Dornbirn, Austria – In the first nine months of the current financial year (May 2007 to January 2008) the Zumtobel Group based in Dornbirn, Austria, was able to post further growth in revenues and earnings, although the pace of growth slowed somewhat in the third quarter. Group revenues for the first three quarters rose by 4.9% to EUR 966.1 million. Adjusted EBIT increased 11.9% to EUR 97.2 million. The EBIT margin for the first nine months moved ahead 70 basis points to 10.1%, although at 30 basis points (from 6.9% to 7.2%) the third quarter improvement in earnings was slightly slower than in Q3 of the previous year.
"Overall, the third quarter brought us more light than shade," said Zumtobel Group CEO Andreas Ludwig, summing up the positive and negative sides of the year to date. "We are very pleased to report that we have been able to maintain the unbroken pattern of growth in our European core markets, which account for more than 80% of Group revenues. This provides absolute confirmation that we are on the right track. Unfortunately the pace of growth reflected the marked negative influence of the strong euro. On top of which our development in overseas markets has been disappointing to date, although we remain convinced of the upside potential of these markets."
Currency translation impacts on pace of growth
The Zumtobel Group's biggest single market is the UK. As a net importer, the Group has been particularly hard hit by the continuing rise in the value of the euro over the Pound Sterling. In the first three quarters of the current financial year, the stronger euro cost the Group EUR 9.1 million in revenue growth, including EUR 7.5 million in the third quarter alone. Currency translation effects had a commensurate impact on the pace of growth at the lighting group: after foreign exchange adjustments, revenue growth for the first nine months stood at 5.9% (in real terms 4.9%). In the third quarter, the difference between the adjusted value of plus 4% and the reported growth of 1.5% was even more pronounced.
Development of revenues by region
A regional breakdown reveals that the Group's European core markets remained the principal growth driver. In the first nine months, revenues from European markets rose 7.5% to EUR 786.4 million, although the third quarter showed a foreign exchange-led slowdown to 3% growth. One particularly positive item is the development of revenues in Eastern Europe where, following postponements on the project business front, Q3 brought renewed growth of 11.5%. Overseas business, by contrast, proved disappointing. Due to a lack of major projects and slower demand in Hong Kong and Macau, after the first nine months, revenues in this region are 9% down on the comparable prior-year period. The Group's relatively small US business was impacted by the drop in the value of the dollar as well as by the weakening US economy and trailed 14.3% behind the first three quarters of the previous year. Development of the Group's LED business once again proved very positive as third quarter revenues more than doubled over the prior-year period, bringing year-to-date growth to 91% and total revenues for the first nine months to EUR 27.7 million.
Benefits of plant relocation in Australia fail to meet expectations
Along with the foreign exchange effects, it was above all the Group's Australian business that had a negative effect on the development of earnings. Following the relocation of two production plants to a single facility last year, start-up problems in the production sector have meant that productivity targets have not yet been met.
Outlook: full-year EBIT margin of between 9.5% and 9.8%
In the fourth quarter the Management Board expects the currency translation effects to continue. Consequently, the Management Board of the Zumtobel Group is adjusting its forecast for 2007/08 Group revenues to reflect growth of around 5%. The EBIT margin is expected to be between 9.5% and 9.8%, which represents a sound improvement over the prior-year value of 9.1%.
Medium-term goals remain unchanged
For the coming years the Zumtobel Group stands by its goal of returning a double-digit improvement in EBIT margin. The Group's confidence is supported by a steady high number of project inquiries – in early March Zumtobel won the largest contract in the history of the company to provide the lighting for the new Skylink terminal at Vienna Airport, with a value of roughly EUR 9.5 million – as well as the substantial growth potential open to the Group in the fields of LED technology and energy-efficient lighting systems. Over the next three years, Group revenues are expected to rise to EUR 1.5 billion on the back of organic growth, supported by targeted acquisitions.