at fleets
worldwide but especially in Europe. Only the sale of specialty trailers has
remained stable. Sales for the Trailer Systems Business Unit totaled EUR
47.2 million (previous year: EUR 158.7 million) declining on an exchange
rate-adjusted basis by 71.4%. The gross margin was -2.1% (previous year:
13.1%), reflecting lingering excess capacity despite the cost reductions
implemented to date.
Aftermarket a Stabilizing Factor with Improved Margin
The Aftermarket Business Unit is likewise affected by the market weakness,
but to a lesser extent than the OEM business in the truck and trailer
sector. In March, SAF-HOLLAND recorded slightly higher order entry.
Business Unit sales declined to EUR 38.2 million (previous year: EUR 42.9
million), exchange rate-adjusted by 16.6%. The Business Unit improved its
gross margin to 38.0% (previous year: 35.7%) due to cost reductions and a
changed product mix.
During the period under review, SAF-HOLLAND benefited from the measures
initiated in fall 2008 aimed at reducing costs and improving efficiency.
The capacity adjustment encompasses not only staff reductions, but also
reduced working hours. In addition, executives and the members of the
Management Board are foregoing a portion of their salaries, the bonus for
2008 as well as vacation days. Furthermore, inventories were reduced
further in the first quarter, which has had a positive effect on liquidity.
Measures to stabilize the Group are continuing; a further EUR 43 million is
to be saved during the current year, following the EUR 16 million in cost
reductions already achieved in 2008. The goal is to continue to lower the
profit threshold substantially. A preliminary expert opinion from the
auditing firm KPMG from April 20, 2009, and Mai 25, 2009, confirmed the
Group's ability to restructure. Based on the expert opinion, external
financing should be secured during the current quarter.
Outlook for 2009: Initial Positive Signs Perceptible
In view of the weak demand, which is also characterized by volatility and
orders placed at short notice, business development still cannot be
forecast with any certainty. Total sales are expected to be well below the
previous year's level, accompanied by corresponding pressure on earnings.
However, SAF-HOLLAND anticipates a slight recovery of orders in the US
truck sector late in the year, the result of pull-forward effects arising
from the introduction of new emissions regulations at the beginning of
2010. Initial positive signs of stabilization are perceptible in the US
truck business as well as across the Group in the Aftermarket Business
Unit. In the past, the replacement parts business has been an early
indicator of the subsequent development of the truck and trailer market.
SAF-HOLLAND reports adjusted earnings figures since costs have accrued as a
result of the business combination, the IPO and restructuring that are not
directly attributable to the operating business. EBIT has been adjusted for
the following effects: depreciation and amortization from the purchase
price allocation as well as restructuring and integration costs.
With more than EUR 800 million in sales and over 2,000 employees,
SAF-HOLLAND S.A. is one of the worldwide leading manufacturers and
suppliers of premium product systems and components primarily for trailers
as well as trucks, buses and recreational vehicles. The product range
encompasses axle and suspension systems, fifth wheels, couplers, kingpins
and landing legs. SAF-HOLLAND customers include the majority of large truck
and trailer producers all over the world. The products are sold to Original
Equipment Manufacturers (OEMs) and Original Equipment Suppliers (OESs) by
means of a global service and distribution network and via aftermarket
channels directly to the end users and service garages. SAF-HOLLAND has
therefore established itself as one of the few manufacturers in its sector
that is internationally positioned with an extensive product range and a
broad service network. SAF-HOLLAND S.A. has been listed in the Prime
Standard of the Frankfurt Stock Exchange since July 2007.
28.05.2009 Financial News transmitted by DGAP