IWKA financial results press conference for fiscal 2006
The year 2006 was decisive for the IWKA Group
- Orders received and sales revenues higher than last year
- EBIT clearly positive (continuing operations)
- Debt substantially reduced
- Positive outlook for 2007
The company's restructuring phase with its far-reaching divestments has been completed. The IWKA Group separated from a number of its companies and thereby sharpened its focus on the essentials.
Step-by-step, the changes are starting to take hold. Operationally, business improved; orders received and sales revenues were substantially higher in 2006. Nevertheless, net after-tax result will again be negative; charges of about EUR 80 million resulting from the sale of companies have impacted the results. Gerhard Wiedemann, CEO of IWKA, commented as follows: "But I can assure you, this company is now on a sound footing. Net debt has been substantially reduced and it has impressive growth potential."
Orders received from continuing operations in 2006 were 10.4 percent higher than in 2005, ending at EUR 1,619.8 million. Order backlog at the end of 2006 came in at EUR 668.5 million, far ahead of the prior year's EUR 609.1 million. All three divisions shared in the positive business development.
Sales revenues from continuing operations were EUR 1,566.0 million, beating the previous year's revenues of EUR 1,435.9 million by 9.1 percent. The rising business trend in all three divisions contributed to this sales revenue growth, which ranged between 4 and 15 percent.
The expanding business volume led to higher earnings contributions from all divisions. As a result of improved cost structures and the measures introduced to reduce overheads, the IWKA Group was able to report a clearly positive operating result in 2006. Our companies generated an EBIT of EUR 33.7 million, which compares with a loss of EUR 42.9 million in 2005. The return on sales was 2.2 percent, and here we see a need for further improvement. The potential is there.
The year 2006 was characterized by further streamlining of the portfolio, which we were able to complete over the course of the year. In 2006, companies such as
- the Boehringer Group
- the ARO Group
- the J.W. Froehlich Group and
- the Bopp & Reuther Sicherheits-und Regelarmaturen Group were sold.
The sale of the companies and groups resulted in book losses amounting to EUR 68.7 million. Including the operating losses of EUR 11.5 million generated by these companies, the result from discontinued operations in 2006 was EUR -80.2 million, compared to -EUR 88.5 million a year earlier.
This led to a net loss of EUR -69.4 million in 2006.
The IWKA Group's cash flow in 2006 was well into positive territory at EUR 52.2 million, and compares to EUR -49.4 million the year prior. Despite higher book losses, a cash inflow from the sales of the companies and a positive operating cash flow from continued operations were recorded.
We are therefore pleased that we were to pay down EUR 92.0 million on the Group's net debt, bringing the total to EUR 83.9 million, half its level at the close of 2005.
However, equity dropped to EUR 126.7 million because of the loss for the year of EUR 69.4 million. The IWKA Group's equity ratio; i.e., the ratio of total equity to total assets, was an unsatisfactory 11.8 percent as at December 31, 2006. A year earlier, it was 12.2 percent.
The return on capital employed (ROCE) was again positive, coming in at 10.1 percent. The Robotics division's ROCE was already at a remarkably high level of 24.3 percent. The Packaging and Systems division reported 11.8 and 9.7 percent respectively, still below this figure.
IWKA was able to report on March 27, 2007 that the Executive and Supervisory Boards had decided to sell the Packaging division. An especially critical analysis of the current status of the Group was carried out and the results showed that continued ownership of the Packaging division would bring the Group neither forward from a strategic operations point of view nor from a financial perspective. In fact, the Packaging division needed to implement independent steps to further strengthen its competitiveness.
The IWKA Group had 8,123 employees as at December 31, 2006, which compares to 7,939 at the same time a year earlier. The workforce was reduced as a result of personnel restructuring measures, but this was offset by the consolidated companies that were added to the Group and the start-up of the pay on production contract in Toledo, USA. A total of 3,066 blue-collar and 4,806 white-collar workers, as well as 251 trainees, were on the company's payroll. Fifty-four percent of the employees work in Germany, eighteen percent in North America and twenty-one percent in the remaining European countries (excluding Germany).
Development in the divisions
The Systems division expanded its business volume. This division continues to be an expert partner for the automotive industry, but is increasingly developing expertise in complementary fields of application. Orders received during the 2006 business year were 7.7 percent higher. In 2006, they were EUR 847.8 million, which compares to EUR 786.9 million in 2005. Sales revenues reached 832.8 million, 7.8 percent higher than the EUR 772.5 million achieved in 2005. The earnings contribution from the Systems division reached EUR 9.8 million, which compares to -14.5 million in 2005. However, this included one-time costs and start-up costs for our pay on production contract in the United States.
The restructuring measures introduced in the Robotics division in 2005 and early 2006 contributed to both further improvement in the profit situation and the delightful progress in orders received. In 2006, the division was able to improve orders received by 13.0 percent. They came in at EUR 382.3 million versus the prior year's result of EUR 338.4 million. The positive business trend is as much due to an increasing number of orders from general industry as it is to new orders from carmakers. Sales revenues were also up 15.4 percent year-over-year. In 2005, the figure was EUR 323.6 million, while EUR 373.3 million were generated in 2006. The expanding business volume led to a higher EBIT in all divisions. The Robotics division contributed the highest amount, EUR 22.4 million, which compares to - EUR 22.8 million last year.
IWKA Packaging also posted better results in 2006. Orders received climbed 12.5 percent, to EUR 436.0 million from EUR 387.6 million in 2005. Sales revenues as at December 31, 2006 had risen to EUR 403.9 million. They were therefore 4.1 percent higher than the prior year's EUR 387.9 million. The Packaging division's earnings from operating activities in 2006 were EUR 17.3 million, also up from the prior year's EUR 7.3 million.
Our goals for the year 2007 are:
- We expect our EBIT to improve substantially. The 2006 business year ended with an EBIT of EUR 33.7 million. We are targeting a substantial improvement of about 50 percent in 2007. Of course, the 2006 EBIT still includes the earnings contribution from the Packaging division. We will present adjusted target values after the legal completion of the sale.
- We expect the sale of the Packaging division to generate a significantly positive result of about EUR 50 million from discontinued operations. The equity ratio will improve to well over 20 percent.
- This means that for the year 2007, we can expect significantly positive earnings after taxes for the overall Group. In 2007, we will therefore leave the IWKA Group's years of substantial losses and capital consumption far behind.