This is a summary of the second quarter 2013 published today. The complete second quarter 2013 report with tables is available at http://investor.cavotec.com/results.cfm.. Investors should not rely on summaries only, but should review the complete reports with tables.
- Record Revenues amounting to EUR 67,418 thousands in 2Q13, up 23.2% (2Q12: 54,712).
- Order Intake increased to EUR 57,920 thousands (2Q12: 50,635).
- Operating Result (EBIT) rebounded reaching EUR 6,607 thousands, up 29.6% compared to 2Q12 (5,100).
- Operating Margin (EBIT) in the quarter increased to historical levels at 9.8%.
- Strong Order Book EUR 102,434 thousands (FY12: 99,145).
- Book to bill ratio 1.03x
A comment from our CEO
2Q13 turned out to be a record quarter in Cavotec's history, despite an increasingly competitive market environment and on-going global economic turbulence. Revenues amounted to EUR 67,418, up 23.2% on the same period last year, while order intake increased to EUR 57,920, which is 14.4% higher than 2Q12.
Improving our margins remains at the forefront of the Group's focus. We have made good progress in bringing them closer to historic levels, and are committed to strengthening this trend going forward.
As highlighted in previous reports, the ongoing integration and strengthening of our INET operations in the US continued to put pressure on profitability in 2Q. As part of this process and due also to an increase in demand for INET systems we have taken proactive actions to strengthen local management, rationalise production and purchasing procedures, and further emphasise our global standards for products and systems. Once this is completed in 4Q13, including the merger of INET and Dabico operations in the US as well as a move to new facilities, the streamlined entity will be one of the strongest players in the ground support equipment market.
Following this rationalization we will be ideally positioned to deliver advanced, integrated systems to both the international and domestic market in the US, an area where we see a great deal of opportunity as the US airports sector starts to devote more resources to infrastructure investment.
2Q13 Summary of activities
The Ports & Maritime market unit (MU) enjoyed a strong quarter, with a substantial increase in revenues amounting to EUR 32,325. This was due in large part to the completion of the MoorMaster™ automated mooring project in the Mediterranean, and the first delivery of MoorMaster™ units for the St. Lawrence Seaway project announced in 4Q12.
The period saw two substantial MoorMaster™ orders in addition to Alternative Maritime Power (AMP) and cable reel orders in China, Singapore, the US and elsewhere.
One of these projects — a bulk-handling application in northern Norway — carries a considerable financial value. The other, also in Norway, is for two passenger ferry berths. This project demonstrates the value customers attach to Cavotec's unique scope for innovation: not only does this application incorporate MoorMaster™ units, it also features an automated AMP system that will use sensors to connect a new-build battery-powered ferry to shore-based electrical power supply.
As already communicated, Ports & Maritime's Oil & Gas sub-unit also won an a significant order to commission, supply and install stainless steel drag chains as part of an extensive upgrade of a Statoil oil platform in the North Sea. This project, along with increasing order volumes for Cavotec radio remote control units for oil and gas applications, indicate a growing demand for Cavotec's the on- and offshore products going forward.
Cavotec's Airports MU reported an increase in revenue to EUR 17,438 in the quarter. This strong performance was boosted by the near completion of the upgrade project at Phoenix International Airport, where Cavotec INET Pre-conditioned Air (PCA) central systems have been installed on approximately 40 US Airways-operated aerobridges.
Reflecting the state of global commodity markets, Cavotec's Mining & Tunnelling unit posted a 22.6% fall in revenue to EUR 7,393 compared to the same period last year. As major mining groups postpone capital expenditure, this has a knock-on effect for Cavotec seen in reduced demand from OEMs in the period.
The General Industry unit saw revenues dip 8.8% quarter-on-quarter to EUR 10,262. While this unit's performance was softer during the period, it is registering growing interest for its products for the defence sector, and for its electrical vehicle charging systems.
Aimed at strengthening long-term growth and performance the Group continues to make substantial investments focussed on Airports and Ports & Maritime. While we expect revenues and order intake to grow with approximately 10% in 2013, these investment costs are putting pressure on the Group's operating margins. Moving forward into 2014 and beyond, we believe these investments will ultimately strengthen our market position as well as our overall performance.
To meet evolving market trends and expand our market share, we have continued to focus on providing turnkey solutions and broaden our after-sales services offering. We continue to make significant investments in maintaining a highly skilled and qualified workforce, improving our engineering capacity and further strengthening the structure and global footprint of the Cavotec network.
Our investments in the BRIC countries are displaying considerable growth potential in a number of sectors. For example, in Brazil, where the Group recently established a full-time presence, Cavotec is already seeing a marked uptick in activity: a development that looks set to continue in the months ahead.
Turning to the outlook for specific MUs; for Ports & Maritime, the trend in manufacturing returning to Europe and the US continues, resulting in a slow down in the growth rate of containerisation.
However, port authorities and shipping lines are continuing to push for higher productivity and efficiency through greater automation and utilisation of larger container ships. These trends provide excellent opportunities for Cavotec, as there will be a renewed focus on upgrading port infrastructure, ship efficiency and environmental performance.
