In the first half of the financial year 2011 the PALFINGER Group managed to continue the positive development recorded primarily since the beginning of 2010. By comparison with the first half of 2010, huge growth in both revenue and earnings was achieved. The economic growth continued to spur demand, on the one hand, and the measures implemented in previous years took effect on the other. By reducing costs and increasing flexibility, PALFINGER was preparing to face volatile markets, which materially supports sustainable and profitable growth both now and in the future.
“As evidenced by the results, the first half-year was extremely positive as a whole. We are particularly pleased with the success achieved in several previously weak fields: Primarily the business unit Hookloaders where we achieved sustainable turnaround and the area North America where, based on our intense market development efforts, we recorded a positive result for the first time in the second quarter”, says Herbert Ortner, CEO of PALFINGER AG, on the highlights of the reporting period.
At EUR 414.3 million, first-half revenue was 39.3 per cent above the figure reported in the first half of 2010, when revenue was EUR 297.4 million. Around one third of this increase was due to inorganic growth through acquisitions made in 2010. Organic growth in revenue was generated largely in Europe, though a positive trend was observed in all the regions.
In the first six months of 2011, EBIT (incl. associated companies) came to EUR 36.0 million as compared to EUR 14.5 million in the same period of 2010, equivalent to more than a doubling of the earnings before interest and taxes. The consolidated net result was more than tripled, rising from EUR 7.3 million in the first half of 2010 to EUR 22.6 million in the period under review.
A comparison of performance over the individual quarters provides convincing evidence of a continuous upward trend since the beginning of 2010. In the second quarter of 2011, revenue came to EUR 222.7, reaching the highest level in PALFINGER’s history. The exceptionally large boost in EBIT including associated companies, made an increase in EBIT margin to 9.4 per cent possible in the second quarter of 2011.
The Group’s performance in Europe reflects marked growth in demand. While many countries recorded exceptionally high increases in revenue on this basis, Spain, Portugal, Greece, Romania and Ukraine remained weak.
Development of demand was also positive in all product areas in North America, particularly in the second quarter of 2011. PALFINGER expects the upward trend in South America to be reinforced due to the upcoming investments in infrastructure.
Strong growth rates were also recorded in Russia where PALFINGER took a major step within the context of its internationalization strategy at the beginning of July 2011: Following the takeover of the leading Russian crane manufacturer INMAN – subject to the approval of the Federal Antimonopoly Service of the Russian Federation – the Group will generate value locally and set up additional distribution channels in the large Russian growth market. With a staff of 415, INMAN is expected to generate revenue of around EUR 20 million in 2011.
The markets in Asia currently still only account for a small share of PALFINGER’s business. The sharp increase in revenue generated in the region demonstrates that these markets are gaining in importance. With production sites in China, Vietnam and – since the end of 2010 – also in India, PALFINGER is well prepared for further growth.
Financial position, cash flows and result of operations
At 46.9 per cent, the equity ratio was still at a high level at the end of the first half. Net debt was EUR 163.4 million and at 48.1 per cent, the gearing ratio once again remained below the 50 per cent target.
In the context of a massive expansion of business volume, net working capital increased to EUR 134.5 million as of 30 June 2011 and capital employed rose slightly to EUR 503.0 million. Nevertheless, the ratio of net working capital to revenue was maintained almost constant which demonstrates the sustainability of the measures taken to optimize net working capital.
Again in this context, cash flows from operating activities went down from EUR 23.4 million in the first half of the previous year to EUR 15.1 million. At 4.7 million free cash flow was higher than in the previous year (EUR 4.3 million), highlighting PALFINGER’s internal financing capability.
After the global economic crisis of previous years, PALFINGER observed a clear trend reversal as early as 2010. This positive trend also continued into 2011, although at the end of the second quarter uncertainty in the markets increased and the mood turned gloomy.
Flexibility is an essential competitive advantage for PALFINGER, particularly when market demand is not stable. Switching to order-based procurement, manufacturing and assembly has enabled PALFINGER to respond to order fluctuations quickly without locking up excessive capital by increasing inventories. PALFINGER must therefore continue to consistently pursue the flexibility route in all fields.
Internationalization is another cornerstone of PALFINGER’s business strategy, an issue which the Group has consistently pursued. At the moment, the focus in this connection is on Asia and Russia, where, along with economic growth, the market potential of PALFINGER is on the rise as well. In the growth market of CIS, which is increasingly gaining in importance, PALFINGER already took a major strategic step at the beginning of July 2011. In China, another important future market, PALFINGER has been promoting, and will continue to promote, the strategic development and increase the degree of local value creation in a very deliberate manner.
Management’s outlook for 2011 is optimistic. However, the massive growth rates achieved in the first half will slow down in the light of the expected economic developments and the traditionally weaker summer months. On the basis of the current economic environment, it is estimated that organic revenue growth will be more than 20 per cent. In addition, the areas North and South America and the business units Access Platforms and Hookloaders are expected to make more substantial contributions to earnings.