kuka and the capital market

international financial market crisis causes economy to slide further

Starting in the United States, the subprime crisis evolved into a worldwide financial crisis on stock markets over the course of 2008, which subsequently led to a major restructuring of the banking sector. Several large American and international banks and insurance companies were absorbed by competitors, had to be nationalized or declared bankruptcy. At the same time, the key North American, European and Asian industrial nations injected liquidity to safeguard their economies and support the banks’ equity ratios. The financial aid package in the United States totaled usd 700 billion, in Germany € 480 billion and in Japan € 80 billion.

The international financial market crisis worsened the ongoing economic downturn. During the first half year, the dramatic increase in oil prices and looming inflation also weighed on the general development of the economy. The negative effects of the financial market crisis on the real economy were first seen in the fall, particularly in the tightening of credit markets. All the major industrial nations subsequently announced wide-ranging economic stimulus packages valued from € 23 billion (Great Britain) to usd 790 billion (United States) in order to mitigate the impact of declining demand in their countries.

The financial market crisis and the economic slump were also reflected in share prices on the stock markets. Price drops in the mid-double-digit percentage range were reported in all major industrial countries. The two leading German indices suffered a similar setback, with the dax and mdax declining 40.4 percent and 43.2 percent respectively over the course of the year.

mechanical engineering industry shares under considerable pressure

As a result of the recession, economically sensitive and cyclic mechanical engineering company shares were among the hardest hit by the price drops. After a period of strong growth by German mechanical engineering companies from 2003 onward, the sector reported a drop in orders that started at the beginning of the year and worsened in the second half. Overall, orders received were down 7 percent from a year earlier according to the industry association’s statistics. This resulted in profit warnings and adjustment of corporate forecasts for 2009 and subsequent years.

The share prices of kuka’s peer group of plant and engineering companies on the mdax and sdax declined accordingly, and dropped between 40 and 60 percent in 2008. kuka’s share price was unable to avoid a similar fate and also fell substantially. Overall, as a result of the emerging recession in many major industrial nations and plummeting sales, particularly in the North American and European automotive industry, the share price was down 51.3 percent. kuka’s share price decline was therefore in the same range as that of its peer group. The stock price reached a high of € 26.01 on the first day of trading, January 2, and a low of € 10.07 at the end of November. By the end of December, it had recovered slightly to € 12.67.

kuka shares – key numbers

			2004		2005		2006		2007		2008
Number of shares	millions		26.60		26.60		26.60		26.60		26.60
Earnings (loss) per share	€		1.83		– 5.45		– 2.43		4.43		1.18
Dividend per share	€		0.66		–		–		1.00		–
Dividend yield (Dec. 31)	%		3.30		–		–		3.85		–
High for the year	€		20.60		23.15		24.75		31.50		26.01
Low for the year	€		16.00		15.62		14.02		18.58		10.07
Closing price for the year	€		20.20		18.25		19.36		26.01		12.67
Change compared to prior year	%		26.20		– 9.60		6.10		34.30		– 51.30
p/e ratio	(Dec. 31)		11.00		–		–		5.90		10.70
Market capitalization (Dec. 31)	€ millions		537.30		485.45		515.00		692.00		337.00
Average daily volume	No. of shares		80,000		91,250		165,000		232,000		234,000

share buyback program and dividend

On March 25, kuka launched a share buyback program aimed at acquiring up to 10 percent of total share capital or 2.66 million shares. By the end of the program on August 29, 1,327,340 shares or 4.99 percent of total share capital had been repurchased. The repurchased shares remained in the hands of kuka and were not canceled. The average price of the repurchased shares was € 21.02.

At the Annual General Meeting of kuka ag on May 15 in Augsburg shareholders approved the reinstatement of dividend payments and distribution of € 1.0 per dividend-bearing share. The last dividend paid, in 2004, was € 0.66. This distribution was based on the strong cash position of the Group at the beginning of 2008 as a result of the sale of the Packaging division and the excellent operating results for the 2007 financial year.

intensified investor relations

In spite of the deteriorating market environment, the financial market interest in kuka shares remained unchanged and high. The Executive Board fielded questions from shareholders at 13 road shows (compared to twelve last year) and seven investor conferences (same as last year). The focus of the initiative was on Frankfurt, London / Edinburgh and New York (each three or four days) as well as Paris, Zurich and Munich (two days each). The executives also went to Milan, Vienna and Stockholm / Copenhagen. In addition, 82 separate meetings (compared to 85 last year) were held with investors and analysts at the company’s headquarters in Augsburg. The Executive Board also gave presentations about the Group at three events: the dvfa analysts’ conference in Frankfurt on March 19 (presentation of the financial statements), on June 12 at this year’s Capital Market Day in conjunction with the automatica trade fair in Munich (latest robot developments) and on November 4 to release the nine-month business results in Frankfurt / Main (strategy of the new Executive Board).

kuka ag is currently being covered by 19 analysts. Of these, 17 are representatives of banks located in Germany and two in London. Of these, nine recommended purchasing or holding the stock at the beginning of 2009.

shareholder structure

(in %)

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* 4.99 percent of total share capital
As of February 15, 2009
Prior year numbers in brackets

convertible bond

kuka ag placed a convertible bond issue with a nominal value of € 69.0 million in the capital markets on May 9, 2006 via its 100-percent owned Dutch subsidiary, kuka Finance b. v. The convertible bond’s term extends to November 2011, pays interest at a rate of 3.75 percent per annum and can be converted to kuka shares at a conversion price of € 25.4. The convertible bond has been listed on the Euromtf market of the Luxembourg Stock exchange since November 9, 2006 (isin de000aogrmco / wkn aogrmc). At the end of December 2008, the last price for the convertible bond quoted by the Frankfurt stock exchange was 72.80 percent, which compares to 114.40 percent last year. This represents a decline of 41.6 percent points, almost the same as the decline in the price of the company’s shares.

kuka share price performance from january 1, 2008 to december 31, 2008

Index January 2008 = 100

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