Demag Cranes AG Continues to Show Profitable Growth in Second Quarter

Düsseldorf,   15. May 2007

  • Significant increase in order intake, driven by strong demand
  • Bottlenecks in global supply markets dampen sales growth
  • Industrial Cranes segment: notably improved profitability
  • Port Technology segment: EBIT affected by supply bottlenecks
  • Services segment: on-going high demand for spare parts and refurbishments
  • Outlook: forecast for sales and earnings confirmed

The Demag Cranes Group continues to show profitable growth in the second quarter of financial year 2006/2007. Thanks to the on-going high demand for cranes, crane components and services, order intake increased significantly by 25.3 percent to EUR 321.1 million. The order book for the period under report was up by 26.8 percent at EUR 402.6 million. In some cases, bottlenecks in global supply markets, reflecting the very high demand in the mechanical and plant engineering sector, have resulted in delays in production and order deliveries. As a consequence, sales growth was dampened, climbing only by 3.4 percent to EUR 255.0 million compared to the prior-year period. A set of measures has been introduced to increase supplier integration and flexibility.

EBIT Margin Improved Once Again
In the second quarter of financial year 2006/2007, the Group achieved adjusted earnings before interest, taxes as well as depreciation and amortisation (EBITDA) of EUR 28.4 million, which corresponds to a year-on-year growth of 14.5 percent. This increase was driven, in particular, by significant growth in the highly profitable Services segment. The EBITDA margin was up by 1.0 percentage point at 11.1 percent. Adjusted EBIT rose by 16.7 percent to EUR 23.1 million. The EBIT margin improved as a result by 1.1 percentage points to 9.1 percent. In a year-on-year comparison, net income after tax increased significantly by 58.9 percent to EUR 11.6 million. Earnings per share amount to EUR 0.54.

Industrial Cranes Segment: Notably Improved Profitability
Compared to the prior-year period, the order intake of the Industrial Cranes segment surged 36.5 percent to EUR 171.8 million. In addition to the keen demand for standard and process as well as drives, this extraordinarily high order intake was partially due to a large order of ov EUR 29.1 million received outside the segment’s core business. This order was awarded un agency agreement still existing with a former sister company and is expected to generate a to low gross profit. Not including this order, the segment’s order intake still grew by a very satisfactory 13.3 percent. Sales were up slightly by 1.2 percent at EUR 117.1 million. In relation to the order intake, this was only a moderate sales growth, resulting largely from supply bottlenecks in some materials. Significant sales growth over prior-year periods is expected for the upcoming quarters. Thanks to further cost reduction measures and an improved mix of products sold, adjusted EBIT saw a remarkable increase of 86.2 percent compared to the prior-year period, totalling EUR 5.4 million. The EBIT margin of 4.6 percent was 2.1 percentage points above the second quarter of financial year 2005/2006.

Port Technology Segment: Impact on Earnings due to Supply Bottlenecks
In the second quarter of financial year 2006/2007, the new mobile harbour cranes of Generation 5 continue to be the main drivers behind the positive order intake in the Port Technology segment. Benefiting from a favourable project situation, order intake increased by 8.7 percent compared to the same period of financial year 2005/2006, reaching EUR 65.1 million. At EUR 64.4 million, sales were up by EUR 1.4 million (2.2 percent) in comparison with the same period in financial year 2005/2006. This slower-than-expected sales development was mainly due to supply bottlenecks and, in some cases, to delayed deliveries and call-orders from a number of long-term agreements. Adjusted EBIT in the period under report was 43.4 percent or EUR 2.3 million, EUR 3.0 million below the prior-year period, representing an EBIT margin of 4.6 percent for this segment. This low figure when compared to the same period of the previous year was caused by supply bottlenecks and above all, by significantly lower R & D capitalisation. In addition, the initial costs for the launch of the series production of Generation 5 mobile harbour cranes as well as relatively low sales activity further affected the EBIT margin in the period under report. In the upcoming quarters, an increase in earnings is expected, as the cause of the high initial costs has been identified and corresponding countermeasures initiated. Also, thanks to ongoing standardisation efforts in engineering and production, the cost situation will also improve.

Services Segment: On-Going Strong Demand for Spare Parts and Refurbishments
As a result of the high level of industrial activity, the highly favourable trend of this segment continued in the second quarter of financial year 2006/2007. Order intake at EUR 84.2 million was up a remarkable 19.6 percent compared to the prior-year period. Especially in the product areas of refurbishments and spare parts, considerable increases were noted. At EUR 73.4 million, sales grew by 8.3 percent over the prior-year period. The high share of spare parts and refurbishments in the mix of products sold boosted adjusted EBIT by 26.5 percent to EUR 14.8 million. The EBIT margin of this segment improved significantly by 2.9 percentage points to 20.1 percent.

Half-Year Figures for Financial Year 2006/2007: All-in-All a Positive Mid-Term Result
For the first six months of financial year 2006/2007, the Management Board can look back on a positive mid-term result. Thanks to the on-going keen demand, the total Group order intake ncreased in total by 10.7 percent to EUR 595.5 million. Sales were up by 6.9 percent to EUR 497.5 million. In particular, earnings were boosted thanks to the profitable sales mix in the ndustrial Cranes and Service segments. In a year-on-year quarterly comparison, adjusted EBITDA at EUR 54.9 million was 34.6 percent higher and adjusted EBIT at EUR 44 million showed a growth of 42.4 percent. Adjusted EBIT margin reached 8.8 percent, increasing 2.2 percentage points. The net income after tax for the year improved by 145.3 percent to EUR 21.1 million, which corresponds to earnings per share of EUR 0.98.

Outlook: Targets for Financial Year 2006/2007 Confirmed
The Management Board of Demag Cranes AG has re-confirmed the figures projected for the end of financial year 2006/2007. According to the outlook presented in January 2007, Group sales are due to be 7.0 to 10.0 percent above the previous year. For the Group, adjusted EBITDA is forecast at 20.0 to 25.0 percent and adjusted EBIT at 24.0 to 29.0 percent higher than the prior-year figures. Chairman of the Demag Cranes AG Management Board, Harald J. Joos underlines, "All in all, we can look back at a successful first half-year. In view of the excellent order book situation, I am sure that we will meet our ambitious targets for the year."

About Demag Cranes:

Demag Cranes AG is one of the world’s leading providers of industrial cranes, crane components, harbour cranes and port automation technology. Services, in particular maintenance and refurbishment services, are another key element of the Group’s business activities. The Group is divided up into the three segments Industrial Cranes, Port Technology and Services and has the strong and established "Demag" and "Gottwald" brands. Demag Cranes sees its core expertise in the development and design of technologically advanced cranes and hoists as well as automated transport and logistic systems in ports, 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 joint ventures. In financial year 2005/2006, 5,680 employees generated sales of some EUR 987 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 included in the SDAX share index.

Demag Cranes. We Can Handle It.


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