Aalberts Industries N.V.: Aalberts Industries achieves sharp improvement of results

Thu Aug 12, 2010 2:00am EDT

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Headlines 1st half of 2010
- Revenue increases organically by 12% to EUR 782 million 
- Added value* margin improves substantially to 60.9% 
- Operating profit before depreciation (EBITDA) up by 55% to EUR 114.0 million 
- Operating profit (EBITA) up by 110% to EUR 81.1 million
- Net profit increases by 180% to EUR 51.3 million 
- Earnings per ordinary share up by 182% to EUR 0.48 
- Improved balance sheet ratios and sharp decrease leverage ratio to < 3.0 
- Industrial Services shows a robust recovery with an organic revenue growth of 23% 
- Flow Control realises an organic revenue growth of 7%
- Announcement of intended acquisition of Conbraco Industries (United States)

 Key figures(before amortisation)                                   1H2010  1H2009     Δ% 
 in EUR million                                                                           
 Revenue                                                             782.0   701.0    12% 
 Added value*                                                        476.3   410.4    16% 
 Added value* margin in % of revenue                                  60.9    58.5        
 Operating profit before depreciation (EBITDA)                       114.0    73.8    55% 
 EBITDA in % of revenue                                               14.6    10.5        
 Operating profit (EBITA)                                             81.1    38.7   110% 
 EBITA in % of revenue                                                10.4     5.5        
 Net profit                                                           51.3    18.3   180% 
 Average number of ordinary shares (x million)                       106.7   106.1     1% 
 Earnings per ordinary share (x EUR 1)                                0.48    0.17   182% 
 Total equity as a % of total assets                                  40.2    35.2        
 Net debt                                                            666.6   787.7  (15%) 
 Leverage ratio: Net debt / EBITDA (12 month rolling)                 2.98    3.93        
 Interest cover: EBITDA / Net interest expense (12 month rolling)      7.7     5.1        
 Net debt / Total equity                                               1.0     1.3        
 Cash flow (net profit plus depreciation)                             84.1    53.4    58% 
 Capital expenditure                                                  22.4    23.3   (4%) 
 Net working capital                                                 331.7   344.5   (4%) 
 Number of employees at end of period (x1)                          10,568  10,140     4% 
 Effective tax rate in %                                              22.3    21.4        

*Revenue minus raw materials and work subcontracted


Jan Aalberts, President & CEO: "During the first six months of this year we made sharp
progress compared to 2009. Revenue rose organically by 12% to EUR 782.0 million and our
added value margin improved substantially to 60.9% (1H2009: 58.5%). During the first six
months of this year our net profit almost tripled to EUR 51.3 million (1H2009: EUR 18.3
million). This robust improvement was mainly due to the increased demand for our
products, systems and processes, stringent cost control, a further strengthening of our
global market positions and a continued focus on sales efforts. 


Net profit during the first half of 2010 was virtually the same as during the whole of
2009 (EUR 54.2 million). This proves the strength of our strategy and portfolio, despite
the changeable and sometimes mediocre market conditions in some countries and segments. 


Industrial Services' activities improved significantly. Operating profit (EBITA) rose to
EUR 24.3 million compared with EUR 7.1 million negative in 1H2009. Flow Control's
activities also improved and an EBITA of EUR 56.8 million was achieved compared with EUR
45.8 million in 1H2009.


To sum up: during the first half of 2010 the foundation for our future was strengthened
further through not only an increase in revenue and net profit but also a substantial
reduction of the leverage ratio (Net debt/EBITDA), stronger balance sheet ratios and
market positions that, thanks to our current potential, offer considerable scope for
expansion. Our strategy of profitable growth, both organically and through acquisitions,
will be continued."


Financial results(before amortisation) 
Revenue  During the first six months of 2010 Aalberts Industries achieved an organic
revenue growth of 12% to EUR 782.0 million compared with the first half of 2009. At
constant exchange rates this amounts to a growth of 10.1%.  


Added value  During the first half of 2010 added value (revenue minus raw materials and
work subcontracted) rose by 16% to EUR 476.3 million (1H2009: EUR 410.4 million). The
added value margin rose to 60.9% of revenue (1H2009: 58.5%).


Operating profit  Operating profit before depreciation and amortisation (EBITDA) rose by
55% to EUR 114.0 million (1H2009: EUR 73.8 million), 14.6% of revenue (1H2009: 10.5%).
Operating profit after depreciation and before amortisation (EBITA) more than doubled to
EUR 81.1 million (1H2009: EUR 38.7 million), 10.4% of revenue (1H2009: 5.5%).


Net interest expense  In the first half of 2010 the net interest expense decreased
further to EUR 13.9 million (1H2009: EUR 15.6 million) due to lower interest rates and a
lower average debt position (despite working capital being increased by over EUR 76


Balance sheet ratios and covenants  Mid 2010 total equity amounted to 40.2% of the
balance sheet total (1H2009: 35.2%). Net debt was EUR 666.6 million compared with EUR
787.7 million in mid 2009. Aalberts Industries amply complies with its bank covenants. 


