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© adam121 dreamstime.com Electronics Production | March 23, 2016

Leoni to restructure its wiring systems business

The provider of cables and cable systems managed to generate sales of EUR 4.5 billion, which represents a YoY growth of 10%.
Out of the growth, about 5.5% stemmed from Leoni's own resources, with increased demand from the automotive sector and numerous other industries

Earnings before interest and taxes (EBIT), however, dropped to EUR 151.3 million (previous year: EUR 182.5 million). The company explains this due to higher-than-planned expenses relating to new projects in the Wiring Systems Division in the third and fourth quarters. Leoni also mentions that these figures includes non-recurring income of EUR 19.6 million from the sale of a share in a plant. Consolidated net income amounts to EUR 77.3 million (previous year: EUR 115.1 million).

"2015 was a challenging year for the Company. Sales performance was encouraging, but earnings were disappointing. We are giving top priority to resolving the problems in our Wiring Systems Division: we have applied measures to achieve a sustained increase in efficiency," said Dieter Bellé, President & CEO of Leoni AG, at the group of companies' balance sheet press conference.

The Wiring Systems Division (WSD) increased its sales by 11% to EUR 2.668 million during 2015 (2014: EUR 2.400 million). The division saw an increase in sales to the export-heavyweight German carmakers during the year. The WSD also maintained its globalisation strategy by opening its fifth plant in Tieling, China, agreeing a joint venture in China and opening a production facility in Paraguay. The division also managed to get Asian carmakers Hyundai and Geely/Volvo as customers; in total, the division booked orders worth EUR 4.1 billion during the year under report.

The division's EBIT contracted to EUR 87.4 million in fiscal 2015, down from EUR 104.6 million in 2014 – which includes the non-recurring income from having sold a share in a plant.

The main reason for the significantly lower result involved increases in the costs of ramping up new projects. Dr Frank Hiller, member of Leoni AG's Management Board and in charge of the Wiring Systems Division, said: "We have launched a comprehensive efficiency programme to increase our profitability. Its implementation has already begun."

Leoni will now implement measures to raise the performance of the projects that are the principal cause of the adverse effect on earnings. The company will also improve processes in project planning and implementation, as well as streamline the matrix organisation to facilitate short decision-making processes, clear responsibilities and lower costs.

The package of measures aims to lead to a sustained increase in profitability, but in 2016 it will incur restructuring charges of about EUR 25 million.

“With the aim of strategic further growth, the division will sharpen the focus of its market activity and to that end will look into consolidating its portfolio. In addition to further strengthening of its position in the automotive cables market, the agenda includes expansion of select segments of industrial business,” the company writes in a press release.

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