• Deterioration of general economic conditions slows EPS Processing in third quarter
• Customers in Technology segment show continued reluctance to invest
• Financial crisis delays project business in Logistics business segment
• Negative EBIT expected from today's perspective
• Great potential for the future with energy-saving products
First to Third Quarter 2008/09
In the third quarter of fiscal year 2008/09, the HIRSCH Servo Group did not succeed in maintaining the positive sales momentum of the first half of the year. All the business segments posted lower sales and earnings due to the economic slowdown. EPS Processing reported a considerable drop in demand in the area of packaging, increased pressure on margins and a fall in insulation sales caused by the weather. In the Technology business segment, customers continued to be reluctant to invest due to the financial crisis, as had been seen towards the end of the second quarter, with the result that the revenue figures are still negative. The Logistics business segment did not yet generate any income in the first three quarters. Sales were down some 7% to 66.4 MEUR (PY: 71.2 MEUR). The operating profit (EBIT) fell to -1.94 MEUR (PY: 0.32 MEUR) and the profit on ordinary activities (POA) to -6.44 MEUR (PY: -2.87 MEUR).
|
Sales and Earnings Trends |
Quarters 1-3 |
Quarters 1-3 |
Change in % |
|
Sales |
71.2 |
66.4 |
-7 |
|
EPS Processing business segment |
58.5 |
56.1 |
-4 |
|
Technology business segment |
12.6 |
10.3 |
-18 |
|
Logistics business segment |
0.0 |
0.0 |
- |
|
Other activities |
0.1 |
0.1 |
- |
|
EBIT |
0.32 |
-1.94 |
- |
|
EPS Processing business segment |
2.72 |
1.44 |
-47 |
|
Technology business segment |
-2.02 |
-1.75 |
- |
|
Logistics business segment |
-0.38 |
-1.63 |
- |
|
Other activities |
0.00 |
0.00 |
- |
|
POA |
-2.87 |
-6.44 |
- |
|
EPS Processing business segment |
0.07 |
-2.40 |
- |
|
Technology business segment |
-2.49 |
-2.40 |
- |
|
Logistics business segment |
-0.45 |
-1.64 |
- |
|
Other activities |
0.00 |
0.00 |
- |
|
Employees (annual average) |
718 |
705 |
-2 |
The profit after tax fell to -5.71 MEUR (PY: -2.24 MEUR) and the balance sheet profit declined to 5.18 MEUR (June 30, 2008: 11.36 MEUR).
The equity ratio dropped to 16.6% (June 30, 2008: 23.0%).
In the period under review, cash flow from operating activities of 9.1 MEUR (PY: 2.8 MEUR) was achieved.
At the reporting date March 31, 2009, the HIRSCH Servo Group employed 658 people (PY: 719), with the annual average falling to 705 (PY: 718 people). The reduction in staff is the result of temporary capacity adjustments and part of an extensive cost cutting program.
In view of the global economic downturn, maintaining liquidity is top priority. The HIRSCH Servo Group invested 5.4 MEUR in the period under review (PY: 7.5 MEUR). Expansion of the Slovakian plant was completed in March.
Business Segment Development in the First Three Quarters 2008/09
In the EPS Processing business segment with the two divisions EPS Packaging and EPS Insulation, the sales growth of the first half year did not continue in the third quarter due to the economic conditions and the weather. In addition to a substantial decline in demand for packaging, greater pressure on margins and lower insulation sales caused by the weather, the gas crisis in January with production stops in Slovakia and Hungary made the situation even more difficult. Capacity was therefore adjusted immediately and, once the plant expansion in Slovakia had been completed, the manufacturing facility concept for insulation was changed to streamline processes, which should have an impact in the medium term.
Compared with the same period last year, sales were down some 4% to 56.1 MEUR (PY: 58.5 MEUR) and EBIT to 1.44 MEUR (PY: 2.72 MEUR). The POA fell to -2.40 MEUR (PY: 0.07 MEUR), primarily due to 1.7 MEUR (PY: -0.6 MEUR) exchange losses.
Following a typically weak first half of the year in the Technology business segment, sales continued to fall in the third quarter, resulting in a decrease in turnover of around 18% to 10.3 MEUR (PY: 12.6 MEUR) for the period under review. The uncertainty among customers caused by the crisis in the financial markets also led to a reluctance to invest in the third quarter. As the cost cutting program took effect, EBIT improved slightly over the same period the previous year to -1.75 MEUR (PY: -2.02 MEUR). The POA however remained virtually unchanged at -2.40 MEUR (PY: -2.49 MEUR).
The Logistics business segment with the two product groups Satellite Plants and Pallet Activities did not yet generate any income in the period under review. Owing to general funding problems, there were no signs of recovery, particularly as far as major projects are concerned, not even among contracts that have already been signed.
Global Green Built GmbH, which supplies mobile manufacturing plants and also provides additional services, expects to win contracts in the medium term from the existing project inquiries. The same applies to the automatic plastic pallet production plants which the company started marketing at the end of 2008.
Outlook
Given the global economic downturn and customers' reluctance to buy as a result, the Management anticipates negative EBIT for the 2008/09 business year from today's perspective. They explicitly stated that the forecasts are subject to risks caused by the financial crisis, which can lead to the actual results differing from the predictions. Definitive developments up to June 30 and also for the coming fiscal year are difficult to predict because of the continuing generally difficult market conditions and the resultant postponement of a major project.
HIRSCH sees itself as a group of companies with four business segments, EPS Packaging, EPS Insulation, Technology and Logistics, which all have great potential for saving energy. They are also strategically well positioned internationally, making them well placed to ride out the recession.
In the medium term the innovations, particularly those in logistics, have huge potential for the future. There are for example excellent market opportunities worldwide for mobile manufacturing plants, especially in emerging markets. They are used to produce EPS formwork blocks locally for building ecological homes quickly and cost effectively (green housing). Similar growth potential is expected for transport pallets made of polystyrene which are lighter and easier to recycle, giving them significant ecological and logistic benefits over other pallets.
In connection with the contingent liabilities of 1.4 MEUR shown in the 2007/08 annual report and arising from legal action by the seller of a Polish plant, a settlement of 140 TEUR was agreed. This settlement payment is already included in the results for the first half year. Other changes did not occur in the contingent liabilities and contingent claims shown in the 2007/08 annual report.
The third quarter report meets the requirements of IAS 34. In addition, the same accounting practices and valuation methods were used as for the 2007/08 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 third quarter report was not checked by the auditor.
Announcement regarding 3rd Quarter 2008/09 Report
The third quarter 2008/09 report covering the period from July 1, 2008 to March 31, 2009 can be downloaded from www.hirsch-gruppe.com from Friday, May 29, 2009 and is also available from HIRSCH Servo AG, 9555 Glanegg Nr. 58, Austria or Bank Austria Creditanstalt AG, Vordere Zollamtstrasse 13, 1030 Vienna, Austria.
The next date on the financial calendar is October 30, 2009 when the results for fiscal 2008/09 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