Zumbotel 1Q13 Financial Result Highlights:
Dynamic growth with LED products continues (+49.7%) First-quarter revenues 4.4% down at EUR 309.3 million (prior year: EUR 323.4 million) Adjusted EBIT rises 40.7% to EUR 17.7 million (prior year: EUR 12.6 million) Adjusted EBIT margin improves to 5.7% (prior year: 3.9%) Exit from magnetics business leads to negative special effects of EUR 6.9 million Further improvement in free cash flow Outlook: continued uncertainty about market developments
In the first quarter of the current financial year (May-July 2013) the Zumtobel Group posted a further improvement in operating earnings despite a moderate downturn in revenues. In what was still a difficult economic environment, the group's revenue fell by 4.4% year-on-year to EUR 309.3 million (US$ 411.59 million) in 1Q13. Revenues from the sale of innovative LED products continued their progress, totaling EUR 89.3 million in the first three months. This equates to an increase of 49.7% and the LED share of Group revenues now stands at 28.9% (prior year: 18.4%). This confirms the Zumtobel Group's strategic decision to invest in the expansion of an innovative product portfolio, despite the difficult business environment.
Developments by segment: Components return to growth, weak environment for Lighting
A breakdown by segment reveals shifts in the patterns of growth in Q1. For the Components Segment (Tridonic brand) there was the first return to growth in seven quarters. For the first time, growth in LED products (+56.4%) more than offset the declining demand for magnetic and electronic ballasts. In all, segment revenues rose by 1.6% to EUR 99.7 million (prior year: EUR 98.1 million). Revenues in the Lighting Segment (Zumtobel/ Thorn brands) by contrast remained impacted by the disappointing development of the commercial construction sector. Segment revenues declined by 5.4% in the first quarter to EUR 229.9 million (prior year: EUR 243.0 million).
Developments by region: all markets hit by economic crisis
As a result of the substantial year-on-year downturn in the global economy, the Zumtobel Group recorded lower revenues in all regions during the reporting period, with the exception of Southern Europe (+7.9%). Revenues in Europe as a whole fell by 2.1% to EUR 246.0 million (prior year: EUR 251.2 million). The share of Group revenues accounted for by Europe reached 79.5% in the first quarter. Outside Europe too, revenues fell, with the Asia & Middle East region down 2.4%, America down 30% after dynamic growth in the previous quarters, and Australia & New Zealand down 15.1% under the impact of negative foreign exchange effects.
Gratifying improvement in earnings; exit from magnetics leads to negative special effects
Despite the downturn in revenues, operating earnings adjusted for special effects (adj. EBIT) showed a 40.7% rise year-on-year, reaching EUR 17.7 million (prior year: EUR 12.6 million). That equates to a return on sales of 5.7% (prior year: 3.9%). Both segments benefited from the restructuring measures implemented in the previous year, which focused on aligning cost structures with the lower level of revenues and on the ongoing development of the product portfolio. In addition, the company benefitted from reductions in the cost of materials. The exit from magnetics technology decided in June led to negative special effects of EUR 6.9 million being recognised in the first quarter of 2013/14. As a result, net profit for the period fell from EUR 8.6 million in the prior-year period to EUR 6.7 million.
Seasonal factors bring 1.9% increase in workforce
Compared to the balance sheet date (30 April) the size of the workforce saw a slight increase in the first three months, rising from 7,162 to 7,299 full-time equivalent employees including contract workers but not including apprentices (+1.9%). This development is largely due to a rise in the number of contract workers in the production sector due to the seasonal increase in production output at the plants. The workforce in Austria also increased slightly in the past three months. A comparison with the group wide headcount twelve months ago, however, reveals a decline of 288 full-time equivalent employees as a result of restructuring activities.
Further improvement in cash flow, solid balance sheet structure
Thanks to systematic inventory and receivables management, working capital totaled EUR 223.7 million, which is substantially lower than the comparable prior-year level (EUR 258.6 million). This led to a further improvement in free cash flow which totaled minus EUR 23.4 million (prior year: minus EUR 27.1 million). The quality of the balance sheet structure remains nearly unchanged. The equity ratio declined slightly from 35.9% on 30 April 2013 to 35.6% on 31 July 2013. Against the balance sheet date, seasonal factors led to an increase of EUR 35.1 million in net liabilities to EUR 148.3 million (Q1 prior year: EUR 158.4 million) and resulted in a deterioration in gearing – the ratio of net liabilities to equity – from 31.7% on 30 April 2013 to 42.3%.
Outlook: continued uncertainty over market environment
The macroeconomic environment has not changed fundamentally since the presentation of results for the 2012/13 financial year two months ago. There are no signs of an easing in the current economic tensions and visibility remains very low. In light of the high forecast uncertainty, a reliable estimate for revenues and earnings is not possible at the present time. In addition to cost efficiency, activities for the current financial year will focus above all on the strategic development of the Zumtobel Group's brands.
