Interim report as of june 30, 2014
6 August 2014
- Orders received rise 17.6 percent to EUR 1,185.7 million in H1/14
- Sales revenues up 10.9 percent to EUR 968.6 million in H1/14
New quarterly record for sales revenues: EUR 506.1 million in Q2/14, up from EUR 437.5 million in Q2/13
- EBIT margin for H1/14 at 6.3 percent
EBIT margin improves from 6.6 percent in Q2/13 to 6.7 percent in Q2/14
- Earnings after taxes for H1/14 reach 22.5 million, up from 27.0 million in H1/13
Early redemption of high yield bond generates charges of EUR 17.7 million in H1/14
- Free cash flow declines from EUR 34.0 million in H1/13 to EUR 23.0 million in H1/14
- Guidance for 2014 raised: sales revenue expected to reach about EUR 2.0 billion and EBIT margin about 6.5 percent
The end of KUKA's second quarter of 2014 represents a successful first half year 2014. "The strong business development confirms the global trend towards automation," said KUKA AG CEO Dr. Till Reuter. "We expect the profitable growth to continue in the second half of the year, and have therefore raised our guidance for full year 2014." The steady strong demand for KUKA products and automation solutions is reflected in high orders received. In the second quarter the total for the Group came in at EUR 570.5 million, up 8.6 percent from the EUR 525.4 million generated in Q2/13. The newly acquired companies, Reis Group and Alema Automation, contributed EUR 45.4 million to the orders received. Adjusted for their contribution, the number remained steady at last year's level. Orders received for the first half of 2014 totaled EUR 1,185.7 million, or EUR 1,100.7 million organically (that is, excluding the new acquisitions). This is an increase of 17.6 percent from the EUR 1,008.1 million posted in H1/13. Organically the growth rate is 9.2 percent. The result is the highest level KUKA Group has ever reported for a first half year. The high demand was driven especially by the automotive and general industry sectors, especially the aerospace sector.
Robotics generated orders received of EUR 207.5 million in the second quarter of 2014, driven especially by strong demand from general industry and from customers in China and the United States. Sales were up 11.0 percent from the EUR 186.9 million reported in the second quarter of 2013. Orders received for the first half of the year were up 5.4 percent, rising from EUR 420.5 million in H1/13 to EUR 443.1 million in H1/14.
Systems' orders received in the second quarter of 2014 came in at EUR 376.3 million, 9.1 percent above the EUR 345.0 million recorded in Q2/13. Of the total, EUR 45.4 million are attributable to orders received from the newly acquired companies. Strong demand from the automotive industry spurred the growth. There was also strong demand for Systems solutions and plant engineering business from aircraft manufacturers. Systems was able to increase orders received by 26.0 percent to EUR 759.9 million in the first half of 2014, up from 603.3 million in H1/13. Excluding the acquired companies, growth came in at EUR 71.6 million or 11.9 percent.
KUKA Group reported consolidated sales revenues of EUR 506.1 million in the second quarter of 2014, a new record in a quarter. The reasons for the good development were strong orders received growth in previous quarters and the contribution from the newly acquired companies, which totaled EUR 33.7 million in Q2/14. Therefore sales revenue were up 15.7 percent from the EUR 437.5 million reported in the second quarter of 2013. Adjusted for the contribution from the acquired companies, sales revenue growth is still considerable, coming in at 8.0 percent year-over-year. Cumulative sales revenues in the first half of fiscal 2014 were EUR 968.6 million, with an organic share of EUR 908.4 million. Growth compared to the EUR 873,5 million reported for the first half of 2013 was a solid 10.9 percent. The organic growth rate is calculated at 4.0 percent.
Robotics generated sales revenues of EUR 203.4 million in the second quarter of 2014, driven by the strong orders received in previous quarters. This is the second-highest quarterly result ever for Robotics. The increase compared to sales revenues of EUR 184.3 million in the second quarter of 2013 is 10.4 percent. The automotive and service segments contributed substantially to this growth. Still, general industry was also able to report higher sales than the year prior. Robotics' sales revenues in the first half of 2014 reached EUR 397.9 million, the best-ever half-year performance. The number was 1.7 percent higher than the EUR 391.1 million posted in H1/13.
