Sales € 5,483m (KBC: 5,666), EBIT € -159m (KBC: -126) including charges of € 267m (see next paragraph) and restructuring charges of € 50m so EBIT excluding charges and restructuring was € +158m (KBC: +230), the clean EBIT margin was 2.9%, PBT € -221.5m (KBC: -183), interest costs € -66m (KBC: -59), taxes € -4.8m (KBC: -38.5), and net profit € -226m (KBC -227).
€ 370m in write downs are allocated to 2011 and 2012:
Write downs re receivables and work-in-progress in Germany (220) and Poland (150) amounted to € 370m, of which € 267m was charged to the 2012 P&L, € 54m to the 2011 P&L, and € 49m was adjusted in the opening balance sheet 2011. On top of these write downs was a € 50m charge for downsizing in Benelux, Spain, and Marine. There were also other adjustments to the 2011 accounts, to the amount of € 28m.
Clean EBITDA margin 2012 was 4.8%
EBITDA is the new focus, as opposed to EBITA in the past. The clean 2012 margin of 4.8% was well below the implied previous target of 6.7-7.7% (EBITA 6-7% plus 70bps for depreciation). We believe Benelux margins are still poor, owed to very tough market conditions. We consider it likely that profitability of Germany & Eastern Europe was also very poor, when adjusted for the aforementioned write downs. As such, earnings capacity going forward will be lower than previously imagined.
Net debt in line with guidance of € 800m:
At end-2012, net debt amounted to € 773m. This is in line with guidance issued in February 2013. We are not sure whether the restructuring costs of € 50m were entirely spent in 2012. The recently announced restructuring of € 80m will hit the 2013 P&L and cash flow statement.
Working capital 1.3% of sales:
It was € 69m, obviously pushed down by write-downs on work-in-progress and receivables due for more than 1 year.
Investigations in the east are nearly finalized:
Management will report the findings on the investigations in Germany and Poland in early June. They will also release the final results 2012, including information on division performance.
AGM on 28 June:
Management will ask approval for the € 500m rights issue, which will be used entirely for debt reduction (after deduction of costs).
Conclusion:
The main risk to the company was solved a while ago as Rabo and ING fully support the rights issue. The main uncertainty to equity investors is the new level of earnings capacity, which looks to be well below levels previously imagined. Hence, we maintain our Hold rating.