financial position
financial management goals and principles
The financing needs of the Group’s companies are largely bundled and managed centrally by kuka ag’s financial management department. This is where Group-wide credit, liquidity, interest and exchange risks are evaluated and to a large extent secured. Risk hedging is done exclusively on a transaction by transaction basis by actively using standard derivatives. kuka has issued a standard set of guidelines to all Group companies for managing financial risks.
group financing and working capital management
Adequate cash flow precautions.
The aim of the Group financing policy is to secure sufficient liquid reserves at all times to satisfy the operating and strategic financial needs of the Group’s companies. Activities to secure working capital occur on the basis of a multiyear financial budget and a rolling monthly liquidity plan, each of which includes all consolidated Group companies.
Jigless bodyshop with cooperating robots.
In general, the impact of the financial crisis on the real economy has made access to money and the capital markets more difficult. There is a risk that refinancing costs could increase if the turbulence in the international financial markets continues. Given these conditions, the kuka Group has taken appropriate precautions regarding liquidity, increasing the frequency and depth of the liquidity planning activities and regularly analyzing various scenarios and simulations regarding the liquidity and financing situation.
The business operating activities of the Group’s companies and the associated revenue streams represent the Group’s most important source of liquidity. Cash management systems are used to employ the excess cash generated by individual Group companies to cover the financial needs of others. The centralized revenue sharing within the Group reduces the amount of third-party financing required for individual companies, which has a positive impact on the interest result. Coverage of kuka Group’s financial needs is primarily secured through lines of credit from banks, as well as the issue of the convertible bond.
As of December 31, 2008, the kuka Group had confirmed cash and guaranteed credit lines and an abs program from national and international banks and credit insurance companies in the amount of € 380.0 million as sources of working capital. This total is comprised of € 190.0 million in working capital guarantees and € 115.0 million in cash credit lines, which are available via a syndicated loan agreement with a term extending to December 2010. In addition, working capital guarantees of € 50.0 million are available from credit insurance companies and an abs program launched in December 2006 (regular sale of receivables) totaling up to € 25.0 million (actual amount required as of December 31, 2008 was € 15.7 million). The financing is complemented by the placement of a convertible bond of € 69.0 million secured on May 2006.
group cash flow summary
(in € millions)
|
2007 |
2008 |
|||
|
Cash earnings |
81.2 |
69.4 |
||
|
Cash flow from operating activities |
62.3 |
– 61.2 |
||
|
Cash flow from investing activities |
161.3 |
– 105.7 |
||
|
Free cash flow |
223.6 |
– 166.9 |
kuka Systems’ assembly line expertise extends to every imaginable type of car body.
Above all, the kuka Group’s cash flow statement shows the higher outflow of cash. The prior year’s comparable numbers were particularly strong because of the cash injection resulting from the sale of the Packaging division and real estate holdings totaling € 193.4 million.
Cash earnings, which consist primarily of net earnings and depreciation of property plant and equipment and intangible assets, came in at € 69.4 million in 2008, compared to € 81.2 million the year prior. This led to a negative cash flow from operating activities of € 61.2 million for 2008 versus € + 62.3 million the year before. This includes the increase in receivables due to orders in the amount of € 80.3 million and the reduction in provisions amounting to € 47.9 million, particularly due to the payment of taxes. In addition, liquid assets were used to redeem the financing for the ktpo pay-on-production contract in the amount of € 77.1 million in the United States. This led to a receivable from finance leasing. At the same time, 2008 capital spending on property plant and equipment and intangible assets totaled € 32.5 million. The negative cash flow from investing activities was therefore € 105.7 million. The kuka Group’s cash flow from investing activities plus operating activities resulted in a negative free cash flow of € 166.9 million, which compares to last year’s € + 223.6 million. Cash flow from financing activities was impacted by the share buyback initiative in the amount of € 27.9 million and payment of the dividend totaling € 26.1 million. In contrast, liabilities due to banks increased by € 35.3 million and led to a negative cash flow from financing activities of € 18.7 million, which compares to last year’s € – 71.2 million. In total, the kuka Group’s liquidity declined by € 181.9 million, going from € 223.2 million on January 1, 2008 to € 41.3 million as of December 31, 2008.
Free cash flow declines because of higher expenditures and receivables.
capital spending by division
Majority of capital spending by Robotics division.
The kuka Group had capital expenditures of € 32.5 million over the course of the 2008 financial year. This represents an increase of 23.1 percent over last year’s € 26.4 million. Spending on property plant and equipment totaled € 18.9 million during the reporting period, which compares to last year’s € 12.1 million. Most of this went toward factory and office equipment (€ 8.6 million), assets under construction and down payments (€ 4.3 million), technical systems and machinery (€ 3.2 million) and property and buildings (€ 2.8 million). Capital spending on intangible assets in 2008 came in at € 13.6 million versus € 14.3 million the year prior and went mainly toward internally developed software and other development costs.
capital spending by division
(in %)
Prior year numbers in brackets
Capital spending for the 2008 financial year by the two divisions was as follows: Robotics, € 18.4 million versus € 16.1 million in 2007 and Systems, € 12.2 million versus € 6.9 million the year prior. The increase in the Systems division was due to the construction of a new manufacturing hall in Slovakia and the purchase of some machining centers. Capital spending by kuka ag / Other during the financial year totaled € 1.9 million, compared to last year’s € 3.4 million.