Stabilus S.A.: Economic impact of the COVID-19 pandemic weighs on Q2 FY2020 results
DGAP-News: Stabilus S.A.
/ Key word(s): Half Year Results
Stabilus S.A.: Economic impact of the COVID-19 pandemic weighs on Q2 FY2020 results
Luxembourg/Koblenz, May 4, 2020 - Stabilus S.A. (ISIN: LU1066226637), one of the world's leading suppliers of gas springs, damping solutions and electromechanical drives for motion control, has today published its financial report for the second quarter of fiscal year 2020 (ended March 31, 2020). After a solid start to the 2020 fiscal year, the global impact of the COVID-19 pandemic weighed on operating business in the second quarter. In particular, Stabilus' automotive business was affected by the abrupt slump in global automotive production.
Group revenue in the second quarter of FY2020 decreased by 7.6 percent compared to same quarter of the previous year to EUR 221.0 million (Q2 FY2019: EUR 239.1 million). Adjusted for USD/EUR currency effects, Group revenue declined by 9.5 percent.
Dr. Michael Büchsner, CEO of Stabilus, said: "After a solid first five months of the fiscal year, our business environment has changed abruptly since March due to the steadily worsening COVID-19 crisis worldwide. This has already had a significant impact on our second-quarter results and will also affect the second half of our fiscal year. We took immediate measures to protect our employees in all production facilities and were thus able to ensure a continuous delivery capability. In addition, we have initiated cost-cutting measures."
Significant impact of the COVID-19 pandemic in all regions
In the EMEA segment, revenues in Q2 FY2020 fell by 6.0 percent to EUR 118.4 million (Q2 FY2019: EUR 126.0 million), mainly due to the weakness of the automotive market as a result of COVID-19. In the Americas segment, revenues fell by 8.6 percent year-on-year to EUR 82.7 million (Q2 FY2019: EUR 90.5 million). Adjusted for currency and acquisition effects, revenues declined in the Americas in Q2 FY2020 by 9.4 percent. In the Asia-Pacific segment, the company reported a decline in revenues of 11.5 percent to EUR 20.0 million (Q2 FY2019: EUR 22.6 million) compared to the same quarter of the previous year. Adjusted for currency effects, revenues in the region fell by 10.7 percent in Q2 FY2020. This was mainly due to the sharp decline of the light vehicle production in China as a result of the plant closures under the COVID-19 measures. While Automotive Gas Spring reported a 17.2 percent decline in revenues in Q2 2020, which was better than regional automotive production, revenues in Automotive Powerise and the Industrial business unit were stable compared to the same quarter of the previous year.
Automotive more affected by pandemic developments than Industrial
As a result of the impact of COVID-19, Stabilus recorded declines in revenues in the Automotive Gas Spring and Automotive Powerise business units in the second quarter of fiscal 2020, while revenues in the Industrial business were on the level of the prior year period. In the Automotive Powerise business unit, revenues fell by 9.0 percent to EUR 54.7 million in Q2 FY2020 (Q2 FY2019: EUR 60.1 million). In the Automotive Gas Spring business unit, the company recorded a decline of 14.9 percent to EUR 71.6 million (Q2 FY2019: EUR 84.1 million). However, both Automotive Powerise and Automotive Gas Spring performed significantly better than global light vehicle production, which fell 23 percent in the reporting period. Adjusted for currency effects and acquisitions, the decline in revenues in these business units was 7.8 percent and 15.0 percent, respectively.
At EUR 94.7 million, revenues in the Industrial business unit in Q2 FY2020 are virtually unchanged compared to the same quarter of the previous year (Q2 FY2019: EUR 94.9 million). Adjusted for currency effects and acquisitions, the business unit recorded a 5.7 percent decline in revenues. While organic sales growth was achieved in the areas of independent aftermarket, office furniture, production and construction technology as well as e-commerce, this was offset by weaker sales with distributors and declines in revenues in the transport, agricultural and construction machinery sectors.
