Demag Cranes Achieves Record Earnings in Financial Year 2007/2008

Düsseldorf,   15. December 2008

  • Dividend set to increase by 27.3 percent to EUR 1.40
  • Group order intake up 9.8 percent
  • Group revenue grows appreciably by 13.5 percent
  • Adjusted Group EBIT soars by 45.3 percent
  • Debt reduced further – equity boosted considerably
  • Profitable development expected to continue over the next two years

Demag Cranes AG looks back on an overall extremely successful financial year 2007/2008. Despite the increasingly difficult economic environment, the Demag Cranes Group managed once again to consolidate its strong market position and benefit from its competitive and technological edge. As a result of the Company’s consistent focus on market requirements and its measures to develop products and optimise processes, Group revenue and earnings continued to increase significantly. The Demag Cranes Group by far exceeded the targets set at the beginning of financial year 2007/2008: with growth of 13.5 percent, revenue at EUR 1,225.8 million (guidance at the beginning of financial year 2007/2008: 1,130.0 – 1,160.0 million) was slightly above the guidance figure raised in May 2008 to EUR 1.2 billion. Adjusted EBIT at EUR 137.5 million was also much higher than the forecast EUR 110.0 million at the beginning of financial year 2007/2008. The year-end adjusted EBIT also slightly exceeded the guidance raised in August to more than EUR 125.0 million and an EBIT margin of some 11 percent, respectively. In combination with this, the Group increased net profit and earnings per share by a disproportionate amount, while further reducing net debt. Gearing is now 6.8 percent compared with 55.8 percent a year ago. Harald J. Joos, Demag Cranes' CEO sums up: "Financial year 2007/2008 was a record year for us. We have managed to boost profitability three times in a row. This is why we intend to propose a more than 25% higher dividend at the Annual Shareholders' Meeting despite the difficult business environment."

Sound Order Situation: Group Order Intake Up 9.8 Percent
The Group's order volume in financial year 2007/2008 was excellent. Order intake was up 9.8 percent to EUR 1,323.4 million. This purely organic growth in the volume of new orders came from both inside and outside Germany and was supported by the Industrial Cranes and Services segments, which posted strong rates of increase. Group order intake was boosted even more by 22.4 percent to EUR 523.5 million.

At segment level, Industrial Cranes profited from the ongoing high demand for the Standard Cranes and Process Cranes product lines, lifting order intake by 16.8 percent to EUR 671.9 million. The Industrial Cranes segment order book grew by 39.3 percent by the balance sheet date (30 September 2008) to EUR 350.4 million, a volume equivalent to more than seven average months’ revenue. Order intake in the Port Technology segment fell slightly year-on-year from EUR 323.3 million to EUR 316.8 million, mainly because order intake in financial year 2006/2007 included the first request for delivery of 10 Automated Stacking Cranes (ASC) under the framework agreement with Antwerp Gateway. Compared to the prior year, demand for the Mobile Harbour Cranes product range, has, however, grown further. At the balance sheet date, the Port Technology segment order book dropped by 5.5 percent to EUR 121.7 million year-on-year. The Services segment sustained the prior year’s positive trend in orders, order intake going up by 9.2 percent to EUR 334.6 million. The order book at EUR 51.4 million at the end of the financial year was 8.6 percent higher than the comparative figure for the prior year.

Group Revenue Grows Appreciably by 13.5 Percent
Thanks to sustained strong demand for products and services, Group revenue was up 13.5 percent at EUR 1,225.8 million in the period under review, enabling the Demag Cranes Group to further consolidate its market position. In the Industrial Cranes segment, the Group continued to expand its market position. Driven by the positive trend in order intake, the segment lifted revenue by 17.7 percent compared with the previous year, thereby more than doubling the rate of increase year-on-year. This growth is attributable to strong demand for the Standard Cranes, Process Cranes and crane components product lines, but was also supported by stable prices. In addition, the international customer structure in the Industrial Cranes segment is broadly spread across all industries and very well balanced. In the Port Technology segment, revenue grew by 8.9 percent to EUR 325.5 million. The Services segment lifted revenue by 11.2 percent to EUR 329.1 million, thereby outstripping the previous year’s growth rate of 10.4 percent. Above all, the Services segment benefited from the expansion of the worldwide service network as well as the ongoing trend towards outsourcing maintenance and refurbishment work, which allowed it to win additional maintenance contracts.

