Cavotec SA
Nov 6, 2014

Cavotec - 3Q14 Report

This is a summary of the third quarter 2014 published today. The complete third quarter 2014 report with tables is available at http://investor.cavotec.com/results.cfm. Investors should not rely on summaries only, but should review the complete reports with tables.

A COMMENT FROM OUR CEO

Cavotec's 3Q14 highlights that the company is delivering on the previously communicated targets and commitments with revenues amounting to EUR 67.4 million, an increase of 27.8% compared to 2Q14 and 29.8% above the same period last year.

Following several volatile quarters, the solid revenue development and robust margins for this quarter underline our previous guidance and brings Cavotec fully on track to meet its adjusted FY14 targets. Our order book remains strong at EUR 124.9 million with a healthy mix of day-to-day and larger projects. The strong 3Q14 result also ensures that all the Company's bank covenants are in compliance.

In September we completed a capital increase of SEK 187 million (approx. EUR 20 million) and welcomed Bure Equity AB as a new major shareholder of Cavotec. I am pleased with this milestone in our history, as Bure's extensive experience will make them a great strategic partner to the Company going forward.

Over the past months I have focussed internally to introduce far-reaching changes, to strengthen focus and trust in Cavotec's management and to increase our efficiency, productivity and, most importantly, profitability.

As a first step we have started implementation of a new, streamlined organizational structure. As part of this new organization our current regional framework will be replaced by three larger areas of responsibility: EMEA (Europe, Middle East & Africa), APAC (Asia Pacific), and AMER (Americas). This includes the appointment of two of Cavotec's most capable and experienced managers as regional COOs, each with full bottom-line responsibility for their respective region. For the time being I will personally oversee the AMER region, focussing on resolving our immediate challenges at Cavotec INET and developing a long-term growth strategy for this important region. This new organisation will come into full effect on 1 January 2015.

Secondly, we have launched an extensive profit improvement plan aimed at reducing our annual operational costs. Several aspects of this plan have already been initiated with the full support of the entire organisation and I am confident it will bring renewed focus on Cavotec's core values and common-sense approach to management and cost control. Furthermore, building on the experiences gained following the release of our 2Q14 report I have commissioned an internal review of our governance procedures to ensure we operate according to best-practice when communicating with the market.

The third, and most crucial aspect when looking ahead is the strengthening trends in our most important markets. Thanks to the proactive steps taken and the diligence of our corporate and local management the Company is perfectly positioned to capitalize on these resurging markets.

LOOKING AHEAD

I fully expect our most important Market Units (MUs) to set a positive trend for the coming quarters, spearheaded by a resurgent Airports MU. Other areas will continue to be affected somewhat by on-going economic turbulence and local market dynamics.

At Cavotec INET we have continued the progress made in preceding quarters, strengthening the organisation and focussing on bringing to market new products and systems such as the new electrical converter launched at the beginning of October. I am also pleased to see that, thanks to the advances made by our engineers at Cavotec INET, we are now able to meet the very stringent technical specifications requested by some of the world's most advanced airports such as Dubai International Airport. These significant advances coupled with strengthened, well-supported management, engineering and service teams will ensure that Cavotec INET starts to positively contribute to our overall results by next year.

Growth opportunities will also come from our core innovations MoorMasterTM and AMP (Alternative Maritime Power) systems. Both these systems have successfully grown their market share over the last years and are set to continue this trend going forward. Other more recent innovations, such as HOI (Human Operator Interfaces) and EV (Electrical Vehicles) technologies are also positioned for future growth.

Cavotec is a well-established company and I am confident that we will reach our adjusted FY14 revenues target of EUR 225 to 235 million with an EBIT margin of approximately 6%.

THE REGIONS

The Americas reached breakeven at the gross operating result level for 3Q14 and the region had the largest increase in both revenues and order intake compared to the other regions. Revenues amounted to EUR 18,197 thousands, up 65.3% compared to the same period last year and order intake amounted to EUR 13,454 thousands, up 150.3%. Book to bill ratio ended at 1.70x.

Europe had an excellent quarter with a gross operating result at EUR 6,197 thousands, an increase of 60.4% compared to 3Q13. Revenues were up 40.8% at EUR 53,367 thousands with the largest increase coming from Ports & Maritime.

