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Interim Financial Report 08: Lighting group shows sound development during the first half-year
09.12.2008
  • Revenues reach prior year level after adjustment for foreign exchange effects
  • Adjusted EBIT margin equals 9.4%
  • Solid capital structure guarantees long-term liquidity
  • Extensive efficiency improvement programme started in response to economic crisis
  • Goals for full year adjusted to reflect changes in operating environment










Dornbirn / Austria – The Austrian Zumtobel Group, which is headquartered in Dornbirn / Vorarlberg, recorded stable operating development for the first half of the 2008/09 financial year (May to October): Group revenues nearly matched the comparative prior year level in spite of negative foreign exchange effects, but the strong Euro led to a nominal decrease of 3.7% in revenues to EUR 641.1 million (prior year: EUR 666.1 million). The increasing strength of the Euro, in particular with respect to the British Pound, was responsible for negative effects of EUR 23.4 million. An analysis by quarter shows the first consequences of the global economic crisis with a decline of 5.4% during the second three months of the current financial year (August to October).

Earnings
The Zumtobel Group recorded adjusted earnings before interest and tax (EBIT) of EUR 60.1 million for the first six months of 2008/09, for a decline of 20.7% versus the comparable prior year level of EUR 75.7 million. As announced in September, the Group was unable to match the high prior year return on sales, but the EBIT margin of 9.4% can be considered satisfactory under the current difficult market conditions. The decrease in earnings resulted primarily from a lower contribution due to the decline in revenues, higher personnel expenses that followed changes in collective bargaining agreements, higher costs for the expansion of LED activities and negative foreign currency effects. Profit for the period totalled EUR 42.1 million – despite a significant improvement in financial results that was supported by valuation effects – for a decline of 23.5% from the comparable prior year value of EUR 55.1 million.

"Even though our company still recorded solid results for the first six months, we are expecting substantial weakness in our operating environment during the remainder of this financial year. In order to counter the effects of the global economic crisis, we have launched an extensive efficiency improvement programme that should lead to cost savings of EUR 50 million over the next 2½ years. This programme is designed to adjust our structures to reflect market developments and, at the same time, allow us to invest in growth opportunities so we will be able to emerge stronger from this difficult market situation", indicated Andreas Ludwig, CEO of the Zumtobel Group. 


Segments of business
The TridonicAtco components business was negatively influenced by foreign exchange effects of EUR 6.5 million, but was still able to match the high comparative prior year level with revenues of EUR 208.8 million. After an adjustment for currency translation effects, revenues rose by 3%. The Lighting Segment with its Zumtobel and Thorn brands was affected by growing market weakness and negative currency translation effects. Revenues for the first half-year declined 3.8% to EUR 473.9 million (prior year: EUR 492.7 million). An adjustment for foreign currency effects results in a slight minus of 0.4%. The growth momentum in the LED business remained unbroken, with an increase of more than 30% in revenues to EUR 22.9 million for the first six months of 2008/09 as planned.

Regional developments
In Germany – Austria – Switzerland (D-A-CH region) revenues totalled EUR 162.9 million for the first six months and reflected the comparable prior year level, even though the slowdown in growth became more and more noticeable during the second quarter. The development of business in Western Europe was increasingly influenced by the unfavourable market environment and negative foreign exchange effects (EUR 205.7 million, - 8.0%), but the Zumtobel Group generated further growth in Eastern Europe (EUR 40.5 million, + 13.6%). In Asia the Zumtobel Group continued the steady implementation of its optimisation programme. Revenues in this region rose by 5.2% to EUR 45.2 million. Australia again failed to meet expectations, and was also affected by the strong devaluation of the Australian dollar (EUR 53 million, - 7.4%).

Solid capital structure
The capital structure of the Zumtobel Group remained solid as of 31 October 2008. The equity ratio improved from 41.0% to 43.9% in year-on-year comparison. Net debt equalled EUR 178.4 million, which is also less than the prior year level of EUR 183.3 million. Gearing – the ratio of equity to net debt – equalled a very low 36% (prior year: 39%). Cash flow from operating activities was again clearly positive at EUR 47.8 million for the first half of 2008/09 (prior year: EUR 53.2 million). Additionally, the financing agreement that was concluded in June 2008 with a volume of EUR 480 million and a term of five years gives the Zumtobel Group sufficient financial latitude to meet all current and future challenges. 

Efficiency improvement programme started / Outlook adjusted
The Management Board expects a further deterioration in the economic climate during the 2009 calendar year. In order to substantially increase the Group’s flexibility to react to the noticeable decline in market demand, Zumtobel has launched an efficiency improvement programme. These measures should lead to a sustainable reduction of roughly EUR 50 million in personnel and operating costs by the end of the 2010/11 financial year. The primary objective of these measures is to adjust organisational and capacity costs as quickly as possible to reflect the current and expected developments in the Group’s markets and sales volumes, and also hold cash flow at a sound level under these difficult operating conditions. Based on the current negative economic trends and the fact that the major part of these cost savings will only provide relief for earnings beginning in 2009/10, the goal to record an EBIT margin of 8 to 9% for 2008/09 no longer appears realistic. However, the Management Board is convinced that the efficiency improvement programme and solid capital structure will allow the Zumtobel Group to emerge stronger from this difficult market situation.

