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Business Figures for 2004 : Dürr Accomplishes Earnings turnaround in 2004

Published on 2005-04-22. Author : SpecialChem

Stuttgart -- The Dürr Group accomplished an earnings turnaround in 2004, registering earnings before taxes of € 11.8 million (previous year: negative € 5.7 million). With its new organizational structure in effect since March 1, the Group has fulfilled an important prerequisite for further strengthening its earning power.

Earnings before taxes, calculated for the first time in accordance with International Financial Reporting Standards (IFRS), rose in the new Group structure, consisting of continuing operations, by € 19.5 million to € 18.6 million. The Services business unit, which has been sold to the Voith Group, and the Development Test Systems (DTS) product line, are not included in continuing operations. DTS, a supplier of measuring and testing technology for vehicle development, is to be put into a venture in which Dürr has a minority holding, or is to be sold entirely. Dürr plans to increase the earnings before taxes and EBITDA of continuing operations further in 2005. Dürr CEO Stephan Rojahn announced that at today's financial press conference in Stuttgart.

Expansion of high-margin industrial business

Expansion of industrial business, which means outside the automotive sector, is expected to contribute importantly to the planned improvement of earnings. "In the framework of our strategic reorientation, we intend to expand in fast-growing, high-margin business areas. Those include, for example, process technology for the mining industry, environmental technology, and painting and assembly systems for the aviation industry," said Mr. Rojahn. Dürr is also counting on expansion of modernization and remodeling business in the automotive industry and efficiency gains resulting from the "sprint" earnings enhancement program. The new Group structure with two divisions, Paint and Assembly Systems and Measuring and Process Systems, will give Dürr more clout on the market. Dürr expects the leaner organizational structure to yield annual savings of € 10 million from 2006 onward.

Opportunities in remodeling and modernization business

Dürr intends to achieve the forecast earnings improvement in 2005 even though it plans on lower sales this year. In view of the current competitive situation, Dürr is carefully selecting the orders that it accepts: "We are not looking for sales at any price, but rather for order quality," said Mr. Rojahn.

Dürr furthermore sees good business opportunities in remodeling existing production plants: "Worldwide, there are far more than a hundred car body paint shops in operation that we have built. With retooling and modernization, we are providing our customers with more support in dealing with pressing issues such as quality improvement, production cost reduction, and compliance with environmental standards," said Mr. Rojahn.

Sales and incoming orders

Consolidated sales in continuing operations came to € 1,903.3 million in 2004 and were thus 6.9% below the previous year's figure (€ 2,044.9 million). Adjusted for currency effects, sales would have amounted to € 1,968.7 million, or 3.7% less than in the previous year. In the Group, which means including Services and DTS, sales amounted to € 2,136.4 million (previous year: € 2,271.9 million).

Against the background of contracting market volume, consolidated incoming orders in continuing operations came to € 1,584.6 million after € 2,127.0 million in the previous year. It should be noted that the amount reported for 2003 was far above normal due to a large order received from General Motors that will impact sales over several years. The Group's consolidated incoming orders were down from € 2,356.2 million to € 1,841.3 million. That is also mainly an effect of the previous year's large order from GM.

Significant earnings improvement in Measuring Systems

The Measuring Systems business unit (excluding DTS) played a substantial role in last year's earnings improvement. Operating improvements and lower restructuring expenses compared with the previous year led to an increase of its earnings before taxes to € 10.9 million (previous year: negative € 14.5 million).

Earnings were burdened in 2004 by unplanned expenditures in the amount of € 15.1 million. Those were incurred in the Ecoclean and Final Assembly Systems business units, where problems arose in the handling of some orders.

In 2003 and 2004, Dürr achieved savings totaling around € 105 million by means of its "sprint" earnings enhancement program; the amount saved will reach about € 170 million by the end of 2005. "These savings are of crucial importance for ensuring our competitiveness in an aggressive price environment," explained Mr. Rojahn.

Net income in continuing operations rose to € 11.6 million in 2004, after Dürr had reported a loss of € 22.0 million in the previous year. Correspondingly, earnings per share after minority interests increased to € 0.88 (previous year: negative € 1.56). The Group achieved earnings per share after minority interests of € 0.40 (preceding year: negative € 2.14) on net income for the year of € 4.7 million (previous year: loss of € 30.3 million). The Group's tax expense of € 7.1 million resulted mainly from valuation allowances on deferred tax assets at DTS and from non-deductible interest charges for long-term loans.

Dürr announced that no dividend distribution to shareholders will be proposed for 2004. Unappropriated profit is to be employed instead to strengthen the company's equity base.

Balance sheet structure improved

The Group's financial ratios improved with the placement in July 2004 of a corporate bond for € 200 million and a syndicated loan arranged at the same time. Dürr managed to lower the ratio of the Group's current financial liabilities from 52% to 29%. The Group's equity ratio rose to 15.5% as of December 31, 2004 from 13.1% on the previous year's balance sheet date.

Number of employees adjusted to difficult market environment

In the framework of the "sprint" program, Dürr has further adjusted its personnel capacities to the difficult market environment in the automotive industry. On December 31, 2004, there were 7,280 employees in continuing operations. That was 4.7% fewer than in the previous year (7,642). In the traditional markets of Europe and the Americas, the number of employees decreased by 546. In the Asian market, where Dürr managed to raise sales by 14% and is further expanding business, the number of employees increased by 33% to 735 (+184). The net total number of employees in the Group rose to 13,295 at the end of 2004 (previous year: 12,747). That was solely to the Services business unit, which has meanwhile been sold.

Investing in future growth: Foundation laid for mining business expansion

Dürr's capital expenditures on property, plant, and equipment and intangible assets in continuing operations amounted to € 41.3 million in 2004 (previous year: € 24.5 million). The largest capital expenditure of € 11.6 million was made to increase the share held in subsidiary Schenck Australia. Dürr has thus laid an important foundation for further expansion of the high-margin business in process technology for the mining industry, which is largely handled by Schenck Australia. There are good growth opportunities in this area, including coal washing plants for the Chinese market, for example.

R&D expense remains high

Dürr is bolstering its efforts to enhance earnings by developing new technological solutions with high demand potential. In 2004, Dürr again invested about 6% of its sales, including expenditures in the framework of customer projects, in new products and technologies. Among those were improved software solutions such as the EcoEMOS supervisory control system for production processes and the CAB 900 high-precision measuring system for balancing equipment from Schenck. In the area of final vehicle assembly, Dürr introduced the FAStplant modular factory concept, with which the main line of a final assembly facility can be set up or reconfigured in a very short time. Dürr will also keep its R&D spending at a high level in the future. "Our innovation management aims at developing products that give customers measurable added value, for example, by reducing unit costs. That way we can generate demand despite the difficult situation in the automotive industry," said Mr. Rojahn.

Opportunities despite difficult economic environment

The economic environment remains difficult and intensely competitive in 2005. Capital spending shifts and cost-cutting programs are shaping the picture in the automotive industry in many places. With an increased offering in the area of remodeling, Dürr is gearing itself to the rising modernization and retooling needs of customers. Dürr sees high growth and earnings potential in the expansion of industrial business. At the same time, the company will systematically continue its cost-cutting efforts and the initiated reorientation process to maintain its competitiveness in the difficult market environment.

Source: The Dürr Group


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