BERU INCREASES SALES REVENUES BY MORE THAN 13%
17 February 2005 - BERU

BERU Aktiengesellschaft, Ludwigsburg, increased its total sales revenues in the first nine months of the 2004/05 financial year (April 1 – December 31, 2004) by 13.2% to EUR 281.7 million (Apr.-Dec. 2003: EUR 248.9 million).

Earnings were negatively affected by
exceptional expenditures totaling EUR 4.8 million connected with changes in
the company’s Executive Board and consulting services relating to the tender
offer by BorgWarner. Excluding exceptional items, net income of EUR 27.0
million in the nine months was 4.7% higher than in the same period of the prior
year (EUR 25.8 million). Including the exceptional items, BERU achieved net
income of EUR 24.0 million.
Diesel on a sustained growth path
BERU’s revenues from OEM sales of glow plugs increased by more than 13% in the
first nine months of the financial year. In addition to the fact that the market for
diesel cars is booming in Western Europe, we also succeeded in increasing our
market share. BERU increased its share of supplies to a French manufacturer and is
now the sole supplier of glow plugs to that company.
Results in the aftermarket business were below our expectations. In particular, OES
sales of glow plugs – the spare parts business with vehicle manufacturers – were
lower than projected and recorded a double-digit decrease compared with the prioryear
period. This was partially due to the late onset of winter, and so far there has
been no second restocking due to the mild weather. This effect was amplified by
customers’ very cautious purchasing behavior. In the first few weeks of BERU’s
fourth quarter, however, a slight revival of glow-plug sales was perceptible in the
OES business.
We are satisfied with the development of unit sales of the ISS diesel instant-start
system, where sales revenues were higher than projected. The manufacturing
capacity of BERU Electronics GmbH in Bretten has been further expanded. As of
March 2005, BERU will already supply the second-generation ISS to an US engine
manufacturer. Additional new launches of products incorporating our diesel instantstart
system will secure sustained high growth rates for the future.
BERU Eyquem posts sales revenues of EUR 24 million
In the Ignition Technology division, sales revenues in the first nine months increased
by 13.8% to EUR 85.2 million (EUR 74.9 million). This growth was mainly a result
of the revenues contributed by our French subsidiary, Eyquem. The market
environment remained challenging. In Western Europe, unit sales of cars with
gasoline engines declined by 7% in favor of diesel.
The revenues generated by sales of ignition coils remained stable despite the weak
economic situation. BERU plans to further expand the output of this product group:
Additional growth will be provided by a higher share of supplies with a French
manufacturer starting in the middle of 2005 and new customer projects.
The development of the aftermarket business outside Europe was weak, partially due
to the weakness of the dollar. Sales revenues from ignition connectors and other
parts developed satisfactorily. BERU increased its share of supplies of these
products and penetrated new markets. Growth was also achieved by expanding the
product range and by including new products in the aftermarket program of BERU
Eyquem.
Newest division below forecast
Developments have been below forecast in our newest division of Electronics and
Sensor Technology, however, which posted sales revenues of EUR 65.9 million
compared with EUR 58.5 million in the prior-year period, representing an increase
of 13%.
Even though BERU achieved strong growth with PTC auxiliary heating systems and
anticipates more than double the prior-year sales revenues for the full financial year,
customer call-offs did not quite meet our expectations.
Sales of tire-pressure monitoring systems were significantly lower than had been
budgeted. This shortfall was partially a result of falling equipping rates, but was also
due to the fact that one manufacturer that originally planned to fit our tire safety
system (TSS) to a platform for the US market as standard equipment has not yet
done so. The reason for this is that the introduction scenario was not formulated in
binding form by the American NHTSA until the late fall of 2004. In the last full
financial year 2003/04, the company generated sales revenues of more than EUR 30
million with its range of tire-pressure monitoring products (2002/03: EUR 20
million). At present, the management expects sales revenues for full-year 2004/05 to
be lower than in the prior year.