Dornbirn / Austria – The Austrian Zumtobel Group, which is headquartered in Dornbirn / Vorarlberg, recorded stable operating development for the first half of the 2008/09 financial year (May to October): Group revenues nearly matched the comparative prior year level in spite of negative foreign exchange effects, but the strong Euro led to a nominal decrease of 3.7% in revenues to EUR 641.1 million (prior year: EUR 666.1 million). The increasing strength of the Euro, in particular with respect to the British Pound, was responsible for negative effects of EUR 23.4 million. An analysis by quarter shows the first consequences of the global economic crisis with a decline of 5.4% during the second three months of the current financial year (August to October). The Zumtobel Group recorded adjusted earnings before interest and tax (EBIT) of EUR 60.1 million for the first six months of 2008/09, for a decline of 20.7% versus the comparable prior year level of EUR 75.7 million. As announced in September, the Group was unable to match the high prior year return on sales, but the EBIT margin of 9.4% can be considered satisfactory under the current difficult market conditions. The decrease in earnings resulted primarily from a lower contribution due to the decline in revenues, higher personnel expenses that followed changes in collective bargaining agreements, higher costs for the expansion of LED activities and negative foreign currency effects. Profit for the period totalled EUR 42.1 million – despite a significant improvement in financial results that was supported by valuation effects – for a decline of 23.5% from the comparable prior year value of EUR 55.1 million. "Even though our company still recorded solid results for the first six months, we are expecting substantial weakness in our operating environment during the remainder of this financial year. In order to counter the effects of the global economic crisis, we have launched an extensive efficiency improvement programme that should lead to cost savings of EUR 50 million over the next 2½ years. This programme is designed to adjust our structures to reflect market developments and, at the same time, allow us to invest in growth opportunities so we will be able to emerge stronger from this difficult market situation", . The TridonicAtco components business was negatively influenced by foreign exchange effects of EUR 6.5 million, but was still able to match the high comparative prior year level with revenues of EUR 208.8 million. After an adjustment for currency translation effects, revenues rose by 3%. The Lighting Segment with its Zumtobel and Thorn brands was affected by growing market weakness and negative currency translation effects. Revenues for the first half-year declined 3.8% to EUR 473.9 million (prior year: EUR 492.7 million). An adjustment for foreign currency effects results in a slight minus of 0.4%. The growth momentum in the LED business remained unbroken, with an increase of more than 30% in revenues to EUR 22.9 million for the first six months of 2008/09 as planned. In Germany – Austria – Switzerland (D-A-CH region) revenues totalled EUR 162.9 million for the first six months and reflected the comparable prior year level, even though the slowdown in growth became more and more noticeable during the second quarter. The development of business in Western Europe was increasingly influenced by the unfavourable market environment and negative foreign exchange effects (EUR 205.7 million, - 8.0%), but the Zumtobel Group generated further growth in Eastern Europe (EUR 40.5 million, + 13.6%). In Asia the Zumtobel Group continued the steady implementation of its optimisation programme. Revenues in this region rose by 5.2% to EUR 45.2 million. Australia again failed to meet expectations, and was also affected by the strong devaluation of the Australian dollar (EUR 53 million, - 7.4%).The capital structure of the Zumtobel Group remained solid as of 31 October 2008. The equity ratio improved from 41.0% to 43.9% in year-on-year comparison. Net debt equalled EUR 178.4 million, which is also less than the prior year level of EUR 183.3 million. Gearing – the ratio of equity to net debt – equalled a very low 36% (prior year: 39%). Cash flow from operating activities was again clearly positive at EUR 47.8 million for the first half of 2008/09 (prior year: EUR 53.2 million). Additionally, the financing agreement that was concluded in June 2008 with a volume of EUR 480 million and a term of five years gives the Zumtobel Group sufficient financial latitude to meet all current and future challenges. The Management Board expects a further deterioration in the economic climate during the 2009 calendar year. In order to substantially increase the Group’s flexibility to react to the noticeable decline in market demand, Zumtobel has launched an efficiency improvement programme. These measures should lead to a sustainable reduction of roughly EUR 50 million in personnel and operating costs by the end of the 2010/11 financial year. The primary objective of these measures is to adjust organisational and capacity costs as quickly as possible to reflect the current and expected developments in the Group’s markets and sales volumes, and also hold cash flow at a sound level under these difficult operating conditions. Based on the current negative economic trends and the fact that the major part of these cost savings will only provide relief for earnings beginning in 2009/10, the goal to record an EBIT margin of 8 to 9% for 2008/09 no longer appears realistic. However, the Management Board is convinced that the efficiency improvement programme and solid capital structure will allow the Zumtobel Group to emerge stronger from this difficult market situation.


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