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Dürr Continues to Improve Earnings

Published on 2004-08-16. Author : SpecialChem

 

Stuttgart -- Thanks above all to the SPRINT² earnings enhancement program, the Dürr Group managed to improve its earnings situation significantly in the first half of 2004. Consolidated sales rose by 8.7 %, to which increases in all business units contributed.

Earnings before taxes for the first half of 2004 stood at € 8.3 million, after having amounted to € -11.8 million in the previous year´s period. In the second quarter of 2004, Dürr achieved earnings before taxes of € 4.0 million (previous year: € 2.7 million) and was thus able to continue the positive development of the first three months (€ 4.3 million; previous year: € -14.5 million).

The group's gross margin increased in the first half of 2004 to 16.9 % (previous year: € 16.8 %), although Dürr was exposed to rising raw material prices and continuing high price pressure. Selling and administrative costs as well as other operating expenses were lowered under the SPRINT² program by € 7.3 million to € 147.9 million. In relation to sales, that represents a reduction from 16.9 % to 14.8 %.

Earnings before interest expense, taxes, depreciation, and amortization (EBITDA) improved to € 32.9 million, compared with € 16.5 million in the first half of 2003. Along with a reduction of net financial debt, compared to the previous year´s date to € 227.2 million (June 30, 2003: € 247.2 million), net financial expense improved by € 1.6 million to € 9.5 million. With consolidated net income at € 4.6 million (previous year: loss of € 6.7 million), earnings per share amounted to € 0.32 (previous year: € -0.47). It should be noted here that during an internal review, Dürr ascertained an overvaluation of order-specific receivables and undervaluation of accruals in the financial statements for the first quarter of 2003. Dürr therefore subsequently adjusted the relevant items in the statements of income, balance sheets, and statements of cash flows for the first half of 2003. In its report on the first half of 2003 released on August 20, 2003, Dürr had shown earnings before taxes of € -4.9 million, a consolidated net loss of € -2.5 million, and earnings per share of € -0.18. The adjustment does not affect the group's annual financial statements as of December 31, 2003, since the earnings effects in question were reversed in subsequent quarters. For the second quarter's earnings of 2003, the adjustment yields the following changes: earnings before taxes increase to € 2.7 million (originally: € 0.4 million), consolidated net income to € 1.7 million (originally: € 0.3 million), and earnings per share to € 0.12 (originally: € 0.02).

SPRINT² program taking hold

"The earnings improvements of the first two quarters show that we are on the right path with the SPRINT² earnings enhancement program. We will continue to consistently implement SPRINT² in order to substantially increase our profitability," says Dürr CEO Stephan Rojahn.

The implementation of the SPRINT² program, with its four main objectives: cutting costs, reducing risk, decreasing net working capital, and streamlining our portfolio of locations and products, is proceeding according to plan. By far most of the over 200 individual measures have been initiated and are in various stages of implementation. Already 90 % of the measures are showing economizing effects now. Strengthening our global purchasing network and standardizing project management group-wide were among the most important SPRINT² measures implemented or initiated in the first half of 2004. Moreover, Dürr has defined binding targets for all business units regarding net working capital and intensified monthly review and evaluation procedures. In the words of CFO Kay Bönisch, "Optimizing our receivables and inventory management is centrally important for further reducing net financial debt."

Earnings of the business units

With an increase of earnings before taxes of € 12.4 million to € 16.3 million (previous year: € 3.9 million), the Paint Systems business unit contributed most to the positive earnings development in the first half of 2004. Also, the Final Assembly Systems business unit and the Measuring Systems business unit were able to improve their earnings before taxes, which amounted respectively to € 2.9 million (previous year: € -1.4 million) and € -5.5 million (previous year: € -11.8 million). The Services business unit and the Ecoclean business unit registered earnings declines to € 2.6 million (previous year: € 3.3 million) and € 0.2 million (previous year: € 2.4 million), respectively. At € -8.2 million, the Corporate Center's earnings before taxes remained unchanged versus the first half of 2003. That result includes, above all, interest expenses for strategic acquisitions of previous years in addition to costs of headquarters and special projects.

