Interim Report to mid-year 2009
Augsburg, August 4, 2009
4 août 2009
- Recession weighs on orders received in H1/09 (-36.6 percent), positive trend in Q2/09 (+18.5 percent from Q1/09)
- Order backlog up from EUR 539.7 million in Q1/09 to EUR 578.5 million in Q2/09
- Operating result (EBIT) at EUR -22.9 million, burdened by extraordinary restructuring costs of EUR 13 million
KUKA Group's orders received in the first half of fiscal 2009 came in at EUR 466.9 million, a substantial drop of 36.6 percent from 2008's level of EUR 736.5 million. KUKA's Robotics division received EUR 156.6 million in new orders in the first half of 2009 versus EUR 244.0 million in the first half of 2008. This is a drop of 35.8 percent, most of which occurred in the automotive segment, which was down 45.7 percent. Orders received by Systems decreased by 37.3 percent to EUR 322.5 million, down from EUR 514.0 million in the first half of the 2008 fiscal year. These trends are also reflected in the current numbers released by the German Engineering Federation (VDMA); in fact, the reported decline was even greater. Orders received by German mechanical engineering companies dropped 46 percent year-over-year between January and June 2009, while in the Robotics and Automation sector, they plunged an even greater 53 percent.
KUKA Group had orders received of EUR 253.2 million in the second quarter of 2009, down 23.8 percent from the EUR 332.2 million posted in the second quarter of 2008. This is 18.5 percent or EUR 39.5 million better than in the first quarter of 2009. Robotics was faced with a drop of 47.7 percent from the EUR 127.2 million recorded in the second quarter of 2008. Thanks to a number of large orders from the automotive sector in the second quarter of 2009, Systems' order volume was only down 9.9 percent.
Orders received were higher than sales revenues in the second quarter of 2009, particularly in the Systems division. As a result, despite the weaker US and global economy, order backlog rose. At the group level, order backlog was up 7.2 percent or EUR 38.8 million from the prior quarter's EUR 539.7 million recorded on March 31, 2009. The book-to-bill ratio improved to 1.2.
KUKA Group's order backlog was EUR 578.5 million at the end of the first half of fiscal 2009. This is 15.3 percent less than the EUR 682.8 million recorded on June 30, 2008. While Robotics' order backlog was down 32.9 percent from the prior year's record date, the Systems division was down only 11.7 percent due to the significantly higher orders received. The Group's order backlog capacity is thus notionally secured for 5.3 months. At the close of the first half of 2008 it was 6.1 months. The Robotics division's order backlog notionally secures activity for 2.1 months as of June 30, 2009, whereas the Systems division will be busy for 7.0 months based on the same calculation.
Sales revenues were 24.7 percent lower than the EUR 580.9 million reported at the end of the first half of fiscal 2008. They came in at EUR 437.7 million. Sales revenues were down from the prior year's level by the same amount in both the Robotics and Systems division. Robotics posted sales revenues of EUR 169.0 million, 24.7 percent less than the EUR 224.3 million reported at the end of the first half of 2008, whereas Systems generated EUR 282.8 million, 25.7 percent less than the EUR 380.6 million at the same time in 2008.
KUKA Group had sales revenues of EUR 210.7 million in the second quarter of 2009, a drop of 29.9 percent from the EUR 300.7 million generated during the second quarter of 2008. While Robotics reported EUR 72.4 million, a decline of 32.2 percent from the Q2 2008 figure of EUR 106.8 million, Systems' sales revenues were EUR 144.1 million, down 29.9 percent from the EUR 205.7 million earned in the second quarter of 2008.
Declining sales revenues with an impact on profits of about EUR 4 million associated with the difficult market situation in the second quarter of 2009 and special accruals related to restructuring foreign subsidiaries totaling about EUR 13 million weighed on operating result (EBIT). Operating profit (EBIT) in the first half of 2009 was thus EUR -22.9 million, substantially lower than the EUR 32.0 million in the first half of 2008. Excluding the extraordinary restructuring costs, adjusted operating profit (EBIT) for the first half of 2009 would therefore have been about EUR -10 million. While Robotics operating profit (EBIT) in the first half of the fiscal year was slightly negative at EUR -2.0 million, special accruals related to restructuring foreign subsidiaries had a significant negative impact on the Systems division's operating profit, which came in at EUR -15.4 million.
The Robotics division was unable to sustain the first quarter's profit level during the second quarter. Sharply declining sales revenues and lower capacity utilization drove operating profit (EBIT) to EUR -6.2 million. Systems' quarterly result came in at EUR -14.3 million, but excluding special accruals, operating profit would only have been slightly negative at EUR -1.3 million. The Group overall, including other companies, reported an operating profit (EBIT) of EUR -23.1 million for the just ended second quarter of 2009.
KUKA AG's Executive Board reacted early to the impending weakened business environment and had already initiated a multi level program in the fourth quarter of 2008 to cut the group's personnel and material costs. The cost-cutting initiative has a target of EUR 70 million. The following individual measures impact the 2009 financial year:
Phase 1, totaling about EUR 40 million:
- Reduce overtime and vacation (in progress)
- Reduce number of contract workers (in progress)
- Restructuring measures abroad (in progress)
- Lower purchasing costs (in progress)
- Savings due to increased shared service activities as part of the integrated business model (in progress)
- Optimize marketing costs (in progress)
- Cut consulting fees (in progress)
Phase 2, totaling more than EUR 30 million:
- Short time working (in progress)
- Pay cuts (in progress for management staff)
- Cancel bonus payments (in progress)
- Postpone payment of wage increases (in progress)
- Cancel one-time wage payments (in progress)
- Postpone payment of vacation bonuses (in progress)
- Review Christmas bonuses (in preparation)
As of June 30, 2009, savings of about EUR 23 million had already been realized, mainly as a result of the first level of the cost-cutting program. However, the majority of the anticipated savings are expected in the second half of 2009, because quite a few of the measures were not implemented until the first half of 2009.
Aside from the measures already implemented as part of multi level program to reduce costs, KUKA aims to sustainably position itself for the years 2010 to 2012. Structures, processes, capacities and products must be adapted to the dramatically changed general conditions and adjusted to suit the new markets. A systematic transformation process is being introduced that will also lead to fewer jobs. This program will be implemented with a strong focus on socially responsible solutions.
For the year 2009 overall, KUKA expects a breakeven operating profit (EBIT) and breakeven free cash flow before extraordinary restructuring costs. However, taking into consideration the extraordinary restructuring costs, KUKA expects that the operating result (EBIT) will be well into negative territory.