For Airports, continuing investment to boost efficiency and sustainability at airports in Brazil, the Middle East, China and elsewhere is set to drive demand for Cavotec ground support equipment (GSE). Another important factor for this MU is the renewed focus on airport infrastructure in the US, a key area that is being revived following years of underinvestment.
The downturn in capital expenditure by large mining companies will continue to soften demand for Mining & Tunnelling in FY13, with delays in investment likely to persist until commodity prices pick-up.
General Industry will continue to provide solid day-to-day business; a forecast that is in line with our projections. Going forward, this unit anticipates interesting progress in the defence and other developing sectors.
Overall, despite concern over growth in certain markets, we maintain a cautiously positive outlook for the Group for the immediate period, supported by the positive trend in Order intake. We remain alert to opportunities in new and emerging sectors, especially for Airports and Ports & Maritime, and increasingly in the oil and gas segment. Our technological and engineering expertise, backed by our extensive global network, ensures that Cavotec is ready to continue its growth in the years ahead.
The Americas registered a strong growth in revenues for the second quarter amounting to EUR 15,626 thousands (2Q12: 10,140) while order intake was subdued as a consequence of lower activity in Ports & Maritime. Gross operating result was negatively affected by the ongoing restructuring of the INET operations, driving the quarterly result to negative EUR 1,787 thousands compared to positive EUR 301 thousands in 2Q12.
Europe & Africa continued to deliver strong results with revenues reaching a new record at EUR 54,526 thousands and order intake at EUR 52,912 thousands. The region benefited from strong demand in the Oil & Gas market and from the Far East. Gross operating result increased from EUR 4,657 thousands to EUR 6,253 thousands, an increase of 34.3%.
MoorMaster significantly contributed to the strong quarterly performance of the Middle East & India region with revenues up 62.2% and a gross operating result amounting to EUR 1,121 thousands (2Q12: loss EUR 29 thousands). Order intake was somewhat subdued as the award of several big projects was postponed to the second half of the year.
In Australasia the slowdown in the mining sector was more than compensated by the strong performance of MoorMaster. Revenues in the region increased 72.7% over the same period of the previous year while the gross operating result reached EUR 1,076 thousands compared to EUR 307 thousands in the second quarter of 2012.
Far East delivered a strong performance in the quarter with revenues and order intake increasing significantly from the previous year, driven by high activity levels in Ports & Maritime. Gross operating result amounted to EUR 1,471 thousands in the quarter and EUR 2,473 thousands in the first half, thereby doubling the result of the previous year.
Revenues, earnings & profitability
Revenues reached a new record in 2Q13 amounting to EUR 67,418 thousands compared to EUR 54,712 thousands, an increase of 23.2%. Likewise, the operating result reached EUR 6,607 thousands, up 29.6% compared to 2Q12 but negatively influenced by the cost of the on-going litigation, integration and investment costs relative to the build up of infrastructure and delivery capability. Operating margin returned to historical levels at 9.8%. Interest expenses were nearly offset by the positive exchange fluctuation and net profit amounted to EUR 4,711 thousands.
Revenues reached 120,594 thousands in 1H13 following the completion of some large projects in Ports & Maritime (revenues up 62.4% compared to 1H12) and Airports. Organic growth was 19.4% while acquisitions contributed 0.4% and negative exchange detracted 0.7%. Operating result amounted to EUR 7,269 thousands compared to EUR 8,186 thousands in 1H12. Tax rate decreased to 30.1% compared to 34.2% in 1H12 as a consequence of higher profitability in lower tax countries. Net interest expenses were lower in the period benefitting from lower base rates and the higher weight of floating rate debt, which was partially offset by the increased average debt. Net profit reached EUR 5,042 thousands in 1H13, compared to EUR 4,897 thousands in 1H12.
Operating cash flow was negative at EUR 6,003 thousands compared to positive EUR 2,948 thousands in 1H12. This is a reflection of increased inventory and working capital to support a higher level of activity. After the significant investments completed in 2012, cash flow from investing activities returned to its historical trend, amounting to EUR 1,341 thousands compared to EUR 5,482 thousands in 1H12.
Net debt increased to EUR 33,422 thousands from EUR 30,814 thousands in 1Q13 as a consequence of working capital movements. The capital reduction was paid at the beginning of July 2013. Net debt/equity ratio ended at 31.4% and the last twelve months rolling ratio (Net debt/EBITDA) remained unchanged compared to 1Q13 at 1.59x.
Cavotec's workforce increased by 55 persons in the first half of 2013, mainly to reinforce the US operations. June 30, 2013 ended with 945 full time equivalent employees compared to 895 in 1H12
For the full 2Q13 Report, please download it from: http://investor.cavotec.com/results.cfm
For further details please contact:
Michael Scheepers - Director, Investor Relations & Corporate Communications
Cavotec is a leading global engineering group, developing innovative technologies that enable the maritime, airports, mining and tunnelling, and general industry sectors to operate productively and sustainably.