Aalberts Industries achieves EUR 18.3 million net profit

Highlights 1st half of 2009
- Revenue of EUR 701.0 million, maintaining the added value  margin
- Decline in organic revenue of 25% (at constant exchange rates)
- Operating profit before depreciation (EBITDA) EUR 73.8 million
(10.5% of revenue)
- Operating profit (EBITA) EUR 38.7 million (5.5% of revenue)
- Net profit EUR 18.3 million; earnings per ordinary share EUR 0.17
- Cash flow from operations EUR 44.4 million
- Maintenance of solid balance sheet ratios: total equity 35.2% of
total assets
 
Key figures  (before amortisation)              1H2009 1H2008 Change
in EUR x million                                                 in %
 
Revenue                                          701.0  913.2   (23%)
Added value (revenue minus raw materials and     410.4  534.5   (23%)
work subcontracted)
Added value margin in % of revenue                58.5   58.5
Operating profit before depreciation (EBITDA)     73.8  139.8   (47%)
EBITDA in % of revenue                            10.5   15.3
Operating profit (EBITA)                          38.7  105.7   (63%)
EBITA in % of revenue                              5.5   11.6
Net profit                                        18.3   66.7   (73%)
Average number of ordinary shares (x million)    106.1  103.3      3%
Earnings per ordinary share (x EUR 1)             0.17   0.65   (74%)
 
Cash flow from operations                         44.4   22.8     95%
Total equity as a % of total assets               35.2   31.2
Net debt (interest-bearing debt)                 787.7  886.2   (11%)
Leverage ratio: Net debt / EBITDA (12 month        3.9    3.0
rolling)
Interest cover: EBITDA / Net interest expense      5.1    7.4
(12 month rolling)
Net debt / Total equity                            1.3    1.5
Cash flow (net profit plus depreciation)          53.4  100.8   (47%)
Capital expenditure                               23.3   51.1   (54%)
Net working capital                              344.5  459.9   (25%)
Number of employees at end of period (x1)       10,140 11,899   (15%)
Effective tax rate in %                           21.4   22.3
 
Jan Aalberts, President  & CEO: 'Over  the last six  months, we  have
managed to  increase our  operational cash  flow and  achieved a  net
profit despite significantly lower levels of activities. Without loss
of the added value margin, our market position has been  strengthened
by additional sales  activities, new products  and processes, and  by
intensifying cross-selling.  In  addition,  costs  were  structurally
reduced in combination with organisational improvements and  specific
investments. By actively managing our working capital it was possible
to limit the normal seasonal build up in the first six months.
 
As a result of an organic  decline in the market and the  de-stocking
at our  clients,  Industrial Services  experienced  lower  production
volumes, which  reduced considerably  the efficiency  resulting in  a
negative result. In particular,  the level of  repeat orders was  too
low which could  only be  partially compensated for  by new  products
and/or processes.
 
Flow Control similarly experienced an organic decline in its markets;
and clients also ran  down their stocks. Due  to the introduction  of
new products, increasing  and accelerating the  cross-selling of  our
broad portfolio and its strong  presence in various market  segments,
Flow Control was  partially able to  compensate for the  fall in  the
market.
 
Due to the  measures we  took, we witnessed  an upward  trend in  the
second quarter's results. We are beginning to see a cautious recovery
in the volume of repeat orders.'
 
Financial results  (before amortisation)
Over the first six months, the group achieved a revenue of  EUR 701.0
million, 23% less than in 1H2008. The measures implemented, including
a reduction  of  the workforce  and  the introduction  of  short-time
working, resulted in a significant  reduction in the level of  costs.
The operating profit  before depreciation  and amortisation  (EBITDA)
was EUR 73.8  million  (1H2008:  EUR 139.8 million),  i.e.  10.5%  of
revenue. The operating profit  (EBITA) was EUR 38.7 million  (1H2008:
EUR 105.7 million), i.e. 5.5% of  revenue. The earnings per  ordinary
share were EUR 0.17 compared to EUR 0.65 for the first half of 2008.
 
Due to lower  interest rates,  a lower  build up  of working  capital
(EUR 27.3 million  compared to  EUR 107.7 million  in 1H2008)  and  a
lower  average  debt  position,  net  interest  expense  amounted  to
EUR 15.6 million,  a  fall  of EUR 4.9  million  compared  to  1H2008
(EUR 20.5 million).  In  mid-2009,  net debt  was  EUR 787.7  million
compared  to   EUR 886.2 million   in  mid-2008,   a   reduction   of
approximately EUR 100  million. Total  equity ended  up at  35.2%  of
total assets, interest cover  was 5.1 and  the net debt/total  equity
ratio 1.3.
 