The Middle East, Africa & India region recorded a gross operating result of EUR 842 thousands, compared to EUR 49 thousands in 3Q13. Revenues were up 8.8%, ending at EUR 7,059 thousands in the quarter while order intake was lower than that in the corresponding period last year when a large MoorMaster™ order was recorded for the Transnet National Port Authority in South Africa.

Far East recorded an increase of 20.4% in order intake for 3Q14, amounting to EUR 12,998 thousands. The increase came both from the Ports & Maritime and Airports MUs. Gross operating result in 3Q14 amounted to EUR 1,538 thousands, the second highest in the Group.

Oceania had a very good quarter with a gross operating result of EUR 668 thousands. Order intake increased with 67.9%, amounting to EUR 4,805 thousands in 3Q14. The biggest contribution came from the Mining & Tunnelling and Ports & Maritime MUs. Book to bill ratio was 1.27x.

REVENUES, EARNINGS AND PROFITABILITY

Quarterly results

Revenues increased by 29.8% compared to 3Q13 to EUR 67,360 thousands. As a result, operating result in the quarter was EUR 7,641 thousands compared to EUR 3,025 thousands in the same quarter of 2013. Adjusted operating result, after deducting litigation and restructuring costs, reached EUR 8,634 thousands compared to EUR 3,460 thousands in 3Q13.

Interest expenses increased to EUR 1,067 thousands (3Q13: EUR 294 thousands) due to the high level of indebtedness and increased borrowing costs due to higher leverage. Currency exchange reached a positive result of EUR 4,172 thousands in quarter, mainly due to the weakness of euro.

Profit before tax was EUR 10,752 thousands (3Q13: profit EUR 2,159 thousands) and net profit for the quarter increased to EUR 9,539 thousands compared to a profit of EUR 2,914 thousands in 3Q13.

Nine-month results

9M14 revenues reached EUR 160,586 thousands, a 6.9% decrease compared to 9M13, of which a negative 3.4% was due to adverse exchange rate fluctuations. Adjusted operating result, after excluding litigation and restructuring costs amounted to EUR 8,420 thousands compared with EUR 11,572 in 9M13, while operating result amounted to EUR 6,048 thousands compared with EUR 10,294 in 9M13. This decrease was mainly due to lower volumes and an increase in employee benefit costs.

Financial items were positive at EUR 1,936 thousands compared to loss of EUR 918 thousands in 9M13, mainly due to positive exchange fluctuations off-set with higher interest expense. Net profit ended at EUR 6,542 thousands.

CASH FLOW

In 3Q14 operating cash flow turned positive at EUR 3,495 thousands due to the good level of profitability of the quarter. 9M14 operating cash flow was negative at EUR 1,651 thousands with a continuous improvement from the previous quarter. Financial activities ended at positive EUR 458 thousands in 3Q14 and EUR 6,800 thousands in 9M14 due to the proceeds of the capital increase, including the effect of the capital reduction of EUR 2,918 thousands and net proceeds of EUR 20,260 thousands. Investing activities ended at EUR 892 thousands in 3Q14 and EUR 2,235 thousands in 9M14, the increase was due to the development of new MoorMasterTM products.

NET DEBT

Net debt amounted to EUR 19,987 thousands in 9M14, a decrease compared to EUR 42,271 thousands in the previous quarter due to the increase of capital. The reduction of net debt and the improvement of profitability had a positive effect on the covenants. Leverage ratio decreased to 1.8 and interest coverage increased to 4.33, both are in compliance.

SHARE CAPITAL

On 15th September 2014 Cavotec issued 7,138,780 new shares to a strategic partner with net proceeds of EUR 20.26 million. Following the directed share issue from authorised capital, the total number of shares and votes in Cavotec increased to 78,536,000. The transaction increased Cavotec's issued share capital by CHF 10.2 million (approx. EUR 8.5 million) and the share premium reserve by CHF 14.3 million (approx. EUR 11.8 million).

EMPLOYEES

Cavotec employed 1,017 FTE employees, including external employees, as of 30 September, 2014.

For the full 3Q14 report please go to http://investor.cavotec.com/results.cfm   

ENDS  

For further details please contact:  

Michael Scheepers - Director, Investor Relations & Corporate Communications  

Mobile: +41795024010   Email: investor@cavotec.com