BERU Reports on Successful Short Financial Year 2005; Sales Revenues and Earnings to Continue Rising in 2006.LUDWIGSBURG, Germany -- In its short financial year (April 1 - December 31, 2005), the BERU Group (FWB (Fixed Wireless Broadband) See fixed wireless. :BZL) increased its total sales revenues by 8.5% to EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 305.8 million, compared with EUR 281.7 million in the same nine months of the 2004/05 financial year (April 1 - December 31, 2004). As a result of one-time charges totaling EUR 9.3 million, operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. (EBIT EBIT See: Earnings Before Interest and Taxes EBIT See earnings before interest and taxes (EBIT). ) for the period amounted to EUR 32.0 million, compared with the unaudited figure of EUR 36.5 million for the same nine months of the prior year. Net profit for the short financial year 2005 of EUR 19.5 million represents earnings per share of EUR 1.95; net profit in the twelve-month period of the 2004/05 financial year amounted to EUR 23.6 million and earnings per share were EUR 2.36. "The short financial year 2005 was yet another strong and successful year for BERU. With sales revenues of EUR 305.8 million, we surpassed the mark of EUR 300 million in a nine-month period for the first time in the Company's history," commented Marco von Maltzan, Chairman of the Executive Board of BERU AG, on the positive revenue trend, which was achieved despite the increasingly difficult environment of international automobile markets. Key growth drivers in the reporting period included the original equipment business for Diesel Cold-Start Technology as well as Electronics and Sensor Technology in the important sales market of Europe. With growth of 8.5%, BERU significantly exceeded its targeted growth in sales revenues of 5% during the nine-month period. The Group consistently pursued its strategy of profitable growth during the short financial year. Operating profit adjusted for special items (adjusted EBIT) amounted to EUR 41.3 million, equivalent to an operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of 13.5%. BERU thus once again demonstrated its strong profitability, which also compares well by international standards. Original Equipment as a growth driver Sales revenues in the Original Equipment segment increased by 11.0% to EUR 199.3 million (EUR 179.5 million), while the General Industry segment's sales revenues rose by 11.7% to EUR 19.0 million (EUR 17.0 million). The Aftermarket Aftermarket See: Secondary market. aftermarket See secondary market. segment expanded by a moderate 2.6% to EUR 87.5 million (EUR 85.2 million), because the strongest quarter of January to March, when the winter weather generally leads to higher demand for spare parts Spare parts, also referred to as Service Parts is a term used to indicate extra parts available and in proximity to the mechanical item, such as a automobile, boat, engine, for which they might be used. Spare parts are also called “spares. , was not included in the reporting period. However, BERU systematically expanded its position in the international aftermarket business in major volume markets and reinforced its strong position in the domestic market of Germany. Due to the aging stock of vehicles in Germany - the average car on the road is now 95 months old - demand for spare parts is increasing. In Western Europe Western Europe The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). , the most important volume markets are France, Italy, Spain, Great Britain Great Britain, officially United Kingdom of Great Britain and Northern Ireland, constitutional monarchy (2005 est. pop. 60,441,000), 94,226 sq mi (244,044 sq km), on the British Isles, off W Europe. The country is often referred to simply as Britain. , Benelux and Scandinavia. Business is also developing positively in the new EU member state, Poland, and in the whole of Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. . BERU profits from the sales structures already developed in recent years and the increasing preference for used cars from Western European manufacturers. BERU utilizes growth opportunities for diesel cold-start technology With a global market share of more than 40%, BERU is the world's Number 1 for glow plugs glow plug n. A small electric heating element in an internal-combustion engine that facilitates starting by preheating the air in a cylinder and is used especially in diesel engines. for diesel engines. The Group extended this leading position during the reporting period. The core division's sales revenues increased by 9.3% to EUR 142.9 million in the short financial year (EUR 130.7 million). BERU supplies leading German, US and Asian engine and automobile manufacturers with glow plugs and technically advanced instant start systems (ISS ISS See Institutional Shareholder Services (ISS). ), enabling cold diesel engines to start within two seconds even at temperatures of well below freezing point freezing