Annual results press conference 2006

IWKA digests charges - positive outlook for 2006

March 29, 2006

  • CEO Hein: "In 2005, IWKA focused rigorously on restructuring and is back on track for growth in 2006"
  • Group consolidated sales for 2005 (continuing operations): EUR 1.6 billion; consolidated EBIT for 2005 (continuing operations): EUR - 30.7 million; net loss for 2005: EUR 147.5 million
  • One-time costs of restructuring (EUR 44.4 million) and losses from divestments (EUR 64.6 million) in 2005: EUR 109.0 million
  • IWKA to complete consolidation in 2006 with the revamping of its financing structure toward medium- to long-term lending 
  • Executive Board forecasting medium-term return on sales of 6 to 7 percent and return on capital employed of 20 percent

 

Karlsruhe, March 29, 2006

During the 2005 financial year, IWKA Aktiengesellschaft systematically pressed ahead with its Group renewal efforts, completed the most important restructuring tasks and established the conditions necessary for sustainable growth. The reengineering, which included significant restructuring and sweeping divestment of unprofitable businesses, led to a streamlined IWKA management organization. At the same time, the company narrowed its focus to that of an automation company with core automotive, robotics and packaging competencies. The Group will have completed its renewal by the end of 2006 after revamping its financing structure and finishing its operational restructuring programs. The Executive Board of IWKA is forecasting medium-term return on sales of 6 to 7 percent and return on capital employed of 20 percent.

Specifically, the IWKA Group's consolidated sales from continuing operations came in at EUR 1,613.4 million in 2005, which compares to EUR 1,680.8 million in 2004. Sales revenues from continuing operations and discontinued operations were EUR 2,069.9 million, down from the prior year's EUR 2,351.9 million. Order backlog in continuing operations as of December 31, 2005 was EUR 1,016 million, up from EUR 764 million at the close of 2004. Orders received from continuing operations were EUR 1,641.2 million versus EUR 1,688.1 million a year earlier. Export orders accounted for 59 percent of orders received as opposed to the previous year's 57 percent.

EBIT from continuing operations was EUR -30.7 million, whereas in 2004 it had been EUR 108.1 million. In the year just ended, a net loss of EUR -147.5 million compares to a net profit of EUR 48.8 million in 2004. One-time charges related to divestments and restructuring measures totaled EUR 109.0 million in 2005. The Group's average annual consolidated net debt for 2005 of EUR 247 million came down from approximately EUR 297 million in 2004. The equity ratio in 2005 was 12.2 percent versus last year's 21.6 percent. The IWKA Group had 8,974 employees as of December 31, 2005. This rises to 11,354 employees when discontinued operations are included.

Wolfgang-Dietrich Hein, CEO of IWKA AG, said, "During the year just ended, IWKA focused rigorously on restructuring and is back on track for growth in 2006. We will complete the renewal of IWKA and the successful consolidation of our operations during the current business year. This includes restructuring the
Group's financing, which in future will be geared toward medium- and long-term lending agreements, as well as reserves for meaningful strategic acquisitions."

Divisional business developments for 2005

Orders received by the Automotive Division in 2005 came in at EUR 951.8 million, 4.2 percent higher than the prior year. Sales revenues were also higher than in 2004, rising by 4.5 percent to EUR 940.0 million. This division's project business is facing considerable cost and price pressure in all business subsegments. Added to that are substantial restructuring expenses in the plant engineering unit. Total EBIT was EUR -2.5 million compared to EUR 47.3 million a year earlier and includes one-time charges of EUR 12 million for restructuring. The division had 4,389 employees as of December 31, 2005, slightly more than at the same time in 2004.

IWKA's orders received from the Robotics Division to the end of 2005 came in at EUR 338.4 million. Because project orders from automotive customers were either canceled or postponed, orders received were 12.2 percent lower than a year earlier. Sales revenues were down 23 percent from 2004 at EUR 323.6 million. The Robotics division's overall EBIT was EUR -22.8 million. The one-time expenses for restructuring the division of EUR 18.4 million included goodwill impairments. At year-end, the Robotics division employed 1,936 persons. An agreement was reached at the end of 2005 to reduce the workforce in conjunction with the planned restructuring of the robot group's companies and the measures are now being implemented.

Despite a difficult market environment, the Packaging Division has proven to be one of the Group's important pillars. The division's orders received came in at EUR 399.5 million, 3.3 percent lower than in 2004. Sales revenues were 2.4 percent higher than the prior year at EUR 401.1 million. The food business subsegment's sales surpassed 2004's by 15 percent. The EBIT of EUR 7.5 million for 2005 after one-time charges was substantially lower than the prior year's EUR 15.2 million. It was charged with one-time expenses of EUR 10.7 million for restructuring. The Packaging division had 2,544 employees at the end of December. Because of the job cuts related to restructuring, there were 164 fewer persons employed than at the end of 2004. Group restructuring led to deep cuts in its non-core businesses portfolio (discontinued operations) during 2005 as the company set its focus on core activities. By February 2006, IWKA Balg- und Kompensatoren-Technologie Group, EX-CELL-O Group and Bopp & Reuther Sicherheits- und Regelarmaturen-Group had been sold. The transactions complete the sale of all the companies of the IWKA Group's former Process Technology Division.

Orders received from this division came in at EUR 462.6 million, 3.3 percent lower than last year. The companies generated sales revenues of EUR 466.7 million (comparable prior year: EUR 486.5 million). The discontinued operations posted a negative EBIT of EUR 36.4 million in 2005 (comparable prior year: EUR -6.3 million). This was largely due to the unsatisfactory performance of the EX-CELL-O Group - in orders received, sales revenues and earnings. Because of the high operating losses and a loss from the disposal of discontinued operations, total losses from discontinued operations were EUR -98.9 million versus EUR -15.0 million a year earlier. The result from the disposal of discontinued operations amounts to EUR -64.6 million (previous year: EUR -6.0 million). On December 31, 2005, 2,380 people were employed in discontinued operations.

Outlook

The IWKA Group is cautiously optimistic about the current business year. The company sees clear signs of expansion in its three target growth markets China, India and Russia. The automotive sector, which is one of the keys to the Group's success, started the year on an upbeat note. In 2006, carmakers will invest primarily in streamlining and retrofitting existing manufacturing systems and tackle the announced new vehicle model projects. IWKA will enjoy sustained benefits from both of these initiatives. The Robotics division expects steady growth, particularly from general industry. This will enable the robotics business unit to continue reducing its dependency on orders from the automotive sector. After two weak years, IWKA's Packaging division finally had an adequate order backlog at the start of the new year. This establishes the right preconditions for completing the restructuring activities in this division.

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