For Q2 FY2020 in total, the Industrial business unit accounted for 43 percent (Q2 FY2019: 40 percent) of Stabilus' Group revenue, and the two automotive business units Powerise and Gas Spring accounted for 57 percent (Q2 FY2019: 60 percent).
Adjusted EBIT margin of 14.1 percent in the second quarter
Adjusted operating profit (adjusted EBIT) fell by 12.9 percent to EUR 31.1 million in Q2 FY2020. This corresponds to an adjusted EBIT margin of 14.1 percent, compared to 14.9 percent in Q2 FY2019.
In Q2 FY2019, profit was EUR 18.1 million, compared to EUR 20.4 million in the same quarter of the previous year. Free cash flow before acquisitions (Adj. FCF) amounted to EUR 13.0 million compared to EUR 6.6 million in Q2 FY2019.
Significant impact of the COVID-19 pandemic on operational developments
The developments and consequences of the COVID-19 pandemic on the real economy are unprecedented in recent history and pose significant challenges for Stabilus, as is true for almost all companies in the automotive and industrial sectors. Major car manufacturers have closed most of their production plants since mid-March. A slow ramp-up of production again has just gotten underway. Global light vehicle production fell by almost one-fourth in Q2 FY2020. For the fiscal year of Stabilus (October to September), experts currently anticipate global light vehicle production to decline by c. 21 percent.
All of Stabilus' major plants were able to maintain operations - but with reduced capacity in the month of March. In the process, the production capacities are adapted to current customer demand with the help of flexible working models. Stabilus has also stepped up its efforts to optimize costs and make them more flexible and will review and possibly postpone planned investments. With a very moderate net leverage ratio, Stabilus has a solid balance sheet and is currently well prepared as a result of the measures taken at this challenging time.
An update of the full year forecast is not yet possible
As announced on March 17, 2020, due to the significant decline in economic activity, revenues in FY2020 are expected to be below the originally forecast level of EUR 970 million to EUR 990 million and the adjusted EBIT margin is expected to be below the original 15 percent forecast. In light of the dynamics of the global developments in connection with COVID-19, a more precise forecast of revenue and adjusted EBIT margin can only be given at a later point in time.
Stabilus continues to pursue its strategy of sustainable and profitable growth (STAR 2025). The currently significantly lower forecasts for global GDP and light vehicle production impact the Group's expectations for mid-term growth. Based on these assumptions, average annual organic revenue growth (2019-2025) of at least six percent appears to be uncertain. Stabilus will update its mid-term forecast at a later point in time.
The interim report for the second quarter of fiscal 2020 is available in English and can be downloaded from the company's website at Investors / Financial Reports & Presentations.
 Cf. definition/calculation of KPI's 'adjusted EBIT' and 'free cash flow before acquisitions (adj. FCF)', 'net leverage ratio' provided in our interim report for Q2 FY2020, pp. 11, 16 and 17, that can be downloaded from the company's website at Investors / Financial Reports & Presentations.
As one of the world's leading suppliers of gas springs, damping solutions and electromechanical drives, Stabilus has for eight decades been demonstrating its expertise in the automotive industry and a variety of other sectors. Gas springs, dampers and electromechanical POWERISE drives from Stabilus optimize opening, closing, lifting, lowering and adjusting operations, and also protect against vibrations. Employing a workforce of more than six thousand worldwide, the company has its operational headquarters in Koblenz. Stabilus has reported revenues of EUR 951.3 million in the 2019 fiscal year. Stabilus has a global production network encompassing plants in eleven countries. Additionally, the Group maintains regional offices and relations to sales partners in over fifty countries in Europe, North, Central and South America, and in Asia-Pacific. Stabilus S.A. is listed in the Prime Standard segment of the Frankfurt Stock Exchange and included in the SDAX index.
This press release may contain forward-looking statements based on current assumptions and forecasts made by Stabilus Group management and other information currently available to Stabilus. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here.
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