Duisburg, 31 August 2018. The family equity company Haniel reported an encouraging increase in operating profit in the first half of 2018. However, impairment losses on the financial investments in CECONOMY AG and METRO AG significantly reduced profit before and after taxes. In future, they will be reduced by positive effects from the transaction with EPGC. "The good development of operating profit shows that we benefit from increased diversification", said CEO Stephan Gemkow. "Unfortunately, the impairment losses recognised on the financial investments have overshadowed this positive development. Nevertheless, we will continue to pursue our buy&build strategy".
Integration of CWS-boco, ROVEMA and Optimar successful
During the first half of the year, the CWS-boco division successfully continued its efforts to integrate Initial's hygiene, workwear and cleanroom activities, which had been acquired from Rentokil Initial in 2017. Not only did the company undergo a strategic restructuring, expand its product range and improve its service offering, it also implemented a wide variety of efficiency enhancement measures. These measures related in particular to the administration, procurement and IT departments, as well as the network of locations and services. ROVEMA, a premium manufacturer of packaging machinery and equipment, and Optimar, a leading producer of automated fish handling systems, were successfully integrated into the Haniel Group.
Encouraging growth underscores success of portfolio development
The Haniel Group posted revenue of EUR 2,403 million in the first half of 2018, representing a significant increase of 17 per cent despite negative currency translation effects, especially in relation to the US dollar. In particular, increased revenue from CWS-boco contributed to this trend, which was due primarily to the first-time inclusion the Initial activities acquired in 2017, as well as to revenue from Optimar and ROVEMA. Organic revenue - i.e., revenue adjusted for currency translation effects as well as company acquisitions and disposals - increased by 8 per cent compared to the previous year.
Profitable growth achieved
Operating profit (EBITA)1 for the first six months of 2018 at EUR 157 million was up 16 per cent above the previous year's figure of EUR 135 million. The increase in CWS-boco's contribution was the main factor in the growth in profit. The commodities trader ELG generated operating profit at the same level as in the first half of 2017. Due to the difficult market conditions in the United States and significant increases in yarn prices, the mattress textiles specialist BekaertDeslee's operating profit was down year on year. TAKKT's operating profit failed to reach the same level as in the first half of 2017. This development was attributable mainly to a lower gross profit margin caused by increased freight costs and higher costs, as expected, for the division's digital transformation. The new divisions Optimar and ROVEMA also contributed to the increase in operating profit.
Impairment losses on financial investments weigh down profit before and after taxes
Profit before taxes fell from EUR 105 million to EUR -811 million despite the improvements in EBIT and net financial income. This was due to the extremely negative investment result from the CECONOMY AG and METRO AG financial investments. The negative share price performance for the CECONOMY and the METRO shares in Q2 2018 prompted Haniel to test both financial investments for impairment. The investment result from the two financial investments fell from EUR 5 million in the first half of 2017 to EUR -949 million, particularly as a result of the recognised impairment losses. As a result, profit after taxes in the first half of 2018 amounted to EUR -842 million. The impairment reflects the valuation situation as of June 30, 2018. On August 24, 2018 Haniel signed an agreement to sell 7.3 per cent of the issued ordinary shares of METRO AG to EP Global Commerce GmbH (EPGC), Germany. Haniel has also agreed with EPGC that they may acquire up to 15.2 per cent of the issued ordinary shares of METRO AG under a call option. The Haniel Supervisory Board approved the agreement yesterday. Contrary positive effects on earnings from the transaction with EPGC announced on August 24, 2018 have therefore not been included in the half-year financial statement.
Sound financial situation despite impairment losses
In the first half of 2018, The Haniel Group's net financial position rose from EUR 1,331 million as at 31 December 2017 to EUR 1,592 million. This was due primarily to the positive business development at ELG, which resulted in a higher need to finance inventories and trade receivables. In addition, the net financial position increased due to two business combinations by the TAKKT division. The equity of the Haniel Group decreased from EUR 4,499 million as at 31 December 2017 to EUR 3,596 million as at 30 June 2018 due to the negative profit after taxes. The equity ratio fell accordingly from 61 per cent to 54 per cent.
Three investment-grade ratings
In April 2018, Moody's issued Haniel an investment-grade rating of Baa3. By upgrading this rating, Moody's recognised the good balance in Haniel's portfolio and the low amount of debt at the divisional level. Thus Haniel now has an investment-grade rating from all three rating agencies.
Still more than EUR 800 million for portfolio expansion
Following the successful portfolio measures of the previous year, Haniel has sufficient financial resources. Haniel has more than EUR 800 million in financial resources available for the acquisition of further business activities as part of its buy&build strategy.
Haniel expects a significant increase in operating profit for 2018
Haniel continues to expect a significant increase in revenue for the 2018 financial year. The first-time full-year inclusion of the Initial companies in CWS-boco as well as the new ROVEMA and Optimar divisions will contribute to this increase. In addition, Haniel also continues to expect a significant increase in operating profit. However, it is now expected that the investment result will be down significantly year on year due to the impairment losses recognised on the financial investments in CECONOMY and METRO. Therefore, the consolidated profit before and after taxes will be negative for financial year 2018 overall. The Group's ability to pay out a dividend remains unchanged despite the non-cash corrections in carrying amounts.
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