SHW AG, Aalen, Germany, a leading supplier of automotive pumps, engine components and brake discs, has published its financial results for the first half of 2014. The company stated that thanks to successful new product launches and a high level of customer orders, sales in the first half of 2014 increased by 20.2% to €212.1 million (first half of 2013: €176.4 million). Incoming orders rose 13.5% year-on-year from €195.1 million to €221.4 million.
“With the achievement of the half year results, we are fully within our target range,” stated CEO Dr Thomas Buchholz, who is responsible for the Pumps and Engine Components business segment.
SHW stated that the high level of customer call orders during the first half of 2014 led to logistical and operational pressures on the existing technical capacity at both its suppliers and in its Powder Metallurgy division’s Aalen-Wasseralfingen site. This also adversely affected the productivity of pump production activities at the Bad Schussenried site, which is the main customer of the Powder Metallurgy division.
Group earnings before interest, taxes, depreciation and amortisation of tangible and intangible assets (adjusted EBITDA) improved from €17.1 million to €19.0 million in the period from January to June 2014 compared to the same period in the previous year. This represents an EBITDA margin of 9.0% (first half of 2013: 9.7%).
“We can be very pleased with the results of improvements in our logistics processes achieved to date, which are reflected in the significant reduction in our inventories. We see the potential for further improvements in the area of receivables management”, commented Sascha Rosengart, CFO of SHW AG.
The Pumps and Engine Components business
The Pumps and Engine Components business segment achieved sales of €163.1 million in the first half of 2014 (first half of 2013: €131.9 million) which is the highest level in the company’s history. Sales in the Passenger Car division grew 26.5% to €131.3 million (first half of 2013: €103.8 million).
This was attributed to a high level of customer call orders, particularly for oil/vacuum pumps (tandem pumps), and to an expansion in capacity for an auxiliary pump used in start-stop systems.
The Powder Metallurgy Division
The Powder Metallurgy division ended the first half of 2014 with sales growth of 17% to €16.2 million (first half of 2013: €13.8 million) following the ramp-up of components for a camshaft phaser and an increase in customer call orders.
The business segment’s earnings before interest, taxes, depreciation and amortisation (adjusted EBITDA) improved from €13.6 million to €15.6 million in the first half of 2014 compared to the same period of the previous year. This figure includes scheduled start-up costs of €0.4 million for the establishment of business activities in North America and Brazil. The corresponding EBITDA margin declined from 10.3% to 9.5%.
With the implementation of the three-year investment programme and action plan adopted by the Supervisory Board, the PM segment, stated the company, should return to a path of profitable growth in the coming year and thus lead to an overall sustainable improvement in the profitability of the Pumps and Engine Components business segment.
The implementation of SHW’s internationalisation strategy, stated the company, is on track. In Brazil, the first oil pumps were delivered to a US automotive manufacturer in mid-July. The Canadian subsidiary, it was revealed, has received a further prototype order from a North American automotive manufacturer and is currently a candidate in the selection process for various large-scale projects.
In China, a new production hall has been secured in Kunshan, Jiangsu Province. The production of engine oil pumps for a prestigious European motor manufacturer for truck and off-highway applications is expected to take place at this site in the first half of 2016. In preparation for this project, the first local employees were hired in the areas of purchasing, quality assurance and sales. As part of their training, each will have a prolonged stay at the site in Bad Schussenried.
Full year 2014 sales and earnings forecast raised
Assuming a continued stable order situation, SHW AG now expects Group sales in fiscal year 2014 to be in the range of € 390 million to €415 million (previously: €380 million to €400 million). Additionally planned product launches and a shift in the product mix towards more complex pumps should lead to sales in the Pumps and Engine Components business segment of between €297 million and €320 million (previously: €287 million to €305 million).