Status report:
General economic conditions
During the first quarter of 2010, the economic environment continued to stabilize in the main economic regions of the world. The main concern focused on the considerable national debt in single countries and the resulting uncertainty regarding their ability to meet their solvency.
In the USA, the economy recovered further during the reporting period; however, this was mostly driven by investments related to the government’s incentive program as well as inventory re-stocking in most industries. Due to the unchanged difficult situation in the labor market, with over 10% unemployment, private consumption (which is the largest contributor to the US gross domestic product) remained subdued. As a result, the Federal Reserve Board (FED) indicated that interest rates will remain at the present low level for the foreseeable future.
In Europe, the economic recovery continued in the first quarter of 2010, but was more modest than in the USA in most of the member countries due to subdued consumer spending. High unemployment in most EU member states, as well as government programs initiated to consolidate and reduce budget deficits, placed a further burden on economic recovery.
The economies in Asia and in other large emerging regions continued their solid development during the reporting period. Economic activities in China were supported by the stimulus program implemented by the Chinese government, as well as by rising export figures. Japan and most South American countries also developed favorably during the first quarter of 2010.
Business development
Sales
Sales of the ANDRITZ GROUP amounted to 732.3 MEUR during the first quarter of 2010, thus decreasing by 7.3% compared to the first quarter of 2009 (790.1 MEUR).
While sales in the HYDRO business area rose compared to last year’s reference period (349.0 MEUR in Q1 2010 vs. 316.6 MEUR in Q1 2009), sales in the other business areas saw a decline. In particular, sales in the METALS (78.0 MEUR in Q1 2010 vs. 135.0 MEUR in Q1 2009) and the ENVIRONMENT & PROCESS (55.7 MEUR in Q1 2010 vs. 70.8 MEUR in Q1 2009) business areas dropped significantly compared to the previous year.
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Sales by business area |
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Sales by region |
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Share of service sales of Group and business area sales in %
| Q1 2010 | Q1 2009 | |
| ANDRITZ GROUP | 27 | 27 |
| HYDRO | 21 | 23 |
| PULP & PAPER | 42 | 40 |
| METALS | 4 | 3 |
| ENVIRONMENT & PROCESS | 35 | 28 |
| FEED & BIOFUEL | 46 | 56 |
| Share of service sales of Group and business area sales in % (Download size 33 KB) |
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Order intake
Order intake of the ANDRITZ GROUP developed very solidly in the first quarter of 2010. It amounted to 908.4 MEUR and was thus 7.4% below the very high level of the previous year’s reference period (Q1 2009: 981.4 MEUR).
The HYDRO business area’s order intake, at 391.4 MEUR, was significantly below the very high reference value of last year which had included some large orders (Q1 2009: 574.2 MEUR).
Order intake of the PULP & PAPER business area developed very favorably during the reporting period; it amounted to 340.1 MEUR and has thus more than doubled compared to the first quarter of 2009 (164.7 MEUR); order intake rose both in the capital and service business segments.
In view of the unchanged difficult economic environment on the international steel markets, order intake of the METALS business area amounted to 42.7 MEUR and was thus well below the level of the previous year’s reference period (Q1 2009: 123.6 MEUR).
The ENVIRONMENT & PROCESS business area recorded again an increase in order intake: at 89.2 MEUR in the first quarter of 2010, it was 5.8% higher than in the first quarter of 2009 (84.3 MEUR).
Order intake of the FEED & BIOFUEL business area amounted to 45.0 MEUR during the reporting period, thus showing a significant increase of 30.1% on the previous year’s figure (Q1 2009: 34.6 MEUR); this is mainly due to very good development in the wood/biomass pelleting sector.
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Order intake by business area |
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Order intake by region |
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Order backlog
Order backlog of the ANDRITZ GROUP as of March 31, 2010 amounted to 4,724.3 MEUR, an increase of 5.8% compared to the reference date of last year (March 31, 2009: 4,464.0 MEUR).