During the past twelve months the primary financial ratios developed as follows:
- Leverage ratio: Net debt / EBITDA (twelve months rolling) from 3.93 to 2.98;
- Interest cover ratio: EBITDA / net interest expense (twelve months rolling) from 5.1
to 7.7;
- Gearing: Net debt / total equity from 1.3 to 1.0. 


Net profit  Net profit over the first half of 2010 amounted to EUR 51.3 million (1H2009:
EUR 18.3 million) and earnings per ordinary share amounted to EUR 0.48 (1H2009: EUR


Capital expenditure and cash flow  In the first six months of 2010 capital expenditure
on property, plant and equipment amounted to EUR 22.4 million compared with EUR 23.3
million in 1H2009. In recent years significant sums have been invested. As a result the
current level of investment is lower, partly in view of the fact that the capacity has
not yet been fully utilised. 


In the first half of 2010 net working capital was EUR 331.7 million (1H2009: EUR 344.5
million) and cash flow (net profit plus depreciation) amounted to EUR 84.1 million
(1H2009: EUR 53.4 million). 


Operational developments
Industrial Services  During the first six months of 2010 Industrial Services' revenue
rose organically by 23% (22.8% at constant exchange rates) to EUR 225.0 million (1H2009:
EUR 182.3 million). Operating profit before depreciation and amortisation (EBITDA) was
EUR 37.9 million (1H2009: EUR 8.2 million), 16.8% of revenue (1H2009: 4.5%). Operating
profit (EBITA) amounted to EUR 24.3 million (1H2009: EUR 7.1 million negative), or 10.8%
of revenue (1H2009: 3.9% negative).


Industrial Services supplies products, systems and processes to specific market
segments, such as the semiconductor and automotive industries, the medical sector, the
aerospace and defence industries, the precision engineering sector and the sustainable
energy market. This is achieved with the aid of a number of specialised and
complementary technologies. Demand rose sharply, especially in the semiconductor and
automotive market. The precision engineering market also showed signs of recovery. The
medical sector and the defence market remained reasonably stable while certain segments
of the aerospace industry still showed no improvement. Within Industrial Services the
focus is on continuously increasing the added value margin by constantly improving the
revenue, quality and service, with relatively fewer employees. 


Flow Control  Despite virtually every country experiencing a harsh winter during the
first quarter of 2010, Flow Control improved both its revenue and its profit. During the
first six months of 2010 revenue rose organically by 7% (5.6% at constant exchange
rates) to EUR 557.0 million (1H2009: EUR 518.7 million). Operating profit before
depreciation and amortisation (EBITDA) amounted to EUR 76.1 million (1H2009: EUR 65.6
million), 13.7% of revenue (1H2009: 12.6%). Operating profit (EBITA) amounted to EUR
56.8 million (1H2009: EUR 45.8 million), or 10.2% of revenue (1H2009: 8.8%).


Flow Control focuses on a complete portfolio for residential new-build, commercial
buildings, renovation and maintenance, solar energy, utility networks, district heating,
fire protection, irrigation systems, the beer and soft drinks industry and other
industries. Despite the market being challenging in most sectors, Flow Control achieved
a relatively strong organic revenue growth and with it an increased market share. This
was primarily due to the introduction of new 'own' products, a further intensifying of
cross-selling and a focus on strengthening the sales efforts. The result was an improved
added value margin. The efficiency measures implemented included the clustering of sales
and distribution channels and intensifying the key account management.


In Western and Northern Europe the markets were hesitant. Although the markets in
Eastern Europe improved slightly they remained difficult due to the limited availability
of liquidity for new-build projects and the long, hard winter. The markets in Southern
Europe continued to suffer from the effects of the financial crisis. In the United
States the irrigation market showed signs of recovery while the markets for both
residential and commercial buildings remained hesitant. In Asia Flow Control responded
pro-actively to the many golf course projects. In the beer and soft drinks industry a
number of new projects were carried out for existing customers, partly based on new
products and intensive cooperation between Europe and the United States.


The intended acquisition of Conbraco Industries in the United States, announced 2 June
2010, was completed successfully on 15 July 2010 and upon closing of the books,
accounting effects and disclosures will be determined. With more than 1,000 employees
Conbraco Industries generates an annual revenue of approximately USD 200 million.
Conbraco Industries' results will make a direct contribution to earnings per share and
will be consolidated with effect from July 2010. 


The number of employees on 30 June 2010 was 10,568 (1H2009: 10,140). 


Structural cost reductions, organisational improvements and growth as a result of a more
active market approach and earlier investments, have further strengthened Aalberts
Industries' foundations.
Based on the current, but admittedly fluctuating, developments in the various markets
and countries, and barring unforeseen circumstances, Aalberts Industries anticipates the
result for 2010 will be significantly better than for 2009. 
Solid balance sheet ratios will be maintained through a continuing focus on
profitability, working capital management and cost control.


Full press release including Interim Financial Statements 2010