• Machinery & Plant Engineering very weak, but attractive products with future potential
• HIRSCH pallet ready for volume production and roll out
• Positive outlook with new products for climate protection
The third quarter 2007/08
The third quarter of fiscal 2007/08 saw sales up 3%. Given the higher financing expenditure and foreign currency exchange impact totaling 0.9 MEUR, the profit on ordinary activities (POA) for the quarter fell 1.9 MEUR to minus 1.4 MEUR. EPS Processing reported a marked increase in sales and EBIT, but Machinery and Plant Engineering has not yet succeeded in compensating for sharply declining individual machine sales with project business.
First to third quarter 2007/08
The POA for the first three quarters dropped to minus 2.87 MEUR (previous year: 2.55 MEUR), although sales rose 6% to 71.2 MEUR (PY: 67.4 MEUR).
In EPS Processing with the two divisions Packaging and Insulation, sales increased organically by 15.8%, with the figure up 9% in Packaging and 22% in Insulation.
EBIT rose 54% over the three quarters to 2.8 MEUR (PY: 1.8 MEUR). The turnaround achieved in the second quarter has been sustained, thus helping to increase the EBIT. These encouraging EBIT trends are expected to continue in the fourth quarter, which should result in EPS Processing ending the year as a whole with a positive POA. Due to exchange rate losses and higher interest paid, the POA fell to 0.07 MEUR (PY: 1.82 MEUR), despite sales rising to 58.5 MEUR (PY: 50.5 MEUR).
Board member Siegfried Wilding assumes responsibility for development in EPS Processing, effective June 1. He succeeds Peter Grabuschnig who served the company for over thirty years and now wishes to dedicate himself to other tasks outside the HIRSCH Servo Group.
This year the third pillar, Technology (Machinery and Plant Engineering), should complete the transition from purely a machine manufacturer to a solution provider in project business. Having initiated this realignment two years ago, the HIRSCH Servo Group has created the necessary diversification to compensate for capacity utilization problems in the individual machine business in the future. After selling the first mobile HIRSCH satellite plants in fiscal 2006/07, several more should follow this year. HIRSCH pallet manufacturing facilities achieved production readiness in May and preparations for roll out are now under way, which should have a positive impact on the coming financial year.
Sales were down 25% in the first three quarters to 12.6 MEUR (PY: 16.9 MEUR). The cause of the drop in sales is generally held to be the property crisis and the resultant reluctance to buy machinery for producing building materials (e.g. ICF production where HIRSCH is primarily operates) as well as the strong euro. The EBIT fell to minus 2.1 MEUR (PY: 1.0 MEUR), while the POA was down to minus 2.49 MEUR (PY: 0.73 MEUR).
The fourth division, Logistics, was set up in response to the growing demand for lightweight, eco-friendly transport devices. Preparations have been made for market launch of the HIRSCH pallets and manufacturing facilities, and support provided for developing various pallet prototypes . During the development stage, POA was down to minus 0.4 MEUR (PY: 0.0 MEUR). In the coming year sales should be generated for the first time and positive results achieved. In view of the great demand for plastic pallets, the growth potential of this division is reckoned to be higher than average.
The profit after tax saw a decline to minus 2.2 MEUR (PY: 1.9 MEUR), causing the balance sheet profit to fall to 11.9 MEUR (June 30, 2007: 15.3 MEUR). The equity ratio was down to 23,1% (June 30, 2007: 26,1%) as a result of the disproportionately low POA and disproportionately high investments for the period.
In the period under review, cash flow from operating activities of 2.8 MEUR (PY: -5.6 MEUR) was achieved.
At the reporting date March 31, 2008, the HIRSCH Servo Group employed 719 people (PY: 643). The annual average rose to 718 employees (PY: 587) with the increase almost entirely in EPS Processing.
In the period under review, the HIRSCH Servo Group invested 7.5 MEUR (PY: 13.7 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 the 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 quarterly 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 quarterly report was not checked by the auditor.
Profit and sales trends for the business segments:
|
|
Quarters 1-3 |
Quarters 1-3 |
Change in % |
|
POA |
2.55 |
-2.87 |
- |
|
EPS Processing |
1.82 |
0.07 |
-96 |
|
Technology (Machinery and Plant Engineering) |
0.73 |
-2.49 |
- |
|
Logistics and other activities |
- |
-0.45 |
- |
|
Sales |
67.4 |
71.2 |
+6 |
|
EPS Processing |
50.5 |
58.5 |
+16 |
|
Technology (Machinery and Plant Engineering) |
16.9 |
12.6 |
-25 |
|
Other activities |
- |
0.1 |
- |
|
Employees (annual average) |
587 |
718 |
+22 |
Outlook
A slightly negative profit on ordinary activities is anticipated for the full year, assuming that the payments for the project contracts are received as agreed. If there are delays in payments for all the projects in hand, the profit on ordinary activities could fall to minus 3 MEUR.
Regardless of the reporting date considerations at June 30, 2008, the HIRSCH Servo Group's growth process will be secured with innovative products. Not only is the EPS insulation market expanding due to the spiraling oil prices, but a new product with attractive growth potential is also 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 coming in and better capacity utilization as a result.
Machinery and Plant Engineering should receive the expected contract for a major project over the next few weeks, which will keep the Glanegg plant working to capacity for several months and improve profits.
Natural disasters and high oil prices have increased the demand for eco-friendly building materials, such as ICF systems. A new company is currently being set up, Global Green Built GmbH, that will sell mobile manufacturing facilities for them. A moderate increase is expected for this product group over 2007-08.
Since the pallet manufacturing facilities are now ready for volume production, marketing can start, which should be successful given the strong demand for plastic pallets. Once HIRSCH pallets have been approved in the United States, rapid market entry will also be aimed at there.
The management expects a substantial POA for the coming business year, building on the performance already shown. However, because of the strong dependence on projects it cannot be quantified in more detail.
As insulation activities are developing extremely well, the viability of building a second plant in Romania is currently being examined.
The next date on the financial calendar is October 31, 2008 when the results for fiscal 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