• Machinery - change to solution provider in project business
• Positive outlook with new products and new plant in Czech Republic
The first half year 2007/08
The HIRSCH Servo Group reports an increase in sales and a decrease in operating profit (EBIT) for EPS Processing and a weak start albeit typical for the season for Machinery and Plant Engineering in the first half year. The POA (profit on ordinary activities) dropped in total to minus 1.47 MEUR (previous year: 2.05 MEUR), although sales rose 7% to 47.3 MEUR (PY: 44.3 MEUR).
In the primary business segment EPS Processing, sales increased organically in both divisions (Packaging and Insulation). The 11% rise in sales achieved in the Packaging division during the first six months reflects general market trends, as electronics and domestic appliance manufacturers continue to expand capacity in Eastern Europe. Contrary to the generally difficult market situation, the Insulation division succeeded in increasing sales by 16%.
The warehouse that burnt down in Wroclaw in October 2007 was rebuilt by February 2008 and the damage covered by the insurers.
Over the first six months, the EBIT fell 9% to 1.8 MEUR (PY: 2.0 MEUR). Following a 17% drop in EBIT in the first quarter, the EBIT was up 9% in the second quarter compared with the same period the previous year. The positive EBIT development is expected to continue in the second half of the year, as capacity utilization should rise and the agreed price increases and cost cutting measures take effect. Due to exchange rate losses and higher interest paid, the POA fell to minus 0.06 MEUR (PY: 2.05 MEUR) despite sales in the primary business segment rising to 39.0 MEUR (PY: 34.5 MEUR).
During the current fiscal, the Machinery and Plant Engineering business segment should complete the transition from being purely a machine manufacturer to a solution provider in the project business. Following the sale of the first mobile HIRSCH satellite plants in 2006/07, the company is not only expecting to sell several more HIRSCH satellite plants this year, but also the first facilities for automatic pallet production.
Reporting sales down 16%, the segment got off to a weak start typical however for the season. Turnover was extremely low in the first quarter at 2.7 MEUR, but sales rose to 5.5 MEUR in the second quarter. Given the order book situation and preparations in the project business, capacity utilization is expected to be good for the second half year. The EBIT fell to minus 1.0 MEUR (PY: 0.1 MEUR), while the POA was down to minus 1.23 MEUR (PY: 0.00 MEUR). The drop in POA was the result of higher trade show expenditure and interest paid than in the previous year of around 0.5 MEUR and of the decrease in sales, which were down to 8.2 MEUR (PY: 9.8 MEUR).
The profit after tax saw a decline to minus 1.1 MEUR (PY: 1.7 MEUR), causing the balance sheet profit to fall to 13.0 MEUR (June 30, 2007: 15.3 MEUR). The equity ratio was down 24.3% (June 30, 2007: 26.1%) as a result of the disproportionately low POA for the period, the disproportionately high investments for the period and the dividend payments.
In the first half year cash flow from operating activities of 3.4 MEUR was achieved (PY: -1.6 MEUR).
At the reporting date December 31, 2007, the HIRSCH Servo Group employed 714 people (PY: 595 people). The annual average rose to 718 employees (PY: 570) with the increase almost entirely in EPS Processing.
In the period under review, the HIRSCH Servo Group invested 6.7 MEUR (PY: 10.2 MEUR). The investments were aimed at expanding capacity in Slovakia, Poland and in Machinery and Plant Engineering to meet the new demands in the project business. Around 1 MEUR was spent on developing a prototype line for automatic pallet production.
Changes did not occur in the contingent liabilities and contingent claims shown in the 2006/07 annual report.
The half year report meets the requirements of IAS 34. In addition, the same accounting practices and valuation methods were used as for the 2006/07 annual report.
No events of particular significance occurred after the reporting date that would have led to a different portrayal of the net assets, financial position and results of operations.
The half year report was not checked by the auditor.
Profit and sales trends for the business segments:
|
|
1st half year |
1st half year |
Change in % |
|
POA |
2.05 |
-1.47 |
- |
|
EPS Processing |
2.05 |
-0.06 |
- |
|
Machinery and Plant Engineering |
0.00 |
-1.23 |
- |
|
Other activities |
- |
-0.18 |
- |
|
Sales |
44.3 |
47.3 |
+7 |
|
EPS Processing |
34.5 |
39.0 |
+13 |
|
Machinery and Plant Engineering |
9.8 |
8.2 |
-16 |
|
Other activities |
- |
0.1 |
- |
|
Employees (annual average) |
570 |
718 |
+26 |
Outlook
A positive result is expected for the full year. Given the change in activities from purely a machine manufacturer to a solution provider in the project business, the significant impact of these activities on the group result and the substantially more difficult predictability of the project business, no POA forecast will be given. Over the coming months, management expects extremely positive contributions from the preparatory effort that was put in to develop the new business activities.
Regardless of the reporting date considerations at June 30, 2008, the HIRSCH Servo Group's growth process will be consistently implemented. In the successful EPS Insulation division, a new product with attractive growth potential is to be rolled out in fall 2008. In the EPS Packaging division profitability should continue to rise in the coming business year with additional orders and better capacity utilization as a result. Capacity utilization should be steadier in Machinery and Plant Engineering also due to the development of the project business. Once pallet manufacture starts, the pallet plants – some of which will be installed in the HIRSCH Servo Group –should also play a role in increasing the value of the company.
To continue the growth process and complete the Eastern European production network, a greenfield investment for packaging and insulation to the tune of 10 MEUR is planned in the Czech Republic.
The next date on the financial calendar is May 30, 2008 when the results for the third quarter 2007/08 will be announced.
*The HIRSCH Servo Group is the EPS specialist on the Vienna Stock Exchange with manufacturing facilities in Austria, Hungary, Poland, Slovakia, Italy and Romania. EPS products (EPS stands for expandable polystyrene and is better known under the brand name of Porozell®) support a variety of functions, including energy savings, as well as sustainable and eco-friendly growth. Their wide-ranging applications cover packaging, shape-molded parts, building insulation, modular boards for underfloor heating, construction blocks, Thermozell® lightweight concrete products and transport pallets.
For further information, please contact Michaela Promberger, Tel: +43 4277 2211-312,
Fax: +43 4277 2211-370, E-mail: michaela.promberger@hirsch-gruppe.com,
www.hirsch-gruppe.com