DGAP-News: SHW AG

SHW AG: Outlook for the full year 2017 reaffirmed

• Group sales and EBITDA margin in line with budget after six months
• Cash flow from operating activities significantly improved
• Capital expenditure increased by almost 50 per cent in the first half year

 
 
Aalen, 28 July 2017. SHW AG, one of the leading automotive suppliers of CO₂-relevant pumps and engine components as well as composite brake discs, published its financial report for the first six months of 2017 today.
 
"The first half of the year has run according to plan", says Dr. Frank Boshoff, CEO of SHW AG. "We remain optimistic that we can reach our forecast for the year. The measures undertaken to improve our processes in the Pumps and Engine Components business segment are having an effect and the margin has risen accordingly. The temporary burdens on earnings in the Brake Discs business segment have eased noticeably in the second quarter. For the full year 2017 we continue to anticipate an EBITDA margin of between 10 and 11 per cent. We are making good progress at expanding our capacities in foreign markets. With this we lay the foundation for significant sales and earnings growth in the coming years."
 EBITDA margin of just under 10 per cent
Group sales amounted to EUR 202.7 million in the first half year, 6 per cent below the previous year's figure of EUR 215.3 million as expected. This was attributable to the Pumps and Engine Components business segment.
 
Consolidated EBITDA decreased by 9 per cent from EUR 21.8 million to EUR 19.8 million. At 9.8 per cent, the corresponding EBITDA margin was slightly below the previous year's figure of 10.1 per cent. While the EBITDA margin in the Pumps and Engine Components business segment improved from 11.0 per cent to 11.5 per cent, the margin in the Brake Discs business segment decreased from 8.4 per cent to 6.6 per cent. Furthermore, in the administrative sector non-recurring costs associated with the public listing of SHW AG, customer projects and also the costs of preparing acquisitions burdened the operating result.
 
As depreciation and amortisation has fallen, the net profit for the period only fell by EUR 1.2 million to EUR 5.4 million (previous year EUR 6.5 million). Earnings per share come to EUR 0.84 (previous year EUR 1.02).  

High level of investments in new markets
The cash flow from operating activities in the first six months came to EUR 18.5 million (previous year EUR -0.3 million). This significant improvement is particularly due to the significantly lower increase in working capital.

 

The cash flow from investing activities in intangible assets and property, plant and equipment of EUR -14.5 million outstrips the figure for the comparable period of the previous year of EUR -9.7 million by almost 50 per cent. Of this amount, EUR 11.6 million (previous year EUR 7.1 million) was invested in the Pumps and Engine Components business segment. In the Brake Discs business segment, investments came to approximately EUR 2.7 million, the same as in the previous year.

		Q2				H1
K EUR		2017		2016		2017		2016
Cash flow from operating activities		7,861		1,427		18,463		-280
Cash flow from investing activities (intangible assets and property, plant and equipment)		-5,720		-4,684		-14,515		-9,683
Operating free cash flow		2,141		-3,257		3,948		-9,963
Cash flow from investing activities (financial assets)		0		0		-6,819		0
Total free cash flow		2,141		-3,257		-2,871		-9,963
Other items (in particular, dividend payments)		-6,672		-6,539		-6,687		-6,585
Change in net liquidity		-4,531		-9,796		-9,558		-16,548

 

The sharp upturn in investing activity is most evident in the expansion of production capacities in the new markets of China and North America, where the company invested approximately EUR 4.5 million (previous year EUR 0.5 million) from January to June. The start of production for a primary transmission oil pump and an electric auxiliary transmission oil pump at the Chinese location in Kunshan ran according to schedule. Over the full year 2017 a total of about EUR 9 million should be invested in foreign locations (previous year EUR 3.2 million).

 

   

Higher margin at Pumps and Engine Components
The Pumps and Engine Components business segment achieved sales of EUR 155.4 million in the first six months of 2017 (previous year EUR 170.6 million). Sales in the Passenger Car division declined from EUR 141.8 million to EUR 123.2 million. This expected sales decline mainly reflects the lower share supplied by SHW for the second generation of an electrical driven transmission oil pump for the start-stop function. The high-margin Industry and Powder Metallurgy divisions both increased their sales significantly. The Industry division recorded an increase in sales of 13.6 per cent to EUR 16.6 million (previous year EUR 14.6 million). The Powder Metallurgy division improved by 9.9 per cent to EUR 15.6 million (previous year EUR 14.2 million).

