Duisburg, 30 August 2019. The business performance of the family-equity company Haniel was weighed down in the first half of 2019 by economic factors – primarily at the early-cycle divisions ELG and ROVEMA. As a consequence, Haniel expects revenue to be down year on year and operating profit for 2019 to be down slightly year on year. Haniel has therefore initiated a programme to improve its earnings power, along with all of its divisions.
Macroeconomic conditions weigh down operating results
The Haniel Group's revenue fell by 5 per cent to EUR 2,292 million in H1 2019, despite positive currency translation and acquisition effects. Organic revenue – i.e., revenue adjusted for currency translation effects as well as company acquisitions and disposals – fell by 7 per cent compared to H1 2018. This was due primarily to the fact that revenue at the early-cycle stainless steel scrap recycler ELG was down significantly as a result of the increasingly difficult market environment. The encouraging growth recorded by the hygiene and workwear service provider CWS and the B2B direct marketing specialist for office equipment, TAKKT, was not sufficient to offset this trend.
Economy weighs down operating profit: cost reduction programme initiated
Operating profit for the first half of 2019 amounted to EUR 132 million, and was thus down as compared to the figure of EUR 157 million for the same period of the previous year. This was due in particular to significantly weaker operating performance at the early-cycle division ELG, whose operating profit fell sharply. The slowed pace of the economy also dragged on the operating profit of the manufacturer of packaging machines, ROVEMA. By contrast, TAKKT and Optimar increased their operating profit. However, this increase was not sufficient to compensate for the declines. As a result, EBIT of the Haniel Group also fell from EUR 126 million in the same period of the previous year to EUR 103 million. CFO Dr Florian Funck emphasised: "In light of the weaker business development and the clouds building on the economic horizon, we are focusing more closely on the operating business and have initiated measures to cut costs and enhance flexibility at all divisions."
Profit before taxes increases
Profit before taxes includes EBIT and the financial result as well as the investment result from the CECONOMY and METRO financial investments. It rose from EUR -811 million to EUR 27 million in the reporting period. In the same period of the previous year, this figure was weighed down by massive impairment losses on the CECONOMY and METRO financial investments. The earnings contribution from both financial investments was also negative in the first half of 2019. CECONOMY's contribution to the financial investment result amounted to EUR -5 million due to restructuring costs, particularly with respect to administration in Germany. METRO's earnings contribution was also negative at EUR -62 million due to considerable impairment losses relating to Real's activities. Overall, Haniel's investment result increased from EUR -949 million in the first half of 2018 to only EUR -66 million in the first half of 2019, and was thus once again negative. In 2018, Haniel initiated its exit from the METRO financial investment, selling 7.3 per cent of the outstanding ordinary shares in METRO AG to EPGC. EPGC holds a call option on the remaining 15.2 per cent.
Sound financial situation and investment-grade ratings confirmed
In the first half of 2019, the Haniel Group's net financial position rose from EUR 974 million as at 31 December 2018 to EUR 1,207 million, primarily as a result of the amended IFRS standard on lease accounting. In particular, the changes in lease accounting and the dividends paid out in the first half of the year led to a reduction in the equity ratio from 58 per cent to 55 per cent. In H1 2019, the rating agencies Moody's and Scope confirmed their investment-grade ratings for the Haniel Holding Company. Haniel has more than EUR 1.3 billion in financial resources available for the acquisition of further business activities as part of its buy&build strategy.
Haniel expects 2019 operating profit to be down significantly year on year
Haniel's Management Board expects consolidated revenue in financial year 2019 to fall short of the prior-year figure. In order to be able to tackle macroeconomic challenges and to be prepared for a further weakening in global economic growth, Haniel has initiated a programme designed to cut costs and increase flexibility. Further one-off expenses will be incurred in this connection. Due to those expenses and as a consequence of the economic development, Haniel forecasts a reported operating profit that will be down significantly year on year. Adjusted for those one-off expenses, operating profit would have been in line with the previous year's figure. The Group continues to expect that the investment result from the financial investments in CECONOMY and METRO will be up significantly year on year. The same applies to profit before taxes.
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