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Order backlog by business area as of |
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Order backlog by region as of |
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Earnings
Despite the decline in sales, EBITA of the ANDRITZ GROUP, at 43.7 MEUR in the first quarter of 2010, was unchanged compared to the reference period of last year (Q1 2009: 43.7 MEUR). While earnings in the HYDRO and the PULP & PAPER business areas rose significantly, the METALS and the ENVIRONMENT & PROCESS business areas, in particular, showed decreasing earnings.
EBITA margin for the Group rose to 6.0% and was thus significantly higher than during the reference period of the previous year (Q1 2009: 5.5%). Mainly the HYDRO and the PULP & PAPER business areas’ profitability developed very favorably.
The financial result, at 1.9 MEUR, was significantly above the level for the first quarter of 2009 (-4.2 MEUR), which was impacted by depreciation of money market funds due to the global financial crisis.
Net income (excl. non-controlling interests) of the ANDRITZ GROUP amounted to 28.9 MEUR and was thus 12.5% above the reference figure for the previous year (Q1 2009: 25.7 MEUR).
Net worth position and capital structure
Total assets of the Group increased to 3,538.0 MEUR as of March 31, 2010 (December 31, 2009: 3,309.3 MEUR); the equity ratio amounted to 19.0% (December 31, 2009: 20.0%).
Liquid funds (cash and cash equivalents plus marketable securities) amounted to 1,296.5 MEUR as of March 31, 2010 (December 31, 2009: 1,082.1 MEUR). Net liquidity (liquid funds plus fair value of interest rate swaps minus financial liabilities) increased to 897.7 MEUR, thus also substantially higher than at the end of last year (December 31, 2009: 677.9 MEUR).
Assets
Shareholders' equity and liabilities
Employees
As of March 31, 2010, the number of the Group’s employees amounted to 13,370, a decrease of 1.7% compared to the reference date of the previous year (March 31, 2009: 13,600 employees).
Employees by region as of March 31, 2010 (March 31, 2009) in %
Important acquisitions
In the first quarter of 2010, ANDRITZ signed a contract for the acquisition of KMPT AG, headquartered in Vierkirchen, Germany, including its affiliates in England, France, Italy, China, and the USA. KMPT ranks among the leading global suppliers of pusher and peeler centrifuges, used mainly in the chemical and pharmaceutical industries. In addition, the company’s product portfolio includes dryers (mixer, helix and plate dryers) for the chemical and food industries, as well as drum and disc filters. The ENVIRONMENT & PROCESS business area is thus strengthening its product offerings for solid/liquid separation. The contract is subject to approval by the relevant authorities and is expected to come into force during the second quarter of 2010. Thus, the company has not been included in the consolidated financial statements yet.
In addition, ANDRITZ acquired certain assets of the insolvent DMT Technology GmbH, headquartered in Salzburg, Austria, and of its subsidiary DMT S.A.S., headquartered in Le Bourget du Lac, France. DMT is one of the world’s leading producers of systems and equipment for the production of biaxially stretched plastic films as used especially in the food industry.
Major risks during the remaining months of the financial year and risk management
The ANDRITZ GROUP has a long-established Group-wide risk management system whose goal is to identify nascent risks early and to take countermeasures, if necessary. This is an important element of active risk management within the Group. However, there is no guarantee that the monitoring and risk control systems are sufficiently effective.
The essential risks for the business development of the ANDRITZ GROUP in 2010 relate above all to: the Group’s dependence on the general economic development and the development of the industries it serves; whether major orders are received and the risks they entail; and whether adequate sales proceeds are realized from the high order backlog. The persistent financial crisis and substantial economic slowdown in the main economic regions of the world also constitute a serious risk for the ANDRITZ GROUP’s financial development during the 2010 business year. The global economic weakness may lead to further delays in the execution of existing orders and to the postponement or cancellation of projects. Cancellations of existing contracts could adversely affect the ANDRITZ GROUP’s order backlog, which would in turn have a negative impact on utilization of the Group’s manufacturing capacities.
The global financial and economic crisis may also necessitate complete or partial impairments of single goodwill created in the course of acquisitions if the business development goals cannot be reached. This may influence the earnings development of the ANDRITZ GROUP. In addition, there is always some risk that partial or full provisions will have to be made for some trade accounts receivable.
