Rheinmetall expects sales growth and significant improvement of earnings in 2014

(PresseBox) (Düsseldorf, ) .
Outlook 2014:
- Consolidated sales of €4.8 billion to €4.9 billion and Group EBIT of €220 million to €240 million expected
- Recovery in Defence, further improvement in Automotive
- Good progress in the "Rheinmetall 2015" strategy program

Fiscal 2013:
- Order backlog at record level at the end of 2013
- Automotive grows faster than the market
- Fall in sales in Defence and restructuring measures have a negative impact on results
- Group EBIT of €112 million
- Proposed dividend of €0.40 per share

The strategy program of the Düsseldorf-based Rheinmetall Group is making good progress. In the current fiscal year, the Company expects sales growth and improved results in both corporate sectors. After the order backlog reached a new high last year, consolidated sales of €4.8 billion to €4.9 billion are expected in 2014 (previous year: €4.6 billion). Earnings before interest and taxes (EBIT) are expected to increase to between €220 million and €240 million (2013: €112 million).

"Fiscal 2013 was dominated by our strategy program 'Rheinmetall 2015'. We made key decisions and initiated important restructuring measures to lay the foundation for profitable growth in the future," says Armin Papperger, CEO of Rheinmetall AG. "Initial progress will already be evident in the figures for 2014. But the strategy program will not reveal its full effect until 2015."

Fiscal 2013: Order growth of nearly 10%

In fiscal 2013, Rheinmetall achieved new records in the order intake and order backlog: The Group obtained orders worth €5,805 million (previous year: €5,311 million). This is an increase of 9.3%. The order backlog increased by as much as 19.8% to €6,475 million (previous year: €5,405 million).

Consolidated sales at €4,613 million were 2% lower than the previous year's figure of €4,704 million because of negative currency effects. After adjustment for currency effects, sales were at the same level as in the previous year. The operating result (EBIT before special items) was €213 million (previous year: €268 million), which means the operating margin was 4.6% after 5.7% in the previous year. While the Automotive sector improved both its sales and its operating result, Defence's revenues and results were lower than in the previous year.

2013 was a year of transition, in which an array of restructuring measures was initiated. In total, the expenses for this amounted to €86 million. €51 million of this was attributable to the Defence sector and €35 million to Automotive. Including all non-recurring effects, EBIT in the past fiscal year amounted to €112 million after €296 million in the previous year.

Group earnings after taxes totaled €22 million, (previous year: €173 million). Following inclusion of earnings attributable to minority interests, this brings earnings per share to €0.75 (previous year: €4.55). At the Annual General Meeting on May 6, 2014, the Executive Board and Supervisory Board will propose a dividend of €0.40 per share (previous year: €1.80). "Our firm target, once our strategy program is concluded in 2015, is to return to the dividend level of the years before the restructuring," emphasized CEO Armin Papperger.

Difficult market environment and non-recurring effects negatively affect Defence

In 2013, Rheinmetall Defence was faced with a difficult market environment. Declining defence spending worldwide curbed the sector's sales performance. At €2,155 million, revenues were €180 million or 8% lower than in the previous year. After adjustment for currency effects, sales fell by 6%. The operating result (EBIT before special items) at €60 million was in line with the last forecast, but fell below the previous year's figure of €85 million. The result was negatively affected by budget cuts in important customer nations, delays and cost overruns in projects and unscheduled acquisition costs.

The order situation developed very promisingly. The order intake improved to €3,339 million, growth of 14% or €406 million. Orders of €6,050 million were on the books at year end, an increase of 21% or €1,063 million. This is a new high.

The larger orders include one from the Australian armed forces to supply around 2,500 logistics vehicles - the second largest individual order in the Company's history with a volume of €1.1 billion. Defence also secured an order from Indonesia to supply military tracked vehicles together with logistics equipment and ammunition with a combined value of approximately €216 million. Rheinmetall also obtained orders in stagnating or declining markets thanks to its broad and innovative product portfolio. For example, the German armed forces ordered 700 sensor devices for various vehicle types and additional batches of Gladius, the modern infantry equipment. The framework agreement with the Dutch armed forces for the supply of various ammunition types was extended by seven years to the end of 2019.

Automotive grows faster than the market

The strong presence in important growth markets and the regulatory trends toward more environmentally friendly mobility drove the Automotive sector's sales up to €2,458 million. This is growth of 4% or €89 million. After adjustment for currency effects, sales actually increased by 6%. This means Automotive grew faster than international automotive production, which increased by 3.5% in 2013. The operating result (EBIT before special items) improved by 15% to €160 million; the operating EBIT margin therefore increased from 5.9% to 6.5%.

With growth of 7%, the Mechatronics division was the main growth driver. The division benefited from the high global demand for mechatronics components for the reduction of consumption and emissions, such as combined oil and vacuum pumps, exhaust routing systems and electrical versions of solenoid valves.

Development was very dynamic in the Chinese joint ventures, which are not included in the figures. Revenues there climbed by 29% or €111 million to nearly €500 million. This makes production growth at the joint-venture companies much higher than the growth of the Chinese automotive market, which grew by 14% in 2013. China will remain an attractive growth market in future. Rheinmetall is already the largest manufacturer of passenger car pistons and cylinder heads in China with its partner SAIC. Rheinmetall is further expanding its market presence in China and is now represented by eleven sales or production sites in the growth market.

The positive business development of the Automotive sector was also supported by other growth regions, especially NAFTA and Brazil. Overall, the Automotive sector generated 28% of sales from customers outside Europe. This is where the global production network that Rheinmetall has established systematically in recent years is paying off.

Outlook 2014

Following a year of transition during 2013 that was dominated by a series of measures to improve structures and increase cost efficiency, Rheinmetall expects growing consolidated sales and significant earnings improvements in 2014. Consolidated sales are forecasted at between €4.8 billion and €4.9 billion. €2.3 billion is expected to come from Defence and €2.5 billion to €2.6 billion from Automotive. The first positive effects of the restructuring measures will emerge in the operating result (EBIT before special items): Rheinmetall expects a Group operating result of between €230 million and €250 million. €85 million to €95 million is expected to come from Defence, €165 million to €175 million from Automotive. Subsequent expenses arising from non-recurring effects and restructuring measures of €10 million are expected, meaning that Group EBIT of between €220 million and €240 million is forecast.

Profitable and sustainable growth from 2015

As a leading European systems supplier for armed forces technology and a leading development partner for major international automotive manufacturers, both sectors find themselves in attractive growth markets. Rheinmetall Defence benefits from the ongoing need for substantial technical modernization of armed forces and new military deployment scenarios. For Rheinmetall Automotive, the regulatory trends toward the reduction of consumption and pollutants represent major opportunities for growth.

This sales and earnings potential is to be better exploited in future with the strategy program "Rheinmetall 2015", which focuses on internationalization, product innovations and cost efficiency.

From 2015, Rheinmetall expects average annual sales growth of 3% to 5%. The international share is expected to increase slightly in both sectors. Defence has set the target of generating about 50% of its sales from customers outside Europe. Automotive aims to increase its proportion of non-European sales to a third. For this purpose, Rheinmetall will consistently pursue its successful internationalization strategy, which it launched several years ago, and further strengthen its local presence in growth regions. At the same time, Rheinmetall will strive for improved profitability. For Defence, Rheinmetall expects an EBIT margin of between 7% and 9% from 2015. With a stable economic and market environment, an EBIT margin of 8% is targeted for Automotive.


Rheinmetall AG
Rheinmetall Platz 1
D-40476 Düsseldorf
Oliver Hoffmann
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