Tuesday, August 12, 2008

Rheinmetall's H1/2008 performance again improved


Rheinmetall's H1/2008 performance again improved

Sales at €1,885 million slightly over the H1/2007 figure
Defence with marked earnings growth
EBIT up by over €6 million to €102 million
Net income upgraded by 19 percent to €54 million
Earnings per share (EPS) grows by 19 percent to €1.50
Favourable forecast for the full year confirmed
In the first half of 2008, a period overshadowed by economic woes, Düsseldorf-based Rheinmetall AG delivered a very good performance. With group sales at €1,885 million, earnings again rose. Therefore, the Group confirms its favourable forecast for the fiscal year 2008.

In H1/2008, EBIT at Rheinmetall rose by just over 6 percent to €102 million, equivalent to an EBIT margin of 5.4 percent (up from 5.1 percent). EBT improved 11 percent to €76 million; net income advanced 19 percent from €46 million to €54 million. As a consequence, EPS improved from €1.26 to €1.50.

Klaus Eberhardt, CEO of Rheinmetall AG comments: "The first half of 2008 was a very successful period for the Rheinmetall Group. Although we did not fully escape the consequences of the weaker US auto climate, we did appreciably improve our group results. Particularly our Defence sector with its long-range projects is proving a stable mainstay. This is why we are highly confident for the last six months of 2008 and the future; therefore, we reconfirm our group performance forecast for all of 2008 and our medium-term goals. Especially in uncertain times, Rheinmetall remains a solid investment."

Order intake exceeds sales

At €1,885 million, H1/2008 group sales were slightly above the €1,881 million generated during H1/2007. Contributing revenue of €737 million (up from €719 million), the Defence sector helped consolidate the again high level of sales. Automotive generated sales of €1,148 million and, adjusted for exchange-rate effects and despite a partly sluggish market, remained at H1/2007 levels.

With new orders valued at €1,980 million in H1/2008, Rheinmetall again exceeded its sales. The order backlog as of June 30, 2008, amounted to €3,789 million, 13 percent above the level one year ago.

Defence with appreciable earnings rise

Defence continued its profitable growth during H1/2008. In a period of normally weaker sales for invoice-timing reasons, sales in this business rose €18 million to €737 million. Boosted in particular by international business, six-month EBIT exceeded the 2007 level by €16 million or 42 percent to reach €54 million. As a consequence, the H1 EBIT margin climbed from 5.3 percent a year earlier to 7.4 percent in 2008.

In Q2/2008, the order intake in the Defence sector again rose substantially, with new orders valued at €467 million (year-on-year up 44 percent). For the first six months, order intake amounted to €829 million, almost level with the €874 million achieved during H1/2007, which had included an exceptionally large order.

Projects initiated during the first half of the year to advance strategic development and internationalisation of Defence activities, are fully on track. The expansion of Rheinmetall's involvement with the largest cross-border project for military vehicles in Europe has become effective in May this year with the acquisition of all Stork PWV B.V. shares, a Dutch tank builder. The company now operates as Rheinmetall Nederland B.V. The planned takeover of 51 percent of South Africa's Denel Munitions (Pty) Ltd. is expected to be completed during the current quarter.

Automotive business stable

In a challenging sector environment, Automotive delivered an altogether very solid performance. At €1,148 million, H1 sales were only slightly short of the €1,162 million delivered during the same period last year. Sales declines due to the poor state of the US market were offset by production growth in other regions, especially the BRIC countries.

EBIT at Automotive for H1/2008 totaled €56 million (down from €60 million last year). However, earnings were eroded by plans, agreed in June 2008, to restructure small-piston production in Neckarsulm and Hamburg (a one-off burden of €4 million).

Outlook for FY 2008 unchanged

Given the continued strong operational capability of its Defence and Automotive businesses, Rheinmetall fully expects to sustain organic growth within the Group, mainly driven by the Defence business. Stronger headwinds in the Automotive unit contrast with brighter prospects in Defence on the basis of H1 results. As a consequence, the Group's EBIT forecast of between €280 million and €290 million budgeted for the full year is reconfirmed. In view of the general economic climate, the Automotive sector is expected to generate an EBIT margin at the prior-year level; Defence is expected to gain further in profitability.

The medium-term goals for the Rheinmetall Group of a 9 percent EBIT margin and a 20 percent ROCE by 2010 are confirmed.

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