Disappointing end to fiscal 2018 for Leoni

In the fourth quarter of financial year 2018 Leoni recorded preliminary sales of EUR 1.2 billion and preliminary earnings before interest and tax (EBIT) of EUR -19 million. For the full 2018 financial year, the company generated preliminary sales of EUR 5.1 billion (2017: EUR 4.9 billion), preliminary EBIT of EUR 144 million (2017: EUR 227 million which includes an exception benefit of approximately EUR 30 million). “Our 2018 result is very disappointing and unacceptable. The issues are significantly more serious than previously evident and the surprisingly negative development in the fourth quarter, particularly in our Wiring Systems division, highlights the necessity for a comprehensive performance program,” said Aldo Kamper, President and CEO of Leoni AG. For the financial year 2018, the company had most recently estimated sales of about EUR 5.0 billion, EBIT of approximately EUR 196 million. Based on preliminary calculations, the Wiring Systems Division (WSD) generated sales of EUR 772 million in the fourth quarter of 2018 (Q4/2017: EUR 806 million) and incurred an EBIT of EUR -26 million (Q4/2017: profit of EUR 27 million). In total for the financial year 2018, the division generated sales of EUR 3.2 billion (2017: EUR 3.1 billion) and an EBIT of EUR 80 million (2017: EUR 118 million). These results were unexpectedly affected, particularly in the fourth quarter, by higher-than-planned ramp-up costs, particularly at Leoni’s new plant in Mexico, decline in individual plant performance and under delivery on cost savings targets. The Wire & Cable Solutions (WCS) Division generated sales of EUR 470 million in the fourth quarter (Q4/2017: EUR 469 million) and an EBIT of EUR 9 million (Q4/2017: EUR 14 million). For the financial year 2018, the division recorded sales of EUR 1.9 billion (2017: EUR 1.9 billion) and EBIT of EUR 66 million (2017: EUR 105 million including a non-recurring adjustment of EUR 24 million). This deterioration of earnings was based, among other factors, on an unfavourable product mix and write-downs related to copper inventories due to price declines. “Leoni has enormous potential, but we must act now to secure our future,” Kamper said. “In the months ahead, we will be concentrating on stabilising the Company with a particular focus on Mexico. As a first measure we have set up a dedicated team of experts on site. As a further consequence, Karl Gadesmann and I together will actively engage in the operations of WSD. In addition, we are immediately implementing a stricter cost discipline at the Company. We will define and implement further measures in the coming weeks and will provide more details on these on 19 March,” Kamper added. Based on the preliminary results for the financial year 2018 and the current market environment, the company projects sales of about EUR 5.2 billion for 2019. Due to a higher burden, primarily from project ramp-up costs in Mexico, before adjustments from the performance and strategy program Value21, Leoni forecasts an EBIT between EUR 100 million.