 

Despite the decline in sales, the Pumps and Engine Components business segment achieved a segment EBITDA of EUR 17.9 million in the reporting period, just EUR 0.9 million below the level of the previous year. The EBITDA margin improved accordingly from 11.0 per cent to 11.5 per cent. The most decisive factors behind the higher margin were positive volume and product mix effects as well as productivity gains.

 

Overall, the earnings trend for the Group's foreign subsidiaries in Brazil, China and Canada was in line with expectations. The Group is currently setting up a company in Romania. Expenses for the forward-looking establishment and expansion of foreign plants are included in the operating segment earnings
 

  Temporary burdens on the earnings of Brake Discs ease noticeably

In the Brake Discs business segment, unit sales were 8.4 per cent higher in the first six months than in the comparable period of the previous year. All product areas contributed to this increase. Sales rose by 6 per cent to EUR 47.3 million (previous year EUR 44.7 million).

 

The segment EBITDA figure was positively influenced by volume and product mix effects as well as productivity gains. However, this contrasted with higher purchase costs for coke and the contractual delay in adjusting material surcharges. Overall, the EBITDA figure in the Brake Discs business segment declined by EUR 0.6 million to EUR 3.1 million in the reporting period. The temporary burdens on earnings eased noticeably in the second quarter.

 
 

 
Sales and earnings forecast remains unchanged for the fiscal year 2017
Based on the economic and industry environment and while considering the potential risks and opportunities for the full year 2017, the Management Board of SHW AG continues to expect Group sales in a range of EUR 400 million to EUR 420 million (previous year EUR 405.8 million).

Sales of EUR 310 million to EUR 330 million are forecast for the Pumps and Engine Components business segment (previous year EUR 317.5 million). For the Brake Discs business segment sales of approximately EUR 90 million are forecast (previous year EUR 88.2 million).

 

Based on these assumptions, SHW continues to expect an EBITDA margin in a range of 10.0 per cent to 11.0 per cent (previous year 10.7 per cent) for the full year.

 

The financial report for the period from January to September 2017 will be published on 26 October 2017

Key performance indicators for the second quarter and the first six months of 2017 (in K EUR)

Key performance indicators - SHW Group		Q2				Change		H1				Change
		2017		2016				2017		2016
Sales		98,390		108,659		-9.5%		202,694		215,263		-5.8%
EBITDA		9,627		10,995		-12.4%		19,774		21,755		-9.1%
as % of sales		9.8%		10.1%		-		9.8%		10.1%		-
Depreciation/Amortisation		5,821		6,249		-6.8%		11,496		12,196		-5.7%
as % of sales		5.9%		5.8%		-		5.7%		5.7%		-
EBIT		3,806		4,746		-19.8%		8,278		9,559		-13.4%
as % of sales		3.9%		4.4%		-		4.1%		4.4%		-
ROCE		-		-		-		11.7%		12.5%		-
Net profit for the period		2,407		3,228		-25.4%		5,380		6,536		-17.7%
Key performance indicators - Pumps and Engine Components		Q2				Change		H1				Change
		2017		2016				2017		2016
Sales		74,739		84,659		-11.7%		155,352		170,605		-8.9%
EBITDA		8,470		9,205		-8.0%		17,867		18,753		-4.7%
as % of sales		11.3%		10.9%		-		11.5%		11.0%		-
Depreciation/Amortisation		4,695		5,042		-6.9%		9,334		9,811		-4.9%
as % of sales		6.3%		6.0%		-		6.0%		5.8%		-
EBIT		3,775		4,163		-9.3%		8,533		8,942		-4.6%
as % of sales		5.1%		4.9%		-		5.5%		5.2%		-
ROCE		-		-		-		18.4%		17.3%		-
Key performance indicators - Brake Discs		Q2				Change		H1				Change
		2017		2016				2017		2016
Sales		23,651		24,000		-1.5%		47,342		44,658		6.0%
EBITDA		1,814		2,171		-16.4%		3,128		3,762		-16.9%
as % of sales		7.7%		9.0%		-		6.6%		8.4%		-
Depreciation/Amortisation		1,022		1,132		-9.7%		1,970		2,234		-11.8%
as % of sales		4.3%		4.7%		-		4.2%		5.0%		-
EBIT		792		1,039		-23.8%		1,158		1,528		-24.2%
as % of sales		3.3%		4.3%		-		2.4%		3.4%		-
ROCE		-		-		-		6.2%		7.2%		-