Systems had sales revenues of EUR 306.6 million in the second quarter, up 17.8 percent from the EUR 260.3 million posted in Q2/13. This strong sales growth was helped by the newly acquired companies. Excluding the acquired companies, sales revenues were EUR 272.9 million, 4.8 percent above the results posted in the second quarter of 2013. Similar to Robotics, Systems also benefited from high orders received in prior quarters and thus had high capacity utilization.
The book-to-bill ratio, orders received devided by sales revenue, in the second quarter of 2014 was again well over 1. This is the sixth quarter in a row the indicator has been at 1 or significantly above 1. For the second quarter of 2014, it was 1.13, versus 1.19 for Q2/13. For the first half of 2014 it was 1.22, which compares to 1.15 for H1/13.
The Group's order backlog rose further and hit a record EUR 1,273.3 million on June 30, 2014. This was 24.5 percent higher than the EUR 1,022.4 million reported on June 30, 2013 and 28.4 percent higher than the EUR 991.6 million posted on December 31, 2013. The order backlog share for the newly acquired companies was EUR 101.4 million on June 30, 2014.
In the second quarter of 2014, KUKA Group's earnings before interest and taxes (EBIT) came in at EUR 34.1 million, 17.6 percent higher than the EUR 29.0 million reported for Q2/13. This is a strong result, especially given the expenses of EUR 3.0 million in Q2/14 for integrating and restructuring Reis Group. EBIT margin was slightly higher year-over-year, coming in at 6.7 percent versus 6.6 percent in Q2/13. EBIT for the first half of the year was up 6.6 percent, rising from EUR 57.4 million in H1/13 to EUR 61.2 million in H1/14. EBIT margin was slightly lower. It came in at 6.3 percent, down from 6.6 percent in H1/13, mainly due to the integration of Reis Group.
Robotics' EBIT rose 18.3 percent, from EUR 18.6 million in Q2/13 to EUR 22.0 million in Q2/14. EBIT margin in the second quarter of 2014 came in at 10.8 percent, up from the 10.1 percent generated in Q2/13. EBIT for the first half of 2014 was reported at EUR 41.4 million, which compares to EUR 39.6 million for H1/13. EBIT margin was 10.4 percent, versus 10.1 percent for H1/13. In the second quarter of 2014, Systems' EBIT was EUR 16.2 million, 7.3 percent above the EUR 15.1 million reported for Q2/13. EBIT margin declined accordingly, going from 5.8 percent in Q2/13 to 5.3 percent in Q2/14. However, EBIT margin has improved substantially from the 4.3 percent reported for Q1/14.
KUKA Group's earnings after taxes for the first half of 2014 declined to EUR 22.5 million from EUR 27.0 million in H1/13. This decline was due to the early redemption of the high-yield bond, which generated a on-time charge of EUR 17.7 million for the Group. However, the redemption will save KUKA interest expenses totaling about EUR 50 million in the coming years.
Free cash flow for the first half of 2014 was posted at EUR 23.0 million, which compares to EUR 34.0 million in H1/13. KUKA has thus been able to report a positive free cash flow every quarter since the beginning of 2013. The decline is mainly due to slightly delayed payments from customers and an increase in working capital driven by the business growth.
"KUKA has had a successful H1/14," said Dr. Till Reuter. "High orders received from automotive and the aerospace sector, as well as excellent sales growth in China, where the main contributors to the strong results. The integration of the newly acquired Reis Group and Alema is proceeding quickly and successfully. This has enabled us to already benefit from higher general industry demand."
Given the current economic forecasts from the IMF, KUKA expects increased demand in 2014, particularly from North America and Asia, especially from China. Overall, current economic trends should have a positive impact on earnings. From a sector perspective, general industry growth is expected to be strong. This is due in part to the high potential for automation solutions, as well as the positive economic prospects for general industry customers. In the automotive segment investments were on a high level over the past few years.
Based on current general conditions, KUKA expects sales revenues of about 2.0 billion, up about 10 percent from last year. The newly acquired Reis Group will contribute to the sales growth. Based on the current economic general conditions, KUKA Group is expecting an EBIT margin of about 6.5 percent for fiscal 2014. The main reason it is expected to be slightly lower than last year is the first-time consolidation of Reis Group. A one-time expense related to the integration and restructuring of Reis is included in the first half year of 2014 in this regard.