point Temperature at which a liquid becomes a solid. When the pressure surrounding the liquid is increased, the freezing point is raised. The addition of some solids can lower the freezing point of a liquid, a principle used when salt is applied to melt ice on . With the marketing of its diesel cold-start products, BERU consistently pursues the goal of maintaining this top position in the coming years and improving it in certain regions. Strategic alignment of Ignition Technology The Ignition Technology division generated sales revenues of EUR 83.9 million (EUR 85.2 million), which was a slight 1.5% below the prior-year figure as a result of weaker unit sales unit sales Sales measured in terms of physical units rather than dollars. Unit sales data are often used by financial analysts when evaluating the health of a company. of vehicles with gasoline engines gasoline engine: see internal-combustion engine. gasoline engine Most widely used form of internal-combustion engine, found in most automobiles and many other vehicles. and intensifying price competition. The French subgroup sub·group n. 1. A distinct group within a group; a subdivision of a group. 2. A subordinate group. 3. Mathematics A group that is a subset of a group. tr.v. , BERU Eyquem, is responsible for the Group's entire European spark-plug production at the modernized production plant in Chazelles sur Lyon; both its sales revenues and earnings were lower than projected during the period under review. In view of these business developments, the management initiated comprehensive restructuring measures that should lead to a sustained improvement in profitability. This will result in a reduction of about 80 jobs at this location in the first half of 2006, for which provisions have been formed in a total amount of EUR 2.7 million. BERU is a major supplier of ignition products to Western European manufacturers. The Group anticipates revenue growth due to the launch of the new compact 12-millimeter spark plug spark plug: see ignition. spark plug Device that fits into the cylinder head of an internal-combustion engine and carries two electrodes separated by an air gap, across which current from a high-tension ignition system discharges, creating a spark in the middle of 2006 and an additional order for ignition coils from a leading European manufacturer due to start at the end of 2006. Growth potential for Electronics and Sensor Technology BERU's youngest division of Electronics and Sensor Technology achieved 20.0% growth in sales revenues to EUR 79.0 million (EUR 65.9 million). BERU sees great potential in the proliferation proliferation /pro·lif·er·a·tion/ (pro-lif?er-a´shun) the reproduction or multiplication of similar forms, especially of cells.prolif´erativeprolif´erous pro·lif·er·a·tion n. of electronics components and the increasing use of intelligent sensor An intelligent sensor takes some predefined action when it senses the appropriate input (light, heat, sound, motion, touch, etc.). Description The sensor has to do the following tasks:
tr.v. des·tined, des·tin·ing, des·tines 1. To determine beforehand; preordain: a foolish scheme destined to fail; a film destined to become a classic. 2. for export to the US with BERU TSS as of 2006. Additional German carmakers intend to fit their vehicles sold in the US with BERU TSS as standard equipment, also starting this year. Strong international revenue growth BERU consistently pursues a strategy of internationalization The support for monetary values, time and date for countries around the world. It also embraces the use of native characters and symbols in the different alphabets. See localization, i18n, Unicode and IDN. internationalization - internationalisation . During the short financial year, the Group's sales revenues in its most important market of Europe outside Germany increased by 9.3% to EUR 147.5 million (EUR 134.9 million). In the domestic market of Germany, sales revenues of EUR 87.9 million were identical to the figure for the prior-year period. This was primarily due to a slight drop in unit sales of diesel vehicles in the second quarter related to the debate about particulate-matter pollution and tax concessions for diesel vehicles. However, BERU achieved growth in sales revenues of 22.7% to EUR 35.8 million (EUR 29.2 million) in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. . Sales in Asia also increased by the strong rate of 19.2% to EUR 26.3 million (EUR 22.0 million), due to the growing popularity of diesel products. In the other international markets, sales revenues rose by the rather lower rate of 8.1% as a result of currency translation, and amounted to EUR 8.3 million (EUR 7.7 million). The Group systematically implemented its growth strategy in Europe and further expanded its presence in the international markets. Sales outside Germany climbed to 71.3% (68.8%). Strategic realignment re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. During the period under review, BERU realigned its