For the majority of orders, the risk of payment failure by customers is mitigated by means of bank guarantees and export insurance, but individual payment failures can have a substantial negative impact on earnings development of the Group. Risks related to deliveries to countries with medium to high political risks typically are also insured to a large extent. Interest and exchange rate risks are minimized and controlled by derivative financial instruments, in particular forward exchange contracts and swaps. Net currency exposure of orders in foreign currencies (mainly US dollar, Canadian dollar, and Swiss franc) is hedged by forward contracts. Cash flow risks are monitored via monthly cash flow reports.
The ANDRITZ GROUP’s position in terms of liquidity is very good; the Group has sufficient liquidity reserves and secures access to liquidity. The Group avoids dependence on one single or only a few banks. To ensure independence, no bank will receive more than a certain defined amount of the business in any important product (cash and cash equivalents, financial liabilities, financial assets, guarantees, and derivatives). Nevertheless, if one or more banks were to become insolvent, this would have a considerable negative influence on earnings development and shareholders’ equity of the ANDRITZ GROUP.
Cash is largely invested in low-risk financial assets, such as government bonds, government-guaranteed bonds, investment funds to cover pension obligations, or term deposits. However, the financial market crisis and its effects have led to unfavorable price developments for various securities in which the Group has invested (e.g. money market funds, bonds), or made them non-tradeable. This could have an adverse effect on the ANDRITZ GROUP’s financial result or shareholders’ equity due to necessary depreciation or value adjustments. The crisis has also heightened the risk of default by some issuers of securities, as well as by customers.
For further information on the major risks for the ANDRITZ GROUP, see the ANDRITZ annual financial report 2009.
Effects from exchange rates
Changes in exchange rates are hedged by forward rate contracts.
Information pursuant to Article 87 (4) of the (Austrian) Stock Exchange Act
During the first quarter of 2010, no major business transactions were conducted with related persons and companies.
Significant events after March 31, 2010
The status of the global economy and the financial markets did not change substantially in the period between the date of the balance sheet and publication of this report.
Outlook
According to recent forecasts by leading economic experts, the economic situation in the relevant regions is expected to stabilize further over the next few months; however, a substantial economic recovery is not expected for 2010.
Based on the prevailing economic environment and the current project activity in those markets that are relevant for ANDRITZ’s business, the expectations of the ANDRITZ GROUP for its economic development in the coming quarters have not changed. Continuing positive market development is expected for the HYDRO business area in the coming months. The ENVIRONMENT & PROCESS and the FEED & BIOFUEL business areas should also see satisfactory development. Moderate project activity is expected to continue in the PULP & PAPER and the METALS business areas.
On the basis of these expectations and the order backlog of more than 4.7 billion EUR at the end of March 2010, the ANDRITZ GROUP expects sales in 2010 to remain unchanged or slightly up compared to the full year of 2009. Cost savings resulting from the restructuring measures initiated in 2009 should have a positive impact on the net income.
If, however, the global economy weakens again in 2010, a negative impact can be expected on the future development of sales and earnings of the ANDRITZ GROUP. As a result, there may be further need for restructuring that will affect the 2010 earnings development accordingly.
Declaration pursuant to Article 87 (1) of the (Austrian) Stock Exchange Act
We hereby confirm that, to the best of our knowledge, the condensed interim financial statements of the ANDRITZ GROUP drawn up in compliance with the applicable accounting standards provide a true and fair view of the asset, financial, and earnings positions of the ANDRITZ GROUP, and that the status report for the first quarter of 2010 provides a true and fair view of the asset, financial, and earnings positions of the ANDRITZ GROUP with regard to the important events of the first three months of the financial year and their impact on the condensed interim financial statements of the ANDRITZ GROUP, and with regard to the major risks and uncertainties during the remaining nine months of the financial year, and also with regard to the major business transactions subject to disclosure and concluded with related persons and companies.
Graz, May 7, 2010
The Executive Board of ANDRITZ AG
Wolfgang Leitner Franz Hofmann Karl Hornhofer Humbert Köfler Friedrich Papst
(President &
CEO)