PKC Group Plc INTERIM REPORT 8 May 2014 8.15 a.m.
PKC GROUP’S INTERIM REPORT 1-3/2014:
BRAZIL WEAKENED OPERATING PROFIT, REVENUE LOWER THAN IN COMPARISON PERIOD AS ESTIMATED
JANUARY - MARCH 2014 HIGHLIGHTS
- Revenue decreased 9.5% on the comparison period (1-3/2013), totalling EUR 203.8 million (EUR 225.2 million).
- EBITDA before non-recurring items was EUR 12.1 million (EUR 18.8 million) and 5.9% (8.3%) of revenue.
- EBITA** was EUR 7.6 million (EUR 14.2 million) and 3.8% (6.3%) of revenue. During the report period PPA depreciation and amortisation totalled EUR 2.0 million (EUR 2.9 million).
- Operating profit before non-recurring items was EUR 5.6 million (EUR 11.3 million) and 2.8% (5.0%) of revenue.
- Diluted earnings per share were EUR 0.04 (EUR 0.14).
- Cash flow after investments was EUR -18.4 million (EUR 0.2 million).
PKC GROUP’S OUTLOOK FOR 2014
- PKC Group estimates that 2014 revenue and comparable EBITDA will be lower than in 2013. In 2013, PKC’s revenue was EUR 884.0 million and comparable EBITDA before non-recurring items was EUR 70.3 million.
- Revenue estimate is based on current business structure. Revenue will be affected by light vehicle build-outs in North America and by changes in exchange rates. As a result of the above, comparable EBITDA is expected to be lower than in 2013. Comparable EBITDA in 2014 will also be affected by reorganisation and program transfers in Europe and expenditures related to the implementation of PKC’s growth strategy.
| KEY FIGURES | 1-3/14 | 1-3/13 | Change % | 1-12/13 | |||||
| EUR 1,000 (unless otherwise noted) | |||||||||
| Revenue | 203,813 | 225,161 | -9.5 | 883,986 | |||||
| EBITDA* | 12,094 | 18,768 | -35.6 | 70,341 | |||||
| % of revenue | 5.9 | 8.3 | 8.0 | ||||||
| EBITA** | 7,649 | 14,234 | -46.3 | 52,461 | |||||
| % of revenue | 3.8 | 6.3 | 5.9 | ||||||
| Operating profit* | 5,613 | 11,316 | -50.4 | 40,873 | |||||
| % of revenue | 2.8 | 5.0 | 4.6 | ||||||
| Non-recurring items | -2,735 | -5,389 | -49.3 | -10,409 | |||||
| Operating profit | 2,878 | 5,927 | -51.4 | 30,463 | |||||
| % of revenue | 1.4 | 2.6 | 3.4 | ||||||
| Profit before taxes | 1,354 | 4,710 | -71.2 | 21,562 | |||||
| Net profit for the report period | 907 | 3,109 | -70.8 | 13,947 | |||||
| Earnings per share (EPS), EUR | 0.04 | 0.14 | -74.0 | 0.62 | |||||
| Cash flow after investments | -18,355 | 204 | 24,941 | ||||||
| ROI,% | 9.1 | 14.4 | 14.7 | ||||||
| Gearing, % | 8.6 | 32.4 | -1.1 | ||||||
| Average number of personnel | 18,806 | 19,535 | -3.7 | 19,206 | |||||
| * before non-recurring items | |||||||||
| ** operating profit before PPA depreciation and amortisation and non-recurring items | |||||||||
MATTI HYYTIÄINEN, PRESIDENT & CEO:
Revenue in the first quarter remained lower than in the comparison period at EUR 203.8 million. Although North American truck production started to grow during the period, revenue fell short of the comparison period because of the build-outs of the light vehicle programmes announced previously, and because of a rescheduling production shut-down carried out during the period by one of PKC’s North American customers lasting almost one month. In Europe, the volume of truck production fell significantly compared to the last quarter of 2013 but was slightly higher than in the comparison period. European revenue was also affected by the decision made by one customer during the period to transfer the production of a bus wiring harness program back to itself. In Brazil, production volumes for heavy-duty trucks fell short of the comparison period. The exchange rates for the key currencies, the US dollar and the Brazilian real, from PKC’s point of view, with respect to the euro were significantly more unfavourable than during the comparison period.
