Hansen Transmissions: Statement for the 3 months ended 30 June 2009
Hansen Transmissions International NV announces its Interim Management Statement for the 3 months ended 30 June 2009. The financial information reported in this release is presented in EURO and has been prepared in accordance with the recognition and measurement criteria of IFRS as adopted by the European Union. The accounting policies and methods of computation followed for the 3 months ended 30 June 2009 are the same as those followed in the consolidated annual accounts as per 31 March 2009. The financial information in this release is unaudited; the statutory auditor has conducted a limited review for the period. The interim report is in compliance with IAS 34.
HIGHLIGHTS Q1 2010
# Revenue 136 million EUR compared to 139 million EUR for the same period in the previous year
# Underutilized capacity has brought EBITDA margin down to 5.2 % compared to 15.5% for the same period in the previous year
# Several cost containment measures are being implemented to maintain flexibility, align the cost structure and support EBITDA margin and cash flow
# First success in China with order for domestic wind turbine manufacturer
# Adjustment of current year's guidance - from previously low to moderate revenue growth - to flat revenue for the full financial year 2010
# The Company remains confident about the long term dynamics of the wind industry
Ivan Brems, CEO of Hansen Transmissions commented:
"In this first quarter, we experienced the dual effect of the current credit environment on our business: first, customers in the wind industry reviewed their requirements for gearboxes as a result of lower turbine orders; secondly, customers reduced their inventory levels in order to manage their working capital situation.
At current output levels Hansen is faced with idle capacity for the first time in recent years, and this inevitably has had an impact on our profitability. While operating conditions are likely to remain challenging, we are actively pursuing cost containment measures in order to align our cost structure to the current environment and support EBITDA margin and cash flow.
Although the current market conditions do not support the efficient utilization of the recently added manufacturing capacity, we expect this situation to ease in the second half of this financial year as a result of improved market dynamics, and we will be able to ramp up production rapidly thereby benefiting from the recent expansion of our capacity. We remain confident about the long term dynamics for the wind industry. As one of the most efficient and high quality manufacturers of one of the key components for that industry we are well positioned for the future."
The Group's results for the first quarter of the financial year 2010 were significantly impacted by lower than expected volumes.
When reviewing the current interim management statement it should be noted that since the start of the previous financial year, in line with the strategy outlined at the IPO, Hansen has added manufacturing capacity both in India and China, resulting in a higher overall cost base.
HANSEN TRADING UPDATE
in € 000
For the three months
30 June 2009
For the three
30 June 2008
30 June 2009
31 March 2009
Net Working Capital
Net Financial Debt (3)
(1) EBITDA = earnings before interest, tax, depreciation & amortisation
(2) EBIT = EBITDA after depreciation & amortisation
(3) Net Financial Debt = calculated as cash & cash-equivalents minus long- & short-term financial debts.
Revenue decreased by 2% in the first quarter of the financial year 2010 compared to the same quarter last year. This decrease is entirely in the sales of wind turbine gearboxes.
In the first quarter of the current financial year, the Company experienced further reduction of scheduled deliveries of wind turbine gearboxes with Hansen working with customers to manage their requirements in line with the current operating and credit environment
Recently, the Company accomplished a first success in the Chinese wind market with a new contract for a domestic turbine manufacturer. The agreement covers the delivery of prototypes of multi MW gearboxes before December 2009 and the delivery of serial products as from calendar 2010. Hansen believes this contract underlines the increasing awareness in the growing Chinese wind market in favour of high quality gearboxes.
With revenue approximately stable, the Company's fixed cost absorption rate of overheads deteriorated. The lower profitability for the quarter is due to the lower capacity utilization. Two new wind gearbox factories were built in India and China, resulting in additional depreciation, fixed operational and general administrative costs.
MEASURES TO REDUCE THE COST BASE AND IMPROVE CASH FLOW
In order to maintain flexibility, align its cost structure to the current environment and support its EBITDA margins and cash flow, Hansen continues to actively pursue cost containment measures, including:
# Supply chain costs optimization;
# Temporary unemployment for blue collar employees (under Belgian legislation);
# Savings programmes on general expenses; and
# Inventory reduction.
In addition, the Company is aligning its white collar workforce to the economic reality, resulting in a potential white collar headcount reduction in Belgium of approximately 15%. The consultation procedure with the Union representatives in Belgium has started on 15 May 2009 and is expected to be finalized in August 2009.
The full effect of these cost containment measures on recurring margins is expected as from the third quarter of the current financial year and additionally the Company will continue to explore and exploit further cost reduction opportunities.
In the first quarter of the financial year 2010, the Company incurred one-time costs of EUR 0.8 million relating to expansion projects. These costs are included in EBITDA and EBIT.
The increase in working capital in the first quarter of the financial year 2010 is mainly driven by a decline in trade payables. Given the current short term outlook and the Company's initiatives to improve working capital levels, the Company has started to reduce its inventory levels, which has resulted in lower purchasing volumes.
Inventory levels have started to decrease since 31 March 2009 and are expected to decrease further over the coming quarters.
Accounts receivables have further increased since 31 March 2009 caused by overdue customer payments. The Company has several arrangements in place with customers to address this situation.
The Company's cash levels remain solid. The reduced sales volumes, the overdue customer payments and the reduction of trade payables have resulted in a higher than expected net debt situation which is anticipated to reduce over the coming quarters.
The Company has put in place certain arrangements in response to the announcement made by Suzlon Energy Limited on 15 June 2009 that it is evaluating alternatives regarding its shareholding in Hansen and that this may or may not lead to Suzlon disposing of some or all of its stake in Hansen to a third party.
These arrangements include the constitution of an Independent Committee of the Board of Directors and the appointment of Goldman Sachs International and Bank of America Merrill Lynch as its financial advisers.
The Company remains confident in the projected medium and long term growth prospects of the international wind power market. Hansen's strong product offering and the quality of its customer base ensure that the Company remains well positioned in this market.
Given the continued impact of the adverse credit environment on the wind turbine industry the Company has adjusted its financial year's guidance - from previously low to moderate revenue growth - to flat revenue for the full financial year 2010.
The current market conditions do not support the efficient utilization of the manufacturing capacity, and the Company expects these conditions to continue during the second quarter. The Company anticipates that this situation will ease in the second half of this financial year as a result of improved market dynamics.
Hansen Transmissions International NV
De Villermonstraat 9
2550 Kontich - Belgium