With the start up of a major order to equip several platforms for a European
manufacturer starting in the middle of the year, BERU assumes that strong doubledigit
growth rates will again be achieved for tire-pressure monitoring systems. The
major order received recently should contribute EUR 15-20 million to the Group’s
sales revenues in the coming financial year. In addition, the company is holding
discussions with another German manufacturer about fitting TSS to a new platform
as standard equipment.
Increases in orders received and order backlog
Both orders received and the order backlog continued to expand in the first nine
months of this financial year. BERU recorded an increase in orders received of
10.2% to EUR 292.4 million (EUR 265.3 million), while the order backlog of EUR
176.9 million was 8.5% higher than a year earlier (EUR 163.1 million).
Slight workforce expansion
At December 31, 2004, the workforce numbered 2,657 employees, and was thus
1.3% larger than at the end of September. The ratio of personnel expenses to sales
revenues increased by 2.1 percentage points to 31.3% (29.2%). However, this
includes the one-offs for the departure of one member of the Executive Board.
Slight increase in ratio of material expenses to sales revenues
Material expenses increased by 14% to EUR 103.3 million in the first nine months,
compared with EUR 90.6 million in the same period of the prior year. Despite rising
raw-material prices, BERU only recorded a slight increase in the ratio of material
prices to sales revenues: from 36.4% to 36.7%. In view of the continued increase in
electronics’ share of the product mix, this development is as planned. For the full
year, the company still plans to achieve a material-expenses ratio of 36.5% to
37.5%. Related to output volume (sales revenues plus changes in inventories and
own work capitalized), the ratio was 35.7% (34.9%). The gross margin was 63.3
(63.6%).
Other operating expenses were higher at EUR 41.7 million in the first nine months
of 2004/05, compared with EUR 39.5 million in the prior-year period, but decreased
as a percentage of sales revenues to 14.8% (15.9%).
High EBIT margin before one-off expenses
Profits in the nine months under review were burdened by one-off expenses of EUR
4.8 million relating to changes in the Executive Board and consulting services
connected with the tender offer from BorgWarner. EBIT (earnings before interest
and taxes) in the actual operating business, adjusted for exceptional expenses, rose
by 7.0% to EUR 42.9 million (EUR 40.1 million). Including the exceptional
expenses, EBIT amounted to EUR 38.1 million. With an adjusted EBIT margin of
15.2%, BERU’s profitability remained at a high level, but was lower than the prioryear
ratio of 16.1%.
Strong financial income
Net financial income improved to EUR 2.4 million compared with EUR 1.7 million
in the prior-year period, despite the continuation of low interest rates. Before taxes
and adjustments, the increase in earnings came in more than 8% higher amounting to
EUR 45.3 million (EUR 41.8 million). Including the aforementioned one-time
expenses, pretax earnings amounted to EUR 40.5 million.
Adjusted net income of EUR 27 million
The overall effective tax rate increased to 40.5% (38.0%), partially due to the nonearnings-
related tax on assets at BERU Eyquem and higher sales revenues in regions
with above-average tax rates. The effective income-tax rate of 38.0% was higher
than in the prior-year period (36.7%). Before one-off expenses, net income increased
from EUR 25.8 million to EUR 27.0 million. Including the one-off expenses, net
income amounted to EUR 24.0 million. Earnings per share adjusted for one-offs
increased by 4.7% to EUR 2.70 (EUR 2.58).
Strong into the future with an investment ratio of nearly 10%
As ever, one of the elements of BERU’s business policy is to make the company fit
for the future as a result of innovative product leadership and highly efficient
production processes. With a ratio of investment to sales revenues of 10%, BERU is
well above the industry average. Capital expenditure on tangible and intangible
assets increased by 30% to EUR 28.8 million (EUR 22.0 million). Some of the main
areas for investment were the expansion of production capacities for the ISS diesel
instant-start system in Bretten and for ignition coils in Muggendorf. In
Ludwigsburg, the company invested in the installation of an additional production
line for our ultramodern slim-line glow plugs.