Sales up in all business units

The Dürr Group's consolidated sales rose in the first half of 2004 by € 80.2 million to € 1,000.9 million (+8.7 %, previous year: € 920.7 million). Adjusted for exchange rate effects, which means calculated at previous year´s rates, the increase would have come to € 116.9 million (+12.7 %). The individual business units achieved the following total sales: Paint Systems, € 564.9 million (previous year: € 500.3 million); Final Assembly Systems, € 161.1 million (previous year: € 146.1 million); Services, € 71.7 million (previous year: € 71.3 million); Ecoclean, € 90.1 million (previous year: € 88.5 million); Measuring Systems, € 169.1 million (previous year: € 160.1 million).

Incoming orders and orders on hand at normal level

The Dürr Group's consolidated incoming orders came to € 975.0 million in the first half of 2004. As expected, they thus fell short of the unusually high previous year´s level (€ 1,513.0 million), which included a large paint systems order from General Motors (GM). Adjusted for exchange rate effects, incoming orders would have amounted to € 999.4 million in the first half of 2004.

As of June 30, 2004, consolidated orders on hand amounted to € 1,385.4 million, after having risen to an above-average € 1,957.3 million as of the previous year´s date due to the large order from GM. Adjusted for exchange rate effects, orders on hand would have come to € 1,424.3 million. On the whole, the group can continue to rely on solid utilization in the months ahead.

Number of employees regionally adjusted

Under the SPRINT² program, Dürr reduced personnel in its engineering business units (Paint Systems, Final Assembly Systems, Ecoclean, and Measuring Systems). The focus was on Measuring Systems, where the number of employees decreased by 189 compared with June 30, 2003. Altogether, the workforce of the engineering business units was reduced in Europe and the Americas by 476 positions compared with June 30, 2003. On the other hand, we created 116 new jobs in Asia in the same period, including 91 in China. The net personnel reduction in the engineering business units compared with June 30, 2003 came to 349 employees, or 4.1%, to 8,099. In contrast, the Services business unit increased the number of its employees to 4,575 because of new service contracts (previous year: 4,470). Altogether, the Dürr Group had 12,674 employees as of June 30, 2004, which is 244, or 1.9 %, fewer than on June 30, 2003.

Innovations in all business units

The statements of income for the first half of 2004 includes direct expenditures for research and development (R&D) in the amount of € 15.9 million (previous year: € 18.7 million), which corresponds to 1.6 % of consolidated sales. Added to that were significantly higher expenditures for development activities in the framework of customer orders. Dürr is thus able to secure its positions of technological leadership for the long term by means of forward-looking innovation management.

Among the most important results of our R&D work in the first half of 2004 were a new version of the Dürr Ecopaint painting robot for automotive industry suppliers (Paint Systems), a more advanced robotic system for mechanical deburring of workpieces (Ecoclean), a solution for automatic fitting of glass roof modules (Final Assembly Systems), and a new controller base for vehicle test stands. The Services business unit managed to enter into its first contract for maintenance functions in an engine factory.

Capital expenditures

Because of low vertical depth of production, capital expenditures play a subordinate role in the Dürr Group. In the first half of 2004, they were limited to € 5.7 million (previous year: € 8.6 million). As an engineering firm, Dürr focuses on investing in human resources.

Outlook

Dürr expects the moderate economic recovery to continue in the rest of this year. But given the automotive industry's strong focus on costs, capital spending restraint on the part of our customers and high margin pressure may be expected to continue. After last year's loss due to special influences, the Board of Management expects that earnings before taxes in 2004 will exceed the amount (€ 18.7 million) achieved in 2003 before restructuring expense. Sales will probably be slightly lower than the previous year's high level.

The Dürr Group is one of the world's leading suppliers of production systems and manufacturing support services for the automotive industry. In 2003, Dürr achieved sales of € 2.3 billion with about 12,750 employees.

Source: The Dürr Group


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