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© Leoni Electronics Production | October 22, 2018

A volatile market forces Leoni to rethink its guidance

The German cable manufacturer says that it has adjusted its guidance for fiscal 2018 to the latest market and business developments.
The reassessment of sales and EBIT is due mainly to a volatile market setting, which, among other factors, is attributable to a weaker trend in the Chinese car market, international trade conflicts and the impact of the new WLTP cycle, the company states in an update.

Despite difficult economic conditions, the Leoni outperformed the market with organic sales growth of 7.7% in the first nine months of 2018. Moreover, the Wiring Systems Division (WSD) generated an order intake worth about one billion euros in the third quarter, about one third of which in the electromobility sector.

In the period from July to September, the beginning of a production ramp-down for a vehicle model supplied on a large scale as well as reduced orders from European carmakers at the end of the third quarter led to a flattening in sales growth and put pressure on earnings.

Based on preliminary figures for the third quarter of 2018, sales supported by a high copper price fell short of expectations amounting to EUR 1.2 billion (Q3/2017: EUR 1.2 billion), as did EBIT with EUR 38 million (Q3/2017: EUR 45 million). Free cash flow in the same period amounted to negative EUR 141 million (Q3/2017: negative EUR 35 million) due to ongoing, substantial investment in new capacity and modernisation as well as an increase in working capital.

At present, it is to be expected that the volatile market conditions and ongoing pre-production spending to realise future growth will result in a heavier burden by yearend. The company therefore now projects that consolidated sales will be up only slightly to about EUR 5.0 billion instead of at least EUR 5.1 billion (2017: EUR 4.9 billion). From today’s perspective, EBIT will amount to about the level of EUR 196 million. The latest estimate for 2018 EBIT was expected to be in the lower half of the range between EUR 215 and 235 million.
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November 15 2018 5:25 pm V11.9.0-1