Demag Cranes interim report (9m): Significant increase in sales and profits

Düsseldorf,   29. August 2006

  • Upward trend confirmed, positive overall market environment continues
  • Increase in order intake and sales by almost 14 percent compared to the same reporting period of the previous Fiscal Year
  • Increase in adjusted EBITDA by 28.4 percent, increase in adjusted EBIT by 40 percent
  • Profitability significantly improved
  • Further reductions in net financial liabilities
  • Outlook for Fiscal Year 2005/2006: sales growth of 9-12 percent; adjusted EBITDA: up 18-24 percent

In Q3 of Fiscal Year 2005/2006, Demag Cranes AG continued to generate a positive operative business in a favorable market environment. Order intake increased by 13.5 percent during the first nine months compared to the same reporting period of the previous year and reached EUR 785 million, while the order book increased by 14.7 percent to EUR 312 million. Consolidated sales climbed 13.7 percent to EUR 713.9 million. Profits grew disproportionately strong. Adjusted EBITDA came to EUR 69.8 million, 28.4 percent up on the same period of the previous Fiscal Year. Adjusted EBIT soared by 40 percent to EUR 54.8 million. As a result, the group’s profitability improved significantly: The EBITDA margin increased by 1.2 percentage points to 9.8 percent. Harald J. Joos, CEO of Demag Cranes AG, emphasizes that "the third quarter again confirmed our strategy of striving sustained profitable growth. The success of the measures we have taken and the favorable market environment underscores our confidence with regard to the coming quarters."

Segment Industrial Cranes: Strong profit increase due to process optimization

For the first nine months of Fiscal Year 2005/2006, sales in the Industrial Cranes segment climbed 13.0 percent year-on-year to reach EUR 332.8 million. Business operations in the BRIC countries (Brazil, Russia, China, India) were particularly expansive. The same can be said for Eastern Europe, where Demag Cranes AG is now successfully positioned. At the same time, promising positive developments characterized business operations in established markets such as the USA, Italy and South Africa. Earnings likewise performed well. Adjusted EBIT recovered from minus EUR 2.6 million in the nine-months reporting period of 2004/2005 to EUR 6.2 million this year. This underlines the success of restructuring efforts in the Industrial Cranes segment and the effectiveness of measures taken to push results, such as process optimization and standardization of products.

Segment Port Technology: Globalisation and product innovations continue to drive growth

The Port Technology segment booked sales of EUR 188.1 million in the reporting period, up 15.1 percent on the same period in Fiscal Year 2004/2005; the segment has thus continued the successful growth of prior periods. Growth continued to be driven by a strong demand for investments at sea ports, where ongoing globalization has been driving container handling volumes, as well as high acceptance of the product innovations launched. Adjusted EBIT increased at a disproportionately fast pace, totaling EUR 14.8 million, up 30.4 percent compared to the same reporting period of the previous Fiscal Year. The EBIT margin improved significantly by 0.9 percentage points to 7.8 percent, above all thanks to cost reduction achieved through modularization of components and optimization of sourcing and production.

Segment Services: significant rise in sales and new service contracts

The positive trend of prior periods also continued in the Services segment, which experienced a significant increase in sales, reaching EUR 193.0 million for the first nine months of Fiscal Year 2005/2006, i.e. up 13.5 percent compared to the same reporting period of the previous Fiscal Year. The segment continues to benefit from the world’s largest installed base of electrical cranes and hoists as well as from the trend to outsource maintenance and refurbishment tasks. In particular, the sales growth was driven by positive developments in business operations in the US and Brazil. Furthermore, adjusted EBIT ran at EUR 33.8 million and was thus well up on the figure of EUR 30.4 million for the same reporting period of the previous Fiscal Year. The EBIT declined by 0.4 percentage points to 17.5 percent. The reason: a changed product mix owing to the higher proportion of lower-margin sales in maintenance services in relation to the stronger-margin replacement parts business. This trend is expected to reverse at the end of the Fiscal Year. In the reporting period, additional service contracts were signed. Thus, the ratio of service contracts with regard to the installed base (650,000 cranes and hoists) has risen from 37 percent to just short of 40 percent. Our medium term goal is to achieve a figure of 50 percent.

Net Financial liabilities further reduced

Net financial liabilities were reduced further in the reporting period. By means of active cash management, the figure decreased from EUR 178.3 million at the end of last Fiscal Year (Sept. 30, 2005) to EUR 166.8 million. The Management Board of Demag Cranes AG intends to consistently reduce debt.

Outlook

Demag Cranes AG expects that the positive trend of past periods will continue in the immediate future. The promising order book, order intake and the identified demand all support this positive outlook. Moreover, in Q3 new products were successfully delivered to clients and new service contracts won. Thus, the foundations have been laid for further growth in promising markets. Last Fiscal Year, the fourth quarter saw the highest sales, and Demag Cranes AG expects a similar trend for 2005/2006. Given the overall conditions and the course of operative business to date, in Fiscal Year 2005/2006 we expect sales to grow 9-12 percent compared to the previous year and forecast a rise in adjusted EBITDA of about 18-24 percent.

Head office now located in Dusseldorf

As previously announced, the head office of Demag Cranes AG was relocated from Wetter/ Ruhr to Düsseldorf as of August 11 with the requisite entry in the Commercial Register. The relocation of the Demag Cranes holding company is scheduled to be completed until the end of 2006.

About Demag Cranes AG

The Demag Cranes Group is one of the world’s leading providers of industrial cranes and crane components, harbor cranes and port automation technology. Services, in particular maintenance and refurbishment services, are another core element of its business activities. The Group, which is divided into the Industrial Cranes, Port Technology and Services segments, has strong brands – ‘Demag’ and ‘Gottwald’. Demag Cranes believes that it is a global market leader, by virtue of its innovation and technology leadership, its excellent product and service quality and its close and long-term customer relationships. 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.

For the fiscal year 2004/2005, the Group reported total sales of € 881.6 million and an adjusted EBIT of € 64.0 million (Combined Financial Statements prepared in accordance with IFRS).


 

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