• Contact
• Locations
• German

Business figures for the first nine months of 2004 (US GAAP) - Dürr improves earnings significantly

11/12/2004

• Nine-month sales at previous year's level
• Unplanned expenses dampen earnings
• Gross margin improved
• Bundling competencies in Final Assembly Systems and Ecoclean

The Dürr Group achieved earnings before taxes (EBT) of Euro 9.1 million in the first nine months of 2004 despite unplanned expenses. Compared with the previous year's period, that means an improvement of Euro 10.7 million on unchanged sales of about Euro 1.5 billion. For the full year, Dürr expects earnings before taxes in a range of Euro 8-12 million due to the unplanned expenses.

"Dürr business developed well in its breadth over the first nine months," summarized Dürr AG CEO Stephan Rojahn. "We view the most recent problems in the Ecoclean and Final Assembly Systems business units above all as a challenge and an obligation to consistently push ahead with risk reduction under our SPRINT SQUARE earnings enhancement program to avoid weak points in the execution of future orders," Rojahn added.

Sales at previous year's level

Consolidated sales in the first nine months of 2004 amounted to Euro 1,529.8 million and thus remained at the previous year's level (Euro 1,529.6 million). Adjusted for currency effects, sales would have risen by 3.5% to Euro 1,582.9 million. Consolidated incoming orders reached Euro 1,310.7 million. Orders on hand amounted to Euro 1,187.0 million as of September 30, 2004. As expected, both these figures fell short of the previous year's unusually high levels (incoming orders: Euro 1,918.8 million; orders on hand: Euro 1,735.2 million), which were heavily influenced by a large paint systems order from General Motors.

Gross profit margin improved

The group's gross profit margin increased to 16.5 % in the first nine months of 2004 (previous year: 16.3 %) despite higher raw material prices. Selling, administrative, and other operating expenses decreased by 5.0 % to Euro 218.4 million (previous year: Euro 229.9 million) primarily as a result of SPRINT SQARED. . Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose to Euro 47.7 million (previous year: Euro 40.3 million).

Unplanned expenses dampen earnings

Earnings before taxes for the third quarter amounted to Euro 0.8 million, after the two previous quarters finished at Euro 4.3 million and Euro 4.0 million. However, the decline is not the result of weaker earning performance on the part of the overall group, but is rather due to unplanned expenses incurred by problems in the execution of particular orders in the Ecoclean and Final Assembly Systems business units. Altogether, the unplanned expenses amounted to Euro 12-14 million. The earnings figure as of September 30, 2004 includes Euro 10.8 million of that, while the remaining expenses will be booked in the fourth quarter. Consolidated earnings for the first nine months of 2004 were additionally burdened by restructuring expenses of Euro 2.0 million (previous year: Euro 1.6 million). Those expenses were mainly incurred in the third quarter for capacity adjustments at Ecoclean (Euro 0.9 million), Measuring Systems (Euro 0.7 million), and Paint Systems (Euro 0.4 million).

Long-term financing secured

The group's financing structure was put on a new foundation at the beginning of the third quarter. A corporate bond in the nominal amount of Euro 200 million and a syndicated loan in the amount of Euro 400 million now give Dürr long-term financing security and greater financial maneuvering room. Dürr has used the two interlinked transactions to retire a very large part of its short-term liabilities to banks and proactively diversify its financing structure.

Overview of business units

In the first nine months of 2004, the Paint Systems business unit managed to acquire relatively large orders in Germany, China, Spain, Russia, and Portugal as well as in the United States. As expected, total incoming orders were, at Euro 575.4 million, below the previous year's figure (Euro 1,188.5 million), which was heavily influenced, however, by a large order from General Motors. While total sales, at Euro 841.5 million, remained at the previous year's high level (Euro 841.2 million), earnings before taxes increased by Euro 8.6 million to Euro 22.4 million primarily as a result of SPRINT SQARED.

