Reading time ( words)
July - September 2015 highlights
- Revenue increased 7.4% on the comparison period (7-9/2014), totalling EUR 225.9 million (EUR 210.2 million). The changes in consolidation exchange rates increased the revenue by approximately +9%.
- EBITDA before non-recurring items increased 4.1% on the comparison period (7-9/2014), totalling EUR 15.9 million (EUR 15.2 million) and 7.0% (7.2%) of revenue.
- Wiring Systems business segment’s EBITDA before non-recurring items increased 8.7% on the comparison period (7-9/2014), totalling EUR 16.9 million (EUR 15.5 million) and 7.9% (7.9%) of revenue.
- The acquisition of Groclin Wiring & Controls business (Kabel-Technik-Polska Sp. z o.o.) was completed and PKC’s joint venture Jiangsu Huakai-PKC Wire Harness Co., Ltd started its operations.
- Operating profit before non-recurring items decreased 11.6% on the comparison period (7-9/2014), totalling EUR 7.4 million (EUR 8.4 million) and 3.3% (4.0%) of revenue. PPA related depreciation and amortization was EUR 2.8 million (EUR 2.0 million)
- Diluted earnings per share were EUR 0.08 (EUR -0.73) including the impact of EUR -1.8 million non-recurring items (EUR -12.4 million non-recurring items and EUR -8.3 additional taxes).
- Cash flow after investments was EUR -39.9 million (EUR 0.9 million) including acquisition cash outflow amounting to EUR 22.0 million.
PKC Group’s outlook for 2015
PKC Group estimates that with prevailing exchange rates 2015 revenue will be higher than previous year level, and that comparable EBITDA will be higher than in 2014. In 2014, PKC’s revenue was EUR 829.5 million and comparable EBITDA before non-recurring items was EUR 48.6 million*. Revenue and EBITDA estimates are based on current business structure.
Matti Hyytiäinen, President & CEO:
In North America and Europe production of heavy-duty trucks during the third quarter grew on the comparison period but fell short of second quarter’s production volumes. However, production volumes of medium-duty trucks in North America and in Europe declined in comparison with both the comparison period and second quarter. In Brazil and China, production volumes of trucks were declining and fell short of comparison period.
PKC's operating profit before non-recurring items in January-September increased on the comparison period by 24.6% and was EUR 24.7 million. The Wiring Systems business EBITDA continued to improve although some production transfers in Europe have been delayed due to the customers’ approval processes. Brazil's operating loss has decreased quarter by quarter despite the fact that the sudden significant weakening of the Brazilian real in the beginning of the third quarter weakened the profitability while the sales prices are based on January-June 2015 average exchange rate. Closing of Curitiba factory in Brazil is progressing as planned and production will cease by the end of first quarter of 2016.
In the third quarter the level of the Electronics business's operating profit was impacted by unfavorable share of ODM products in the product mix due to a change in a customer's product strategy.
During the period PKC's executive board was strengthened and responsibilities were realigned to accelerate the company's growth.
The first growth projects in line with the PKC 2018 strategy were realized during the reporting period. Expansion in Asia progressed while a Chinese joint venture, Jiangsu Huakai-PKC Wire Harness Co., Ltd., began operations and the company is to reach the full speed by the end of the year. Despite current downturn in China's truck markets, wiring systems market value is growing due to increasing complexity of trucks’ electrification and higher quality requirements. PKC has the knowhow to respond to this market change and we are confident that new growth projects will be realized. Also the expansion to rolling stock markets took place with the acquisition of Groclin Wiring & Controls business including the Polish Kabel-Technik-Polska Sp. z o.o. Global rolling stock electrical cabinet, powerpack and electrical distribution system market is about EUR 2 billion annually. We see significant opportunities to grow organically and through acquisitions utilizing KTP's good customer relations to the world's leading rolling stock manufacturers.
In North America, the full-year production volume forecasts for trucks remain unchanged. In Europe, full-year production volumes are expected to be somewhat higher than the previous estimate, due to a slight increase in heavy-duty truck production volumes. In Brazil and China production forecasts have been reduced further.
Wiring Systems Business
In 2015 the production of heavy-duty and medium-duty trucks in Europe is expected to grow by about 10% compared to previous year’s level.
In 2015 the production of heavy-duty and medium-duty trucks in North America is expected to increase by about 6%, and production of light vehicles to increase by about 6% compared to 2014.
In 2015 the production of heavy-duty and medium-duty trucks in Brazil is expected to be clearly lower than previous year. The economic and political uncertainty in Brazil bear a significant risk for Brazilian truck sales to further drop in 2015.
The market demand for Electronics segment’s products is expected to remain on the current level at the most.
About PKC Group
PKC Group is a global partner, designing, manufacturing and integrating electrical distribution systems, electronics and related architecture components for the commercial vehicle industry, rolling stock manufacturers and other selected segments. The Group has production facilities in Brazil, China, Estonia, Finland, Germany, Lithuania, Mexico, Poland, Russia, Serbia and the USA. The Group's revenue in 2014 totalled EUR 829.5 million. PKC Group Plc is listed on Nasdaq Helsinki.