production activities in the NAFTA NAFTA in full North American Free Trade Agreement Trade pact signed by Canada, the U.S., and Mexico in 1992, which took effect in 1994. Inspired by the success of the European Community in reducing trade barriers among its members, NAFTA created the world's region (North American Free Trade Agreement North American Free Trade Agreement (NAFTA), accord establishing a free-trade zone in North America; it was signed in 1992 by Canada, Mexico, and the United States and took effect on Jan. 1, 1994. ). Effective December 30, 2005, the cable production activities of the Mexican subsidiary BERU S.A. de C.V. were sold to General Cable, a specialist in the production of cable harnesses A Cable harness is a string of cables in e.g. car manufacture, which transmit signals (information) or operating currents (energy). The cables are bound together by e.g. clamps, cable ties or sleeves. . At the same time, BERU established a new subsidiary under the name of BERU Mexico S Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. .A. de C.V., which cooperates with General Cable and is now responsible for spark-plug production and the distribution of BERU products in the Original Equipment and Aftermarket segments for the NAFTA region. Double-digit operating margin despite exceptional charges "The increased pressure on sale prices and margins accompanied by high raw-material and energy prices mean that automotive suppliers like BERU need high levels of operating efficiency in the entire value chain and the continuous improvement of production costs. BERU once again achieved a double-digit operating margin in short financial year 2005, which is a top result also by international standards," commented Marco von Maltzan on BERU's earnings. Operating profit (EBIT) for the period amounted to EUR 32.0 million. One-time charges totaling EUR 9.3 million had an impact on earnings, and led to an EBIT margin of 10.5%. As a result of the growth strategy introduced three years ago, the Group continued the strategic realignment of its international production network to reflect core competencies A core competency is something that a firm can do well and that meets the following three conditions specified by Hamel and Prahalad (1990):
The realignment of our activities in Mexico and the measures taken to restructure the French subgroup in Chazelles sur Lyon gave rise to expenses of EUR 5.5 million. At the same time, the annual impairment tests led to the impairment of tangible and intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. of EUR 3.8 million. Adjusted for these special items, operating profit (EBIT) amounted to EUR 41.3 million, which is equivalent to an EBIT margin of 13.5% and continues the high profitability of prior years. The adjusted margin in the 2004/05 financial year was 13.9%. Earnings before taxes in the short financial year amounted to EUR 33.5 million, representing a return on sales Return on sales A measurement of operational efficiency equalingnet pre-tax profits divided by net sales expressed as a percentage. return on sales The portion of each dollar of sales that a firm is able to turn into income. before income taxes of 11.0% (12.2%). However, adjusted for one-time special items, a return on sales before income taxes of 14.0% was achieved (13.5%). As a result of ongoing efficiency-improvement actions, BERU succeeded in compensating for most of the additional expenses from high raw-material prices. Investment in future growth With investments of EUR 24.8 million (12-month period of 2004/05: EUR 34.9 million) on property, plant and equipment, BERU continued modernizing its production facilities during the short financial year and further improved its competitiveness in terms of production costs. EUR 20.6 million or 83.1% of these investments were made at locations in Germany. At the same time, we succeeded in utilizing synergy potential in our international production network and in reducing quality costs. BERU continues to make substantial investment in new products and technologies. Research and development expenditure in the short financial year amounted to EUR 24.8 million (12-month period of 2004/05: EUR 30.1 million), equivalent to 8.1% (7.8%) of total sales revenues. In Germany, 220 persons are employed in the area of research and development, which is about 8% of the entire workforce. Altogether, the BERU Group employed 2,702 (2,664) persons at the end of the reporting period, which was 1.4% more than at March 31, 2005. 1,444 (1,413) people were employed in Germany and 1,258 (1,251) at the Group's international locations. With 53.4% (53.0%) of the workforce employed in Germany and 46.6% (47.0%) abroad, BERU has a balanced and stable workforce structure. Sound balance-sheet structure and financial position BERU was able to finance all of its investments from the cash flow in the short financial year. The operating free cash flow (net profit plus depreciation and impairments plus changes in long-term provisions minus investments) increased by 43.8% to EUR 19.7 million, from EUR 13.7 million in the twelve-month period of the prior year. BERU further improved its strong balance-sheet structure during the reporting period. Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. before minority interest increased by EUR 10.9 million (3.7%) from EUR 296.8 million to EUR 307.7 million. At the same time, the equity ratio before minority interest rose from 68.0% to 70.0%. Due to the repayment of loans, BERU is meanwhile virtually debt-free. Liabilities to banks fell to EUR 11.1 million (EUR 22.5 million). The balance-sheet total increased by EUR 3.0 million (0.7%) from EUR 436.6 million at March 31, 2005 to EUR 439.6 million on the balance-sheet date. Strong revenue growth anticipated for 2006 The Executive Board of BERU AG anticipates only a moderate revival of worldwide demand for automobiles in the 2006 financial year (January 1 - December 31, 2006), with ongoing high pressure on sale prices and margins accompanied by high raw-material and energy prices. Due to the continued rise in demand for diesel vehicles and the anticipated increase in sales revenues from electronic products, the Executive Board looks forward to the BERU Group's continued profitable growth. In addition to the expansion of the product portfolio, the Group will push forward with its continuous growth also by expanding its international presence. The Company sees further growth potential in the current year: "We assume that BERU will continue its profitable growth in 2006 and will achieve a return above the average for the industry," stated Marco von Maltzan, Executive Board Chairman of BERU AG. Assuming that no further negative effects arise from general economic developments and that the automotive industry The automotive industry is the industry involved in the design, development, manufacture, marketing, and sale of motor vehicles. In 2006, more than 69 million motor vehicles, including cars and commercial vehicles were produced worldwide. develops in line with market projections, the Executive Board anticipates sales revenues in 2006 of EUR 425-435 million. During the same period, the Executive Board aims to increase operating profit (EBIT) to more than EUR 50 million, thus continuing the strong earnings trend of recent years. Dividend proposal The Executive Board and the Supervisory Board Supervisory board The board of directors that represents stakeholders in the governance of the corporation. intend to propose to the Annual Shareholders' Meeting shareholders' meeting n. a meeting, usually annual, of all shareholders of a corporation (although in large corporations only a small percentage attend) to elect the Board of Directors and hear reports on the company's business situation. of BERU Aktiengesellschaft to be held on June 21, 2006 that in view of the Company's strong profitability, sound financial position and positive prospects for the current financial year, a dividend of 83 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. be distributed. This is equivalent to a distribution ratio of 42.6% (full-year 2004/05: 46.6%). Annual Report BERU AG has published the annual report for the short financial year 2005 (April 1 - December 31, 2005) on March 30, 2006. The annual report is accessible on the company's website at www.beru.com. FY 2004/05 (April 1, 2004 - March 31, 2005) results and key figures in comparison to short financial year (April 1 - December 31, 2005)
Consolidated income statement
FY 2004/05 SY 2005
EUR million EUR million
Sales revenues 385.8 305.8
Changes in inventories and other own work 4.2 3.9
capitalized
Other operating income 7.3 4.7
Cost of materials -139.5 -116.1
Personnel expenses -114.9 -87.0
Depreciation and impairments -27.1 -25.8
Other operating expenses -65.1 -52.2
Other taxes -2.1 -1.3
Earnings before interest and taxes 48.6 32.0
Financial income -1.4 1.5
Earnings before taxes 47.2 33.5
Income taxes -23.3 -13.7
Net profit 23.9 19.8
Consolidated balance sheet
Mar. 31, 05 Dec. 31,05
EUR million EUR million
Assets
Non-current assets 184.3 196.6
Current assets 252.3 243.1
Equity and liabilities
Equity* 299.2 309.8
Non-current liabilities 53.8 38.0
Current liabilities 83.6 91.8
Additional key figures
FY 2004/05 SY 2005
Dividend distribution (EUR million) 11.0 8.3**
Dividend per share (EUR) 1.10 0.83**
Capex (EUR million) 34.9 24.8
Number of employees (at end of period) 2,664 2,702
* Including the minority interest in equity
** Management's proposal on the appropriation of profits for the
Annual Shareholders' Meeting on June 21, 2006
language: English
company: BERU AG
Morikestr. 155
71636 Ludwigsburg Deutschland
phone: +49 (0)7141 132-2 46
fax: +49 (0)7141 132-5 86
email: investor-relations@beru.de
WWW: www.beru.de
ISIN: DE0005072102
WKN: 507210
indices:
stockmarkets: Amtlicher Markt in Frankfurt (General Standard),
Stuttgart; Freiverkehr in Berlin-Bremen, Munchen,
Hamburg, Dusseldorf
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