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- 10.9 per cent revenue growth to EUR 996.6 million
- Harding acquisition makes PALFINGER world market leader in maritime lifesaving equipment
- 14.7 per cent increase in EBITDA normalized by restructuring costs (EBITDAn) to EUR 131.1 million
- 3.4 per cent rise in consolidated net result to EUR 49.7 million
Performance of the PALFINGER Group
In the first three quarters of 2016, the PALFINGER Group posted further growth in a global environment that continued to be divergent. Revenue rose by 10.9 per cent to EUR 996.6 million, as compared to EUR 898.9 million in the first three quarters of 2015, thus setting a new record for a third-quarter result. In particular the positive development in Europe in almost all the product areas, as well as the acquisition of Harding, contributed to the expansion of business. However, the necessary restructuring in North America and the marine business had a negative impact on results.
Profitability still showed satisfactory development. EBITDA normalized by restructuring costs (EBITDAn) went up by 14.7 per cent to EUR 131.1 million, resulting in a margin of 13.2 per cent. Restructuring costs amounted to EUR 10.6 million, as compared to EUR 6.6 million (retrospectively calculated) in the same period of the previous year. EBIT thus increased by 11.7 per cent from EUR 77.3 million to EUR 86.4 million. The consolidated net result for the first three quarters of 2016 was EUR 49.7 million, 3.4 per cent higher than the previous year’s figure of EUR 48.1 million. Earnings per share came to EUR 1.33, as compared to EUR 1.29 in the previous year.
“The first nine months were characterized by revenue growth and an increase in operating profitability. Right now we are investing in restructuring processes in North America and the marine business in order to raise margins significantly there. We are striving to continue our long-term growth; particularly in the marine business, which we are going to develop into the strong second mainstay of the PALFINGER Group, we will achieve this through further acquisitions,” explains Herbert Ortner, CEO of PALFINGER AG, when asked to comment on the development of the first three quarters.
Performance by Segment
Starting with the third quarter of 2016, the performance figures of the PALFINGER Group will be broken down into the segments LAND and SEA as well as the HOLDING unit. This reflects organizational and management structures and also provides more transparency regarding future business development. On the earnings side, PALFINGER is placing more emphasis on the EBITDA ratio. For the purpose of comparability, EBITDA and EBIT have been normalized by restructuring costs, now showing investments in restructuring, acquisitions, integration and the adjustment of the business model, as well as actual profitability.
Performance LAND Segment
In the first three quarters of 2016, the LAND segment saw a year-on-year increase in revenue of 11.4 per cent from EUR 772.8 million to EUR 861.2 million. Normalized EBIT (EBITn) showed an extraordinarily strong growth of 26.9 per cent from EUR 84.6 million to EUR 107.3 million. As a consequence, the segment’s EBITn margin rose from 10.9 per cent to 12.5 per cent in the first three quarters of 2016. In the reporting period, restructuring costs amounted to EUR 4.0 million, as compared to EUR 3.8 million in the previous year.
In the first three quarters, PALFINGER achieved a growth in business in all the regions except for South America. In Europe, the acquisition of the Spanish sales partner MYCSA and the establishment of PALFINGER Iberica had positive impacts. Restructuring in North America has been progressing well and is expected to step up productivity at these sites provided that demand continues to be satisfactory. In previous months, intensive efforts have gone into product development for this region. In South America, PALFINGER is still operating in an extremely difficult market environment; a short-term recovery of the overall situation is not expected. The partnership with SANY has proven its worth in Asia, particularly in China, as a cornerstone of the positive development of business. In Russia/CIS, local value creation enabled further growth despite the challenging economic environment.
Performance SEA Segment
In the first three quarters of 2016, the revenue of the SEA segment increased by 7.3 per cent from EUR 126.2 million in the same period of the previous year to EUR 135.4 million. The segment’s contribution to the Group’s revenue came to 13.6 per cent, as compared to 14.0 per cent in the first three quarters of 2015. The acquisition of the Harding Group at the end of June facilitated the growth in revenue but had an additional negative impact on the segment’s result. The normalized EBIT (EBITn) recorded in this segment decreased by 70.4 per cent from EUR 10.9 million to EUR 3.2 million. The EBITn margin came to 2.4 per cent, as compared to 8.6 per cent in the first three quarters of 2015. The restructuring costs recorded in this segment amounted to EUR 3.0 million, as compared to EUR 0.4 million in the same period of the previous year.
The business environment of the SEA segment remained very difficult as a consequence of the strained situation in the oil and gas industry. In the period under review, the level of incoming orders receded in all areas. By taking targeted restructuring measures, PALFINGER plans to position itself for future upswings. The first measures, such as the consolidation of business operations and sites, are already being implemented, with the additional objective of tapping into potential synergies between the traditional marine business and the Harding Group.
Performance HOLDING Unit
In the HOLDING unit, the set of group functions that are bundled at headquarters, as well as strategic project costs incurred by this unit, affected EBITn by –EUR 13.6 million in the first three quarters of 2016 as compared to –EUR 11.5 million in the same period of the previous year. Following EUR 2.4 million in the first three quarters of 2015, the restructuring costs allocated to this unit amounted to EUR 3.5 million. In 2016, they mainly related to external consulting services in connection with the acquisitions planned and made in the SEA segment.
Outlook
The level of incoming orders gives reason to expect that in the fourth quarter of 2016 the PALFINGER Group will continue to record generally positive, albeit divergent, business development at regional level. Moreover, the acquisition of the Harding Group has resulted in an enormous expansion of PALFINGER’s business. However, the necessary restructuring measures, particularly in North America and in the marine business, will impact negatively on earnings.
For the 2016 financial year, the management still expects revenue growth of approx. 10 per cent, and an increase in earnings when normalized by integration and reorganization expenses. PALFINGER still sees the potential to increase the annual revenue generated by the Group, including the joint venture companies in China and Russia, by 2017.
