15/05/2009

Leoni: Sales decline and negative result

Although the downtrend did level out somewhat in March following the extremely weak demand in the months of January and February, the consolidated sales for the first quarter of 2009 of this leading provider of cable systems to the automotive and other industries were nevertheless down by 36 percent year on year to EUR 492.4 million (previous year: EUR 770.6 million). The reduced capacity utilisation took earnings before interest and taxes (EBIT) to a loss of EUR 45.6 million (previous year: profit of EUR 34.1 million), although the losses did come down significantly in March. Taking the budgeted finance costs and taxes into account, the Group reported a net loss of EUR 49.7 million versus net income of EUR 20.0 million in the first quarter of 2008.

To counteract this situation, Leoni launched a comprehensive cost reduction programme in January that has been an exerting increasingly beneficial effect in all areas since March. Along with worldwide cutback of capital spending and material costs, the measures comprise above all adjustment of staffing capacity to the lower demand. The Company thus introduced short-time working at almost all of its German facilities as well as having made working hours largely flexible and reducing them at its foreign plants. In addition, Leoni was compelled during the period under report to trim the number of its employees at various facilities worldwide by a total of nearly 6,000 to about 45,000 people at the end of March 2009. In Germany, only about 80 jobs have been cut. In addition, the Company is currently considering further restructuring measures. In the first three months of the year, EBIT was weighed down by restructuring expenditures of EUR 5.0 million (previous year: EUR 0.8 million).

Sharp sales decline in the automotive industry

In the wake of the steep sales decline in the international motor vehicle industry, the external sales of the Wiring Systems division from the beginning of January to the end of March 2009 dropped by 34 percent versus the same quarter of the previous year to EUR 270.1 million (previous year: EUR 411.1 million). The EBIT-level result came to a loss of EUR 30.3 million (previous year: profit of EUR 13.4 million). The decline in demand was evident in all segments of vehicles and on a worldwide level. At the end of March 2009 Leoni’s customers, who had repeatedly lowered the volume of product called forward since the crisis started, for the first time no longer scaled back their forecast for the year. Some buyers even raised their output forecast slightly. Regardless of the difficult market situation, all the new start-ups and model changeovers planned by the carmakers with effect on Leoni were carried out, which is why Leoni also commenced production of several new wiring systems during the period under report.

Robotics, solar technology and rolling stock as rays of light

The economic crisis also left its traces on many of the Wire & Cable Solutions division’s customer industries, as a result of which this segment’s external sales in the first three months of 2009 were down by 38 percent to EUR 222.3 million (previous year: EUR 359.5 million). Excluding the changes in the price of copper, the decline would have come to 22 percent. The result before interest and taxes came to a loss of EUR 13.8 million in the first quarter of 2009 after profit of EUR 21.9 million in the same period of the previous year. Alongside the motor vehicle industry, demand was especially weak in the telecommunications, automation and mechanical engineering sectors. On the other hand, Leoni recorded gains with cable products for the robotics, rolling stock, petrochemical and solar industries.

Prospects still fraught with uncertainty

Leoni still anticipates a significant decline in both sales and earnings over fiscal 2009 as a whole. As most customers are holding back with medium to long-term guidance on performance, Leoni is likewise unable to provide any specific forecast for the current financial year. The Group will continue to strive for balanced free cash flow over the year as a whole.