Adjusted Group EBIT Soars by 45.3 Percent
Adjusted Group profit before interest and tax (EBIT) in financial year 2007/2008 went up by 45.3 percent to EUR 137.5 million, thus surpassing the guidance figure (more than EUR 125 million) that had been raised for a second time in August 2008. This remarkable performance is attributable, in particular, to the strong EBIT development in the Industrial Cranes Segment. In this segment, adjusted EBIT soared 91.0 percent to EUR 47.8 million, and thus almost doubled. The adjusted EBIT margin improved as a result, rising from prior-year figure of 5.2 percent to 8.4 percent. This increase reflects higher revenue in all product groups, cost cutting programmes, and efficiency gains due to operating closer to full capacity worldwide. The Port Technology segment generated adjusted EBIT of EUR 22.1 million in financial year 2007/2008. The EBIT margin consequently improved from 3.5 percent in the previous year to 6.8 percent in the period under review. This performance highlights the fact that the Company has resolved the problems with manufacturing costs relating to the Generation 5 Mobile Harbour Cranes sooner than planned. The targets set of EUR 18 to 20 million for adjusted EBIT and five to six percent were slightly exceeded. In the Services segment, adjusted EBIT increased significantly compared with the previous year by 21.2 percent to EUR 75.4 million. The strong spare parts business due to industry operating at high capacity and greater demand for servicing and refurbishment work comprised a major earnings driver.

Significant Boost in Net Income: Dividend to Increase by 27.3 Percent
At EUR 84.7 million, adjusted net income for the year was up a notable 65.8 percent. Adjusted earnings per share (EPS) increased from EUR 2.41 in the preceding financial year to EUR 4.00 in 2007/2008. The Management Board and Supervisory Board intend shareholders to benefit from the business success of Demag Cranes and will therefore propose a 27.3 percent rise in the dividend to EUR 1.40 per share (previous year 1.10 per share) at the Annual Shareholders’ Meeting on 3 March 2009.

Debt Reduced Further – Equity Boosted Considerably
Free cash flow before financing at EUR 125.9 million on the balance sheet date more than tripled in financial year 2007/2008. Thanks to the significant improvement in cash flow, net debt was reduced in the year under review by EUR 98.2 million to EUR 18.4 million. As equity also increased by 29.8 percent to EUR 271.2 million, gearing (net financial liabilities in relation to equity) improved by 49.0 percentage points to 6.8 percent.

Number of Employees Increased
As at 30 September 2008, our Group had a total of 6,093 permanent employees (excluding temporary employees, apprentices and trainees). This represents an increase of 4.8 percent or 280 employees compared to the previous year. In Germany, the total number of employees amounted to 3,008 on the balance sheet date. During the reporting period, the number of employees grew in nearly all segments. Employee productivity (average revenue per employee) in the Group was disproportionately higher at 9.9 percent, amounting to EUR 207 thousand in financial year 2007/2008.

Profitable Development Expected to Continue over the Next Two Years
Based on the healthy order book at the end of financial year 2007/2008 and despite the difficult economic environment, the Group expects overall sustained steady demand in all three business segments – Industrial Cranes, Port Technology and Services – throughout financial year 2008/2009.

As the Group has a broad international customer base, our business is globally highly diversified. In financial year 2007/2008, the Management Board continued to work on achieving more flexible cost structures throughout the Group and believe that our three highly diverse segments will enable the Company to meet strategic challenges even in difficult times. At the present time, no one, however, can say for sure how the financial crisis will affect the real economy and thus the Group’s customers and suppliers. As a result, forecasts involve an even greater degree of uncertainty. The Management Board has adopted a conservative approach and has chosen not to make a specific Group revenue and EBIT forecast at this time. The Management Board is confident, however, that the Demag Cranes Group will continue to develop profitably over the next two years.

The Management Board intends to maintain the solid base built over the past financial year and if necessary implement new measures to improve cost efficiency. The aim remains to keep a sound balance sheet and use strong cash flows to invest in products and attractive markets.

About Demag Cranes AG:
The Demag Cranes Group is one of the world's leading suppliers of industrial cranes and crane components, harbour cranes and port automation technology. Services, in particular maintenance and refurbishment, are another key element of the Group’s business activities. The Demag Cranes Group is one of the world's leading suppliers of industrial cranes and crane components, harbour cranes and port automation technology. Demag Cranes sees its core competence in the development and construction of technically sophisticated cranes and hoists as well as automated transport and logistics systems in ports and terminals, the provision of services for these products and the manufacture of high-quality components.

As a global supplier, Demag Cranes manufactures in 16 countries on five continents and operates a worldwide sales and service network that is present in over 60 countries through its subsidiaries, representative offices and a joint venture. In financial year 2007/2008, the Group, with its 6,093 employees, generated revenue of EUR 1,225.8 million. Since the end of June 2006, the Demag Cranes share (WKN: DCAG01) has been listed in the Prime Standard of the German Stock Exchange and is traded on various indices including the MDAX®.

Demag Cranes. We Can Handle It.


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