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Bekaert Announces Annual Results 2003

Published on 2004-03-18. Author : SpecialChem

- Overall strong performance

- Result from operations reached E112 million, an increase of 74 %

- A net result of E85 million

- EPS before goodwill amounts to E4.32

- A proposed gross dividend of E1.748 per share, an increase of 4 %

IFRS

In 2003, Bekaert decided to move to full compliance with IFRS as a 'first-time adopter'; consequently the results are compliant with the application of IFRS1. Bekaert now reports in four segments (advanced wire products, fencing systems Europe, advanced materials and advanced coatings). This reporting is introduced in accordance with the standard IAS14.

Sales

Combined sales amounted to E2.6 billion, a decrease of 6.8 %, but, at constant currencies, combined sales would have increased by 3.2 %, despite difficult economic circumstances.

At E1.8 billion, consolidated sales were down by 3.6 %. At constant currencies, consolidated sales would have been up by 4.1 %. This growth was driven by organic growth (2,4%) and by new acquisitions, net of divestments (1,7%).

Sales were favorably affected by the increasing activities in Asia and in Central Europe, while sales in North America and Western Europe remained weak.

Combined sales are the sales realized by the consolidated companies, joint ventures and associated companies.

Despite adverse currency movements, consolidated sales of advanced wire products were stable at E1.2 billion. Lower sales in a number of activities in this business segment were compensated by acquisitions in Central Europe, the purchase of the remaining 50% of Contours (USA) and higher sales of steel cord products for tire reinforcement. Asia and Central and Eastern Europe were important growth markets, where Bekaert has strengthened its competitive position. 2003 was a difficult year for wire Europe and wire North America. Combined sales were down 5.3% at E1.9 billion, mainly due to the weak demand for ropes in North America and currency movements.

At constant currencies, consolidated sales of advanced wire products would have been 8% higher and combined sales 7% higher.

The 8.5% decline in consolidated and combined sales for fencing systems Europe reflects the shift towards a product mix with higher added value, which necessitated the closure of several production lines.

Consolidated sales of advanced materials were 5.5% higher, due entirely to growth in Bekaert's activities in combustion technologies. At constant currencies, consolidated sales would have been up 8%. By focusing clearly on selected applications and further moving up the value chain, Bekaert strengthened its position.

Consolidated sales of advanced coatings were 6.5% lower and combined sales were down 7.3%. Sales of industrial films were higher, but specialised films' sales were sharply lower, due entirely to the weakness of the dollar. At constant currencies, consolidated sales would have been up 7% and combined sales 6% higher.

Sales of the joint ventures and associates decreased by 13.3 % to E0.8 billion but would have increased by 2 % at constant currencies. Bekaert performed well in the joint ventures due to the good activity level in Latin America in the whole range of wire products.

Profitability

Bekaert achieved a consolidated result from operations (EBIT) of E112 million, an increase of 74 % compared with 2002 that was adversely affected by non-recurring items. This 2003 result represents a margin of 6.2 % on sales. At constant currencies, the result from operations would have been E138 million or 7.1 % on sales. The capital employed amounted to E1 231 million, while the return on capital employed was 9 %.

The result from operations in advanced wire products was strong and the margin increased slightly to 10.1% on sales. The implementation of the rationalisation plan in fencing systems Europe was successfully completed, turning the negative results of 2002 into a positive operating margin of 6.6% on sales. Advanced materials achieved an improvement in operating margin to 7.5% on sales. Bekaert has increased its development efforts in advanced coatings, but the decline in profitability reflected an extremely weak demand for specialised films in the US-market.

Consolidated net result of the Group

The consolidated net result of the Group amounted to E85 million or E96 million before goodwill amortization. The earnings per share were respectively E3.85 and E4.32. The share in the result of companies accounted for under the equity method increased from E23 million to E35 million, mainly driven by the Latin American companies and the exit from Unisolar.

Balance Sheet

The balance sheet remains strong. At the end of 2003, shareholders' equity accounted for 43% of total assets. Net debt remained constant at E364 million and the gearing ratio at 31 December, defined as net debt on equity, was 44 %. Working capital remained also stable at E354 million or 19.6% on sales. The move to full compliance with IFRS resulted in a restatement for unrecognised actuarial losses of defined benefit post-employment plans at the end of 2001, which led to a net decrease in equity of E82 million.

Cash flow

The operational cash flow (EBITDA) reached E239 million, an increase of 6 % and the consolidated cash flow amounted to E222 million, an increase of 8 %, representing a cash flow per share of E10.07. Excluding acquisitions, capital expenditure for the consolidated companies was E109 million compared with E78 million in 2002. Total capital expenditure for the consolidated companies and for the joint ventures and associates was E140 million compared with E119 million in 2002.

In 2003, new investments and capital increases were made for E34 million. The major new acquisitions were in advanced wire products, Bekaert Hlohovec, a.s. (Slovak Republic) and the acquisition of the remaining 50 % in Contours (United States).

N.V. Bekaert S.A. (Statutory Accounts)

Sales of the parent company amounted to E496 million, a decrease of 25 % compared to 2002 due to making fencing systems Europe a separate legal entity. The profit for the year 2003 was E117 million compared with a loss of E61 million in 2002.

Dividend

In the light of the company's good results for 2003 and the confidence of the Board of Directors and the management in the potential for further profit generation of the recently approved corporate strategy, the Board of Directors will propose to the Annual General Meeting of Shareholders, that the dividend be increased by 4% compared with 2002. If this proposal is accepted, the gross dividend will be E1.748 per share. This corresponds to a net dividend of E1.311 per share. The net dividend on shares with VVPR strip giving entitlement to reduced withholding tax of 15% would be E1.4858. The dividend will be payable as from 19 May 2004.

Outlook

While North American and West European markets remain uncertain, further growth is expected in Central Europe, Asia and Latin America. Within the advanced wire products segment, overall demand is increasing slightly; in particular, the order book for steel cord products for tire reinforcement remains high. The 2004 season for the fencing systems Europe segment began well. Present forecasts for the advanced materials and the advanced coatings segments are good.

Major efforts will be spent to properly accommodate the increases of wire rod prices and the tight wire rod supply situation. Striving to further improve profitability, Bekaert continuously evaluates its product portfolio in line with its strategy of sustainable profitable growth. The weak dollar/euro exchange rate also forces Bekaert to express caution for the current year.

Bekaert (Euronext Brussels: BEKB) is worldwide leader in advanced metal transformation and in advanced materials and coatings, focused on high added value market segments. It is a European based company, headquartered in Belgium, with a turnover of 2.6 billion euros and selling its products in more than 120 countries.

Source: Bekaert


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