Letter to Dürr AG Shareholders - Report of Dürr AG on the First Half of 1998
08/11/1998
- Sales and earnings significantly higher
- Record inflow of orders
- Market success with newly developed robot
Dear Shareholders,
Your company continued to develop well in the first six months of this year. Earnings before taxes come to DM 22.3 million, thus significantly surpassing (26.7 %) the comparable result for the year-earlier period (DM 17.6 million), with the first half of each year being the less profitable in plant construction due to the timing of invoice settlements.
Incoming orders are high at DM 1,449 million, thus registering a plus of 2.0 % over their year-earlier level (DM 1,421 million). The paint finishing systems and industrial cleaning systems divisions attained above-average incoming orders.The increases were primarily achieved in Germany and the Americas.
Consolidated group sales come to DM 756 million, which represents a 20.6 % increase over the preceding year's figure (DM 627 million).
Orders on hand stood at DM 2,896 million at the end of June. That is 24.4 % more than a year earlier (DM 2,328 million).Utilization of group capacities is thus assured well into the year 1999.
About DM 15 million were invested in plant, property, and equipment in the first half of the year (preceding year: DM 12 million). The main emphases of capital investment were an office and assembly building in Radom (Poland), expansion of our site in Ochtrup (Germany), the expansion of the headquarters' engineering division in Stuttgart, and modernization of our information technology systems.
The number of employees in the group rose to 3,787 at the end of the period under review. The acquisition of the exhaust air purification product division of Engelhard Corp. (USA) contributed to this. Additional personnel were also hired in Germany to cope with the increased volume of orders.
Positive market developmentThe markets of the Dürr Systems group (the Paint Finishing Systems divisions - Plant and Application - and the Automation and Conveyor Systems division) benefited again strongly in the first six months of this year from capital spending by the international automobile industry. In particular, a large number of projects were in the planning stage in Germany and Western Europe. The project situation was also good in North America. In Latin America, a consolidation of sorts has begun after the order boom of recent years. In Asia, a slackening of demand may be observed due to general development in the region. We were able to book some orders in China, however.
Success with our Ecopaint RobotThis paint finishing robot, developed by Dürr and launched on the market last year, has already registered good success worldwide. The Dürr Ecopaint Robot satisfies optimally the automobile industry's demands for flexibility regarding body type, variety of colors, and operating cost reduction. We have already received major system orders for this forward-looking product after one year on the market.
The Environmental Systems division has managed to further expand its leading market position. In particular, above-average incoming orders have been received from England. The division has sensibly added to its product range with the acquisition of the exhaust air purification division of US-based Engelhard Corp.. Dürr has also developed a unique product called "Total Solution", which takes care of all customer needs in the area of exhaust air purification.Under a leasing agreement, operators can obtain equipment tailored to their specific purposes and receive maintenance and long-term functional guarantees.
Corporate interests in Italy increasedWe increased our holdings in the successful Italian companies Olpidürr (from 49% to 65%) and Verind (from 25% to 37%) in June of this year.
Dürr Ecoclean's product range extendedThe Dürr Ecoclean group continues to steer an expansion course. In June, it acquired the largest American producer of emulsion and filtration equipment: Henry Filters, with headquarters in Ohio and a company in England. In the first six months of 1998, Dürr Ecoclean received the largest single order in its history. Ford Europe has ordered cleaning and deburring equipment for its plants in Chihuahua, Mexico and Dearborn, Michigan worth a total of about DM 20 million.
Representative office in Moscow, order from ELAZ-GMRussia is becoming a more and more interesting market for Dürr in view of the automobile industry's steadily increasing production volume there. We have therefore begun to set up a representative office in Moscow. Dürr received in July 1998 a general contracting order worth DM 50 million from ELAZ-GM, the Russian joint venture with General Motors, to build a new paint finishing plant in the Republic of Tatarstan.
OutlookThe Board of Management expects a positive development for 1998 as a whole. Conditions are good for a continuation of the growth trend. Dürr is currently examining the possibility of further acquisitions.
It now appears that the group's order inflow will be gratifying again this year in all business areas worldwide. In view of our good project situation and high orders on hand, we anticipate increases of sales and earnings over last year's results. The Board of Management expects more than proportionate earnings growth relative to sales.
Stuttgart, August 1998
Hans Dieter PötschChairman of the Board of Management
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