Interim Report as of March 31, 2009
n the first quarter of 2009, KUKA had orders received of EUR 213.7 million
This represents a decrease of 47.1 percent compared to the EUR 404.3 million during the same quarter last year, and is down 15.0 percent from the EUR 251.3 million booked during the last quarter of 2008. These results reflect the cautious capital spending of both automotive and general industry customers due to the global recession. A similar development was already evident in the recently released German Engineering Federation (VDMA) numbers, which showed a decline in orders received in the German mechanical and plant engineering sector compared to last year of 42 percent for the first three months of 2009. Orders received reported by Robotics came in at EUR 90.1 million, down 22.9 percent from the EUR 116.8 million posted in the first quarter of 2008, while the Systems division's orders dropped 56.8 percent from the EUR 300.0 million generated in Q1 of 2008.
While the EUR 539.7 million order backlog at the end of March 2009 is significantly less than the EUR 647.3 million posted on March 31, 2008, it was at about the same level as the EUR 542.3 million recorded at last year-end, December 31, 2008. Both divisions' order backlog was lower than at the same time last year. This was also due to the sharply declining economic development: fewer new orders led to a lower order backlog. The order backlog coverage therefore fell from about six months at the end of the last quarter of 2008 to about five months at the end of Q1 2009.
Sales revenues in the first quarter of this year reached EUR 227.0 million, down 19.0 percent or EUR 53.2 million from the EUR 280.2 million reported at the end of the first quarter of 2008. Similar to the situation for orders received, neither division was able to achieve the sales revenue numbers of the prior year's comparable quarter. Robotics posted sales revenues of EUR 96.6 million and Systems reported EUR 138.7 million, a decline of 17.8 percent from Q1 2008's EUR 117.5 million and 20.7 percent from Q1 2008's EUR 174.9 million respectively.
Operating profit (EBIT) of EUR 0.2 million was sharply lower than the prior year's EUR 15.8 million, mainly because of the sales decline. Robotics posted an EBIT of EUR 4.2 million in the quarter just ended compared to EUR 10.1 million in the first quarter of 2008, while Systems reported a loss of -EUR 1.1 million, which compares to a profit of EUR 8.4 million in Q1 2008.
The first phase of a cost-cutting program, which the Group had already initiated at the end of 2008 to address the economic situation, aims to save a total of EUR 50 million in 2009 in the divisions and at Group headquarters. This phase includes the following steps:
- Reduce overtime and vacation
- Cut back on temporary workers
- Restructure operations outside Germany.
Additional measures include:
- Reduce costs in purchasing
- Cut administration costs using shared services based on the integrated business model
- Reduce consulting costs
- Optimize marketing costs.
As part of a second phase currently underway, KUKA is negotiating with the employee's representatives and unions in an effort to respond to the sustained recession with suitable cost and capacity adjustments. These discussions are among other things exploring the continued use of reduced working hours, postponement of wage increases, a review of Christmas/vacation bonuses and adjustment of staff levels. The main aim is to avoid layoffs in the core workforce as long as possible, provided the current recession does not become worse.
KUKA Group is primarily exposed to market risks. This includes in particular the effects of the international financial market crisis, which have worsened the economic downturn. There is also the issue of dependency on major customers in the automotive sector, particularly in the case of our American subsidiaries.
The total risk exposure of KUKA to the American manufacturers facing financial difficulties (Chrysler and Jeep Wrangler/KTPO, General Motors/Opel) is currently in the order of EUR 28 million. The risk of receivable default (trade receivables, PoC receivables and open orders) is now one of KUKA Group's major risks and is being regularly monitored with particular diligence.
Despite sharply lower orders received and sales revenues, KUKA achieved a break-even EBIT in the first quarter of 2009. At the same time, the high order backlog in the Systems division will support the capacity utilization in the second and third quarter of 2009.
KUKA continues to adhere to its strategy of securing the automotive business and expanding the general industry business. We are continuing to enhance the integrated business model.
In spite of the difficult market situation, KUKA continues to strive toward achieving a break-even to slightly positive operating profit (EBIT) and positive free cash flow in 2009 including adjustments and restructuring measures implemented so far. However, these expectations exclude the final outcome of Chrysler's Chapter 11 bankruptcy proceedings and further possible bankruptcy proceedings with other major clients.
On the market site, the Group will continue to seize all sales opportunities and internally, will exploit all possibilities to cut costs and secure liquidity. KUKA is accelerating the ongoing cost-cutting program in order to achieve this goal. The main aim is to avoid layoffs in the core workforce as long as possible, provided the current economic situation does not become worse.