The free cash flow from operating activities decreased by 7.2% to EUR 16.3 million
(EUR 23.5 million). BERU’s total cash flow of EUR 45.1 million was similar to the
prior-year level (EUR 45.5 million). Cash and cash equivalents at December 31,
2004 amounted to EUR 96.2 million compared with EUR 91.5 million at September
30, 2004. The net cash position improved by EUR 6.1 million to EUR 73.4 million
(Sep. 30, 2004: EUR 67.3 million).
Outlook
Due primarily to lower sales of tire-pressure monitoring systems than in the prioryear
period and an unusually warm early winter leading to weaker than planned
aftermarket sales in the third quarter, the BERU Executive Board does not rule out
the possibility that the original goal for the full year of increasing total sales
revenues and operating profit by more than 13% might not quite be achieved. The
profitability of our French subsidiary Eyquem, which we acquired in the middle of
2003, is still below our expectations and has been burdening the Group’s EBIT
margin by approximately one percentage point. The installation of ultra-modern
manufacturing equipment and processes as well as the restructuring that has been
carried out at BERU Eyquem should help to improve this situation.
With a view to the full year, the Executive Board assumes that total sales revenues
will increase by at least 10%. EBIT before one-time expenses of nearly EUR 5
million for changes in the Executive Board and consulting services connected with
the acquisition offer from BorgWarner should be at least EUR 56 million. In the
prior year, BERU achieved an EBIT of EUR 53.4 million.
“We are not satisfied with the call-off rate for tire-pressure monitoring systems.
With the start-up of a major order from a European manufacturer in the middle of
this year, we expect to return to double-digit growth rates for these products. In fullyear
2005/06, the new order will contribute sales revenues of EUR 15-20 million.
An additional positive factor is that we have a quarter ahead of us that has usually
been always one of the best parts of the year for seasonal reasons,” stated Marco von
Maltzan, Chairman of the Executive Board of BERU AG. “With our globally
leading position in diesel cold-start technology, we are also well placed to profit
from the growing popularity of diesel cars that is expected worldwide in the coming
years.”
Consolidated profit and loss Account BERU Aktiengesellschaft, Ludwigsburg
Nine months 2004/2005 (April 1 to December 31, 2004)
2004/05 2003/2004 Change
in EUR mn in EUR mn in %
Sales revenues 281.7 248.9 13.2
Change in inventories of
finished goods and work in
progress and own work
capitalized
7.9 10.4 -24.0
Other operating income 2.4 2.8 -14.3
Cost of materials -103.3 -90.6 14.0
Personnel expenses -88.3 -72.6 21.6
Depreciation and
amortization
-20.6 -19.3 6.7
Other operating expenses -41.7 -39.5 5.6
Earnings before interest
and taxes
38.1 40.1 -5.0
(Adjusted earnings before
interest and taxes)
(42.9)
Financial income, net 2.4 1.7 41.2
Earnings before taxes 40.5 41.8 -3.1
(Adjusted earnings before
taxes)
(45.3)
Taxes on income and
earnings
-14.8 -15.0 -1.3
Other taxes -1.6 -0.9 77.8
Earnings after taxes 24.1 25.9 -6.9
(Adjusted earnings after
taxes)
(27.1)
Shares in profits/Losses by
other shareholders
-0.1 -0.1 0.0
Net income 24.0 25.8 -7.0
(Adjusted net income) (27.0)
Earnings per share
(in EUR)
2.40 2.58 -7.0
(Adjusted earnings per share
in EUR)
(2.70)
Consolidated Balance Sheet as at December 31, 2004 based on IFRS
Assets 31.12.2004 31.03.2004
EUR mn EUR mn
Fixed assets
Intangible assets 33.7 27.4
Property, plant and equipment 138.0 128.3
Financial assets 6.9 6.5
178.6 162.2
Current assets
Inventories 71.1 55.6
Trade receivables 73.1 73.7
Other receivables and other assets 10.3 8.5
Marketable securities 63.0 65.2
Cash and cash equivalents 33.2 39.8
250.7 242.8
Deferred tax assets 6.7 6.0
436.0