In the Final Assembly Systems business unit, total incoming orders fell on sluggish business development to Euro 221.6 million, after having reached Euro 351.1 million in the previous year's period primarily due to a large order from General Motors. Total sales amounted to Euro 253.8 million and thus fell slightly short of the previous year's level (Euro 262.9 million). Nevertheless, earnings before taxes rose slightly to Euro 2.6 million on the same period a year earlier (Euro 2.0 million). Earnings development was impaired in the first nine months by unplanned expenses in the amount of Euro 5.5 million at US subsidiary Dürr Production Systems. They are the result of unexpected problems of execution involved in the launch of final assembly products on the North American market.

The Services business unit managed to increase total incoming orders and sales by about 7 % in the first nine months of 2004 to Euro 114.1 million each (previous year: Euro 106.2 million each). Adjusted for exchange rate effects, i.e., calculated at the previous year's exchange rates, the increase would have amounted to 14 %. The newly developed business area of transportation equipment management in the United States made the largest contribution to growth. Earnings before taxes declined to Euro 4.1 million (previous year: Euro 5.0 million). Besides exchange rate effects, advance outlays for the entry into transportation equipment management were primarily responsible for that.

Against the background of an improved market situation in North America and focused selling activities, the Ecoclean business unit managed to increase total incoming orders by 11.6 % to Euro 147.1 million (previous year: Euro 131.8 million). On the other hand, total sales decreased from Euro 150.0 million to Euro 131.1 million. Earnings before taxes for the first nine months of 2004 amounted to Euro -3.5 million and thus fell short of the previous year's figure by Euro 6.5 million. Unplanned expenses in the amount of Euro 5.3 million in the Coolant Filtration product line contributed primarily to this significant decline.

In the Measuring Systems business unit, total incoming orders rose in the first nine months of 2004 by 8.9 % to Euro 304.1 million (previous year: Euro 279.2 million). The growth was supported by the continuing positive trend in Asia, and especially in China, and a market upturn in North America. At Euro 269.8 million, total sales were also above the previous year's level (Euro 253.8 million), with all three product lines contributing to the increase. Earnings before taxes were still negative in the amount of Euro 5.4 million, but they improved after successful restructuring by Euro 7.6 million compared with the previous year's period. In the third quarter, they were positive in the amount of Euro 0.1 million (previous year: Euro -1.2 million), Measuring Systems will also improve its earnings significantly in the full year and reach the break-even point.

Outlook

For 2004 as a whole, the Board of Management expects consolidated sales of slightly more than Euro 2 billion. Because of the unplanned expenses in the Ecoclean and Final Assembly Systems business units, the target for earnings before taxes has now been set at Euro 8-12 million, after a previous guidance of over Euro 18.7 million.

Bundling competencies at Final Assembly Systems and Ecoclean

Under the SPRINT SQUARED program, measures are being taken in the Final Assembly Systems and Ecoclean business units to bundle competencies and improve operating processes. In the case of Final Assembly Systems, the business of Dürr Production Systems (DPS) is being integrated into North American affiliate Acco Systems. In this way, structural cost advantages are being realized, and responsibilities centralized, which is expected to increase project mastery and reduce the margin of error. The same applies for the Ecoclean business unit, where the control of all product lines is being concentrated. Thus, the Coolant Filtration product line is to be directed from one location in the future. The two measures will enable tighter management across all process levels and significant efficiency gains. Dürr CEO Stephan Rojahn declared, "By bundling competencies in the Final Assembly Systems and Ecoclean business units, we are taking up a central point of the SPRINT SQUARED program, which we are implementing in various individual measures throughout the group. By systematically bundling decision-making capacities with experienced managers, we will improve processes and minimize business risk."

The Dürr Group is one of the world's leading suppliers of production systems and manufacturing support services for the automotive industry. In 2003, Dürr achieved sales of almost Euro 2.3 billion with about 12,750 employees.

The complete report on the first nine months of 2004 is available at www.durr.com.