© leoni Business | March 23, 2017

Leoni 'upbeat' but fraud case weighs in with EUR 40 million

Leoni fulfilled its operating targets for 2016 and takes an upbeat view of the medium-term trend for its own business activities.
The sales of EUR 4.43 billion for the year under report (2015: EUR 4.5 billion) exceed the projected level of EUR 4.4 billion slightly. Both divisions generated more than 3 percent organic growth. However, the adverse effects of changes in the copper price and exchange rates ultimately led to a marginal sales decrease.

In terms of earnings before interest and taxes (EBIT), Leoni beat its forecast of EUR 65 million with a figure of EUR 78.1 million (2015: EUR 151.3 million).

Exceptional factors, particularly restructuring expenses of EUR 31.4 million as well as the losses due to the fraud case of approx. EUR 40 million, had a starkly defining effect on the achieved result.

On an adjusted basis, EBIT improved by about 12 percent to EUR 160.2 million (2015: EUR 143.6 million). The bottom line was a figure of EUR 10.5 million, down from EUR 77.3 million in 2015.

“The year 2016 presented Leoni with all sorts of challenges, which incurred exceptional charges. However, we are satisfied with our operating performance and are also confident that we will be back on track to success in 2017,” said Dieter Bellé, President and CEO of Leoni AG, during the company’s balance sheet press conference.

Capital spending down from the previous year

In the 2016 financial year, Leoni again invested a substantial EUR 211 million in property, plant and equipment as well as intangible assets, although this was down by about 15 percent compared with the previous year (EUR 248 million). This investment related mainly to the expansion of wiring systems production capacity in China, North Africa and Eastern Europe and rebuilding work at the plant in Kitzingen, Germany. Among other things, the WCS Division enlarged its capacity to produce standard automotive cables, commissioned a PVC processing line in China and began its installation of an irradiation crosslinking line in India.

Financial and asset situation: free cash flow affected by one-offs

The fraud case and the restructuring programme weighed heavily on operating cash flow during the period under report. Free cash flow was down from negative EUR 5.2 million in fiscal 2015 to negative EUR 40.3 million in 2016. Adjusted for the outflow due to the fraud case and restructuring, free cash flow was positive. Due primarily to the significantly lower profit and negative valuation factors involving pensions and foreign exchange, equity decreased by about 8 percent to EUR 916 million during the period under report (2015: EUR 996 million); the equity ratio stood at 31 percent on the reporting date, down from 35 percent in the year before.

Forecast: Short and medium-term increases in sales and EBIT

For the current year, Leoni projects sales of about EUR 4.6 billion, equating to growth of approx. 5 percent, as well as significantly improved consolidated EBIT of between EUR 180 and 200 million. Alongside the additional profit contributions from increased sales, the absence of the fraud-case losses of about EUR 40 million as well as a return of restructuring expenses to a normal measure from last year’s EUR 31.4 million will exert a positive effect on income.

Improvements in the Wiring Systems Division stemming from lower overheads as well as exceptional benefit from the sale of Business Group Electrical Appliance Assemblies and insurance compensation in connection with the fraud case with also contribute. The Company projects positive free cash flow despite higher capital expenditure of approximately EUR 250 million.
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December 13 2018 1:08 pm V11.10.14-2