- Defence 2009: EBIT improved by 11% to €215 million
- Crisis mastered: Automotive operating results exceed expectations
- Operating free cash flow: raised to €186 million
- Liquidity: net liquidity improves from €-205 million to €+44 million
- Growth prospects: Group aims for a sales increase of over 8% in 2010
- EBIT forecast for 2010: EBIT between €220 million and €250 million
Rheinmetall AG increased the performance of the Defence sector further and reported positive EBIT of €15 million for fiscal 2009, despite high expenses in the Automotive business as a result of the crisis. Both company sectors achieved better operating results than originally forecast. The company intends to pay its shareholders a dividend of €0.30 per share.
The signs are once again clearly pointing towards growth in sales and earnings in both sectors in fiscal 2010: by means of a drastic restructuring program, the company has adapted its Automotive sector to the altered market situation. Growth opportunities are opening up in the Defence sector thanks to a high order backlog and a product portfolio geared towards the deployment requirements of armed forces.
Klaus Eberhardt, CEO of Rheinmetall AG:
"We have successfully overcome the crisis and lived up to the trust placed in us by our shareholders. Thanks to a huge amount of effort, we have actually achieved better operating results than originally forecast. We intend to return to our previous level of earnings already in this year. The strong Defence sector is still on a profitable growth path, and in Automotive we will directly benefit from a considerably lower break-even point and sector-wide recovery."
Group: operating EBIT of €153 million
During the past fiscal year, the Rheinmetall Group generated sales of €3,420 million (previous year: €3,869 million), down 12% year-on-year.
While the Defence sector reported another increase in sales, the Automotive sector posted a significant fall in sales, reflecting the development in the automotive sector. With 55% of consolidated sales, the business volume in the Defence sector exceeded that of the Automotive sector for the first time and is increasingly dominating business development in the Group.
Operating EBIT in the Group before crisis management measures totaled €153 million. Despite considerable one-off expenses of €138 million aimed at managing the crisis in Automotive, the Rheinmetall Group reported positive EBIT of €15 million for fiscal 2009. The corresponding figure in the previous year was €245 million.
With net interest down €9 million and after deducting income taxes, the consolidated result for 2009 is €-52 million. The previous year's figure was €+142 million. After deducting profit attributable to minority interests of €6 million, this brings earnings per share to €-1.60 (previous year: €+4.09).
Operating earnings per share total €+1.50.
Liquidity improved considerably – positive Group net liquidity
Rheinmetall AG improved its liquidity considerably in fiscal 2009. As of December 31, 2009, the company reported positive net liquidity of €44 million. In the previous year, negative net liquidity of €-205 million was posted. Operating measures such as the strict reduction of working capital and reduced capital expenditure, which were significant factors in determining the operating free cash flow of €186 million, as well as the successful capital increase with an inflow of €102 million, contributed mainly to this improvement of €249 million.
Proposed dividend distribution of 30 cents
Based on the sound financial situation and confidence in business prospects, the Executive Board and the Supervisory Board will propose a dividend of €0.30 (previous year: €1.30) to the Annual General Meeting on May 11, 2010. In relation to the operating result, this is a payout ratio of 20%.
Defence: growth in sales and earnings
With highs reported for sales, earnings and profitability as well as the order backlog, the Defence sector once again appears to be in excellent shape.
With a business volume of €1,898 million, the sector achieved an increase in sales of approximately 5% compared to the previous year's figure of €1,814 million in fiscal 2009.
In 2009, Rheinmetall Defence posted incoming orders with a value of €3,153 million, thus increasing orders by 83% compared to the previous year when the order intake totaled €1,723 million. Thanks primarily to the contract for the series production of the new Puma infantry fighting vehicle with a total value for Rheinmetall of almost €1.3 billion, Rheinmetall Defence increased its order backlog to €4,590 million as at the end of 2009, which corresponds to an increase of 39%.
In terms of EBIT, Rheinmetall Defence once again built on the high figure of €194 million in the previous year to €215 million in 2009. The EBIT margin improved to 11.3% in 2009, following 10.7% in the previous year.
With an innovative and wide-ranging product portfolio geared towards the deployment requirements of armed forces in international conflict management, Rheinmetall enjoys excellent growth opportunities in its markets in the future. Based on the joint venture with MAN Military Vehicles announced in January 2010, Rheinmetall is continuing to press ahead with industry consolidation and tapping into new growth opportunities in the key area of wheeled military vehicles.
Automotive: successful crisis management
Rheinmetall Automotive has successfully mastered the crisis. An improved production and cost structure as well as the significant €300 million reduction in the break-even point are expected to move the company back into the black already in 2010, supported by the gradual recovery of the automotive economy.
Drastic measures to lower costs and adjust capacity were necessary in order to lay the basis for this quick turnaround. These were introduced back at the start of the automotive crisis in the fourth quarter of 2008. Fixed costs were reduced by €72 million in fiscal 2009. The number of employees fell by 14% to 10,111 persons in the past year. As part of personnel measures which have already been agreed, a further 500 employees will leave the company in fiscal 2010.
In fiscal 2009, the Automotive sector generated sales of €1,522 million. In comparison to the previous year, this amounts to a decline of €533 million or 26%. This fall in sales is consistent with the decline in automotive production in the relevant Triad markets (Western Europe, NAFTA and Japan). The rate of declining sales dropped steadily in the course of the year from one quarter to the next. The fourth quarter of 2009 showed the first return to slight sales growth, although this was in comparison to the same quarter of 2008 which had already been hit by the crisis.
With EBIT of €-187 million in the year under review, this fell considerably short of the previous year's figure of €+61 million. However, this EBIT includes one-off expenses for crisis management measures of €138 million. The Automotive sector generated operating EBIT of €-49 million.
The cost-cutting measures introduced had a significant impact on operating EBIT over the four quarters of 2009: in the first three quarters, operating losses were reduced on a continual basis, and a return to operating growth was achieved for the first time in the fourth quarter.
Outlook
Rheinmetall sees good prospects in 2010 for a return to organic growth and a considerable increase in results.
Defence expects organic growth of more than 5% in 2010 and a further improvement in EBIT. A further increase in earnings is expected for 2011. Rheinmetall Defence also sees good opportunities in the coming years to exceed its medium-term target of an EBIT margin of 10%. This requires the realization of ongoing large-scale projects according to schedule and the non-appearance of massive interventions in defence budgets in the short term.
On the basis of expert forecasts, which expect an increase in automotive production of around 10% in the current and coming year, the Automotive sector anticipates a trend reversal in sales performance and sees good opportunities for sales growth of slightly over 10% in 2010. On the basis of the significant improvement in plant and cost structures in the past few months and the associated lowering of the break-even point, the Automotive sector predicts positive EBIT for the current fiscal year and a further improvement in earnings in 2011. In the medium term, it will remain the target of the sector to achieve a return on sales of 8%.
With stable upwards development in the automotive economy – according to forecasts – Rheinmetall expects an increase in consolidated sales to approximately €3.7 billion and an improvement in consolidated EBIT from €15 million in 2009 to between €220 million and €250 million in 2010. A further increase in sales and earnings is expected for the Group in 2011. The forecast development is supported by a financial and asset situation that will open up sufficient courses of action, in particular thanks to the early refinancing of the bond due in mid-2010 and the successful capital increase.
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