Duisburg, 31 August 2016. Haniel benefited from its diversified position in the first half of 2016. The challenging market situation expected for the ELG division was more than offset by increased earnings contributions from the other investments. In addition, Haniel received two investment-grade ratings: "We consider this an affirmation of our conservative financial policy and long-term investment strategy", said Stephan Gemkow.
During the first half of 2016, the Haniel Group recorded a 9 per cent decline in revenue, to EUR 1,800 million. This is attributable solely to ELG. The significantly lower prices for all relevant commodities – in particular the considerable drop in nickel prices – and the reduced output tonnage due to the difficult market environment affected this development. Revenue was primarily boosted by the positive contribution made by the BekaertDeslee division, which covered an entire half-year period for the first time. Bekaert Textiles' acquisition of the DesleeClama Group in February 2016 received the active support of the Holding Company and also made a positive contribution to revenue growth in the four months that followed. Acquisitions by TAKKT and CWS-boco in the previous year also generated additional contributions. However, the two divisions also experienced encouraging organic growth in revenue resulting from their respective strategic growth initiatives.
Encouraging growth in all earnings figures
In the first half of 2016, the Haniel Group's profit was boosted by the fact that the new BekaertDeslee division was included for the first time over six months. However, profit growth at TAKKT and CWS-boco was also a contributing factor. The reduction in output tonnage and the significant drop (as expected) in the price of nickel meant a considerably weaker operating profit for ELG than in the first half of 2015. In addition, negative measurement effects from hedging transactions caused by the jump in the price of nickel as at 30 June 2016 also had an impact on ELG's earnings development. In the aggregate, however, the ELG effect was more than offset; as a consequence, operating profit amounted to an encouraging EUR 115 million in the first half of 2016, up on the prior-year figure of EUR 109 million.
Profit before taxes increased from EUR 13 million to EUR 57 million. In addition to the higher operating profit, this is attributable primarily to a higher investment result and an improved result from financing activities.
The investment result increased from EUR -60 million in the same period of the previous year to EUR -31 million in the first half of 2016. This mainly comprised the investment result from the METRO GROUP, which generated a higher operating profit than in the same period of the previous year thanks to lower negative one-off factors.
Result from financing activities benefits from systematic debt reduction
The result from financing activities, comprising the finance costs and other net financial income, amounted to EUR -27 million in the reporting period. In the same period of the previous year, this figure had amounted to EUR -36 million. Aside from the valuation of the option component of the exchangeable bond linked to Metro shares, one key reason for this improvement was the lower finance cost thanks to the lower level of debt than in the previous year. Haniel thus continued to benefit from the systematic debt reduction.
Significant rise in profit after taxes
With a slight drop in the tax expense, the growth in profit before taxes had a significant impact on profit after taxes. This rebounded from EUR -21 million in the prior-year period to EUR 25 million in the first half of 2016, an increase of EUR 46 million.
High equity ratio underscores the Group's sound financial position and investment potential
Equity declined only slightly from EUR 4,169 million as at 31 December 2015 to EUR 4,035 million as at 30 June 2016 due to negative measurement effects relating to pensions and currency translation. However, the lower total assets meant that the equity ratio remained almost constant at 60 per cent. This sustained high level underscores Haniel’s investment potential.
More than EUR 1 billion available for further portfolio expansion
By positioning itself as a family equity company, Haniel clearly sets itself apart from other investors as a partner with a long-term investment horizon.
At present, Haniel has more than EUR 1 billion at its disposal, providing it with considerable financial resources with which to expand its portfolio. Its focus lies not only on acquiring additional companies but also on the continued development of its existing investments. "Our approach is to act as a value developer for the investments, keeping both value and values in view. This is why we made the further digitalisation of the divisions the strategic focus of our value development some time ago", said Stephan Gemkow.
The Holding Company established Schacht One GmbH, Haniel's own digital unit in the historic Zollverein Colliery world heritage cultural site in Essen, to help implement the Digital Agenda at the investments. Schacht One will work together with the divisions to develop and directly assess the plausibility of innovative and radical user-oriented ideas and problem-solving approaches. In addition, at the beginning of the year Haniel decided to invest up to EUR 50 million in selected venture capital funds, thereby making indirect investments in start-ups. Haniel has already invested in five different funds in recent months, which in turn invest in a number of new companies. These learning opportunities can for example give rise to innovation processes at the investments and also provide momentum as Haniel continues to seek out new investments that will be successful in the long term.
Scope and S&P affirm investment grade rating
Haniel submits itself to external rating assessments voluntarily, thus ensuring broad access to capital markets. European rating agency Scope assessed Haniel's creditworthiness for the first time in February 2016. The rating agency gave Haniel a BBB- investment-grade rating with a stable outlook. Scope thus affirmed the Group's conservative investment strategy, strong liquidity and solid cash flow profile.
In April 2016, Standard & Poor's Ratings Services (S&P) raised its Long and Short Term Corporate Credit Rating from BB+/B (positive outlook) to BBB-/A-3 (stable outlook) – also as a consequence of Haniel's conservative long-term financial policy. As a result, S&P again classified Haniel as investment grade. Moody's had already raised the rating to Ba1 with a stable outlook in the second half of 2013.
As a corporate citizen, Haniel not only traditionally lives up to its social responsibility towards its investments and employees, but also supports and promots institutions and initiatives in and around Duisburg. Together with the KfW Foundation, the Prof. Otto Beisheim Foundation and Social Impact gGmbH, Haniel established Social Impact Lab Duisburg. The incubator for social entrepreneurs supports business founders who want to use their ideas to solve pressing social challenges. The aim of spreading social innovations and establishing social enterprises is to create positive momentum for the ongoing structural transformation in the Rhine-Ruhr region.
Haniel does not just provide opportunities for founders of social enterprises, but also for refugees: as a founding member of "We together – The integration initiative of the German economy" ("Wir zusammen - Integrationsinitiativen der deutschen Wirtschaft"), Haniel was one of the first 35 companies to sign up to this initiative for the integration of refugees. The network has since grown to 96 companies as at 30 June 2016. In Duisburg, Haniel works directly with the city to help feed, house and integrate refugees.
Haniel expects encouraging increase in all earnings figures in 2016
The macroeconomic situation influences the divisions to varying degrees. Assuming that the economic outlook remains stable, Haniel's Management Board currently continues to expect a relatively positive development in all divisions. Despite the positive performance at TAKKT and CWS-boco, Haniel is now expecting that organic revenue growth will fall short of the forecast. This is due to the persistently difficult market environment in the cyclical ELG division.
With respect to operating profit, Haniel continues to expect a significant increase for the Group year on year, due to the increased profit in all divisions. For the financial investment in Metro, Haniel expects a slight increase in operating profit before one-off factors and adjusted for currency translation effects for the METRO GROUP. The earnings contribution from the Metro investment included in the investment result may be lower year on year, contrary to the previous forecast. This is due on the one hand primarily to negative currency translation effects, particularly with respect to the Russian rouble. On the other hand, Haniel expects earnings to be weighed down in connection with the planned METRO GROUP demerger, which the Haniel Management Board supports in full. Overall, Haniel's Management Board continues to anticipate an encouraging improvement in the Group's profit before and after taxes.
The complete press release you will find here.