PKC’s operating profit before non-recurring items, EUR 5.6 million, was below that of the comparison period owing to the low production utilisation rates and particularly to the deepening losses at the Brazilian unit. In Brazil, the price agreements with our main customers have expired and negotiations for new agreements have been ongoing during the period. In a very challenging environment, PKC is working to improve its operations and implement reinforced measures. However, a prerequisite for future profitable business are price agreements that will take into account Brazil’s significantly increased labour costs and the effects of exchange rates.
PKC is continuing to develop its manufacturing footprint in order to ensure cost-competitive solutions for its customers. During the period, we opened a new plant in Serbia, where production has increased rapidly. During the period, a new wiring harness factory also began production at Suzhou in China. We also made the decision to close the factory at Nogales in Mexico, owing to the build-outs of some light vehicle programmes. We also decided to establish a wiring systems company in Lithuania. During this year, we will evaluate the future European manufacturing footprint in the light of experience to be gained in Serbia and Lithuania.
In North America, the truck market was healthy and production forecasts for the whole year have been increased somewhat. It is expected that production volumes for heavy-duty class-8 trucks will increase so that, in the last quarter of 2014, predicted production volumes will be about 10% higher than production achieved in the first quarter. Production volumes for medium-duty trucks are forecast to remain at the present level until the end of the year.
In Europe, the transition to the Euro 6 emission standard at the beginning of the year meant that the market was quieter than before. The production volume forecast for the whole year has been lowered further. It is expected that production volumes for the remainder of the year will on average remain at roughly the same level as in the first quarter. With regard to the remainder of the year, PKC’s product range will focus more on medium-duty vehicles than previously.
In Brazil, customers’ order books have been on a good level. In terms of the whole year, production volume forecasts have been further downgraded and a growing uncertainty about the development of truck demand will dominate the market during the latter part of the year. A sign of the increasing uncertainty is the reduction of daily production volumes planned by some customers.
Our work to implement PKC’s strategy 2018 is continuing and we are working towards some projects to become concrete during the year.
PKC’s personnel have once again been committed in their work, for which I express my sincerest thanks.
MARKET OUTLOOK
In 2014 the production of heavy-duty trucks in Europe is expected to decline by 11% and production of medium-duty trucks by 9% compared to the level of 2013.
Production of heavy-duty trucks in North America is expected to increase by 16%, production of medium-duty trucks by 5% and production of light vehicles to increase slightly compared to 2013.
Production of heavy-duty trucks in Brazil is expected to decline by 5%, and production of medium-duty trucks to increase by 33% compared to 2013. The governmental incentive program to support the purchase of new trucks continues to be valid until further notice, although the terms have been weakened somewhat.
The market demand for Electronics segment’s products is expected to remain at the present level.
PKC GROUP’S OUTLOOK FOR 2014
PKC Group estimates that 2014 revenue and comparable EBITDA will be lower than in 2013. In 2013, PKC’s revenue was EUR 884.0 million and comparable EBITDA before non-recurring items was EUR 70.3 million.
Revenue estimate is based on current business structure. Revenue will be affected by light vehicle build-outs in North America and by changes in exchange rates. As a result of the above, comparable EBITDA is expected to be lower than in 2013. Comparable EBITDA in 2014 will also be affected by reorganisation and program transfers in Europe and expenditures related to the implementation of PKC’s growth strategy.
DISCLOSING PROCEDURES OF FINANCIAL REVIEWS
PKC Group Plc follows the disclosure procedure enabled by Standard 5.2b published by the Finnish Financial Supervision Authority, and discloses relevant information related to its Interim Report with this release. PKC's interim report for January - March 2014 is attached to this release and is also available on company's website at www.pkcgroup.com.
PKC GROUP PLC
Board of Directors
Matti Hyytiäinen
President & CEO
For additional information, contact:
Matti Hyytiäinen, President & CEO, PKC Group Plc, +358 400 710 968
PRESS CONFERENCE
A press conference on the interim report will be arranged for analysts and investors today, 8 May 2014, at 10.00 a.m., at the address Event Arena Bank, Unioninkatu 20, Helsinki.
ATTACHMENT
PKC interim report Q1 2014
DISTRIBUTION
NASDAQ OMX
Main media
www.pkcgroup.com
PKC Group is a global partner, designing, manufacturing and integrating electrical distribution systems, electronics and related architecture components for the commercial vehicle industry and other selected segments. The Group has production facilities in Brazil, China, Estonia, Finland, Germany, Mexico, Poland, Russia, Serbia and the USA. The Group's revenue in 2013 totalled EUR 884.0 million. PKC Group Plc is listed on NASDAQ OMX Helsinki Ltd.