Aalberts Industries has reached an agreement with its banks regarding
an adjustment to its covenants, which means the net debt/EBITDA ratio
(as at end of 2009: <4.5, mid-2010:  <4.0 and end of 2010: <3.5)  and
the interest margin have been adjusted.
 
Operational developments
Industrial Services
Due to  the  decline in  market  volumes and  strong  de-stocking  at
clients, Industrial Services experienced a decline in organic revenue
of 35% in the first six months compared to 1H2008. As a percentage of
revenue,  operating  profit  before  depreciation  and   amortisation
(EBITDA) was  4.5%  (1H2008:  16.9%)  and  operating  profit  (EBITA)
amounted to EUR 7.1 million negative.
 
In particular, activities  in the  precision engineering  industries,
and  the   automotive  and   semiconductor  industries   were  at   a
significantly lower level in the first half of 2009 than in  previous
years. The  developments  within  the  aerospace  industry,  and  the
medical and  energy  sectors  were  relatively  favourable,  enabling
activities focussing on these markets to remain reasonably stable. To
enhance its commercial  clout, Industrial  Services strengthened  its
organisation in  a number  of areas,  whereby the  focus was  on  the
growth of  market share  through intensified  sales efforts  and  the
introduction of  new customer  specific  products and  processes.  In
addition,  the  level   of  costs  in   various  sites  was   lowered
structurally.
 
Flow Control
Flow Control  was also  confronted by  challenging market  conditions
including the de-stocking at clients and, in the first six months, it
witnessed an organic revenue decrease by 21% in comparison to 1H2008.
By improving margins, intensifying the cross-selling  activities  and
introducing new  products  into  various  market  segments,  such  as
sprinkler and  sustainable energy  systems, the  market position  has
been  strengthened.  In  addition,  organisational  improvements  and
enhanced efficiency  contributed to  a  reduction of  the  structural
costs and  stocks were  run  down. As  a  percentage of  revenue  the
operating  profit  before  depreciation  and  amortisation   (EBITDA)
amounted to 12.6% (1H2008: 14.5%) and operating profit (EBITA)  ended
up at EUR 45.8 million.
 
Being active in a range of market sectors, such as district  heating,
the medical industry,  irrigation, utility,  solar energy,  sprinkler
systems and construction, Flow Control's results were varied. In  the
Benelux, Germany and France it  fared relatively well, mainly due  to
its strong  position  and  the  focus being  on  the  renovation  and
maintenance markets.  In  Scandinavia,  de-stocking  at  clients  was
noticeable and a large number  of new group products was  introduced.
Certain countries, such as Russia and Ukraine, were severely affected
by a lack of financial resources. In Italy and, in particular, Spain,
where the group has a relatively small position, the market continued
to be very challenging. This dip in the market was partly compensated
for by an increase in revenue from high-quality sanitary products. In
the United  Kingdom,  there  was a  visible  downturn  in  commercial
projects, but exports and  cross-selling were intensified. The  North
American  market   stabilised  at   a  low   level.  Currently,   the
introduction of new  (cross-sell) products and  the strengthening  of
the market approach by offering a complete portfolio are being worked
on intensively.
 
Capital expenditure
Investments in tangible fixed assets amounted to EUR 23.3 million  in
the first  six  months,  a  sharp decline  when  compared  to  1H2008
(EUR 51.1 million). Over the last  few years, considerable sums  have
been invested in new technologies, capacity expansion and efficiency,
as a result of which investments can be made on a lower level for the
moment.
Employees
In mid-2008,  there were  11,899 employees.  Due to  the  exceptional
market circumstances in the  past twelve months,  the number of  jobs
has been reduced by approximately 1,750 to 10,140 by mid-2009.
 
Outlook
Given  the  current  economic  circumstances  and  the  corresponding
uncertainties, it is not possible to give an outlook for the whole of
2009.  The  extra  sales  efforts,  organisational  improvements  and
structural reduction  of costs,  will enable  Aalberts Industries  to
emerge strengthened  from  the  current  market  situation  when  the
economy improves.
 
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