Wednesday, November 5, 2008

Rheinmetall: nine month performance slightly ahead of previous year

Rheinmetall: nine month performance slightly ahead of previous year

11/05/2008 --
At €2.8bn, group sales matched last year's total
EBIT increased to €163m
Net income improved to €85m, from €79m
Earnings per share (EPS) rose to €2.39, from €2.18

For the first nine months of 2008, and despite a deteriorating world economy, Düsseldorf-based Rheinmetall AG is able to report results slightly up from last year's level. The Defence segment, largely insulated from economic cycles, again made solid progress. The Automotive segment did not escape the general downturn in the industry which has been especially marked in the US market. With sales of €2.827bn, the Group's EBIT rose to €163m from €157m.

Klaus Eberhardt, CEO of Rheinmetall AG, comments: "Rheinmetall is showing stability even in these rather unsettled times. Although we cannot escape the difficult situation in the global Auto business, we have already responded to these challenges with cost-cutting measures and across-the-board use of our flexible working hour arrangements. The solid and sustainable progress of our international Defence business provides us with a significant degree of resilience even in a challenging economic environment."

Improved earnings, stable sales level

Group sales at €2.827bn year-to-date matched last year's level of €2.838bn. The Defence sector increased its sales by €34m or 3 percent to €1.177bn, Automotive generated sales of €1.65bn, a drop of 3 percent due to sharp production cutbacks in the USA.

The Rheinmetall Group's cumulative EBIT ytd advanced slightly, from €157 million to €163m, the EBIT margin improving from 5.5 to 5.7 percent. Net income for the same period added up to €85m (up by €6m or 7 percent). EPS jumped from €2.18 to €2.39.

The Group's headcount grew from 19,252 to 21,271, an increase of around 10 percent, mainly due to the takeover of a majority stake in South Africa's Denel Munitions (Pty) Ltd, which is consolidated for the first time in this reporting period.

The Defence sector generated 3Q sales of €1.177bn (up from €1.143bn). Organic growth in this sector during the period was helped primarily by additional business in the US and in simulation systems. For invoicing reasons, Q4 sales will once again exceed substantially the figures for each of the preceding quarters.

Order intake by Rheinmetall Defence during the first nine months was once more strong and order backlog at September 30, 2008, increased. Three-quarter order intake reached €1,125 million, down from the year-earlier €1,267 million which had been positively influenced by a large order at the Air Defence division. Order backlog climbed 13 percent to €3.349bn.

Defence's nine month EBIT of €108m was a significant €27m or 33 percent up on last year. The segment's EBIT margin rose year-on-year from 7.1 to 9.2 percent.

Year-to-date sales in the Automotive segment added up to €1,650bn, €45m down from last year's €1.695bn. For the period through September 2008, the decline was due mainly to the dramatic slump in auto production in the USA.

Automotive EBIT for the period totaled €66m, down €16m from €82m y-o-y. The reduction results from lower sales and the start-up costs for new engine blocks and exhaust-gas recirculation systems, plus a total of €4 million from the piston production relocation program concluded in June 2008.

Given the unexpected production cutbacks announced by European auto manufacturers for the rest of the year, the Automotive sector expects much weaker Q4/2008 sales than a year ago.

Group forecast for 2008: EBIT between €250m and €260m

In response to the Q4 drop in call orders by auto industry customers worldwide Rheinmetall AG no longer expects its Automotive sector to achieve its original sales and EBIT forecasts for this year. As of today, Rheinmetall is expecting an EBIT of around €80m for the Automotive segment and an EBIT of at least €180m for the Defence segment, together yielding a revised consolidated EBIT of between €250m and €260m as opposed to an original forecast of €280m to €290m. This revised estimate compares with 2007's total of €270m.

On the basis of the estimates so far publicly announced by its auto industry customers, Rheinmetall assumes that 2009 will prove to be a tough year for the industry with special challenges. The highly uncertain situation makes it presently impossible for Automotive to submit a reliable forecast for 2009 and hence reaffirm its medium-term goals. Defence, in contrast, is expected to continue to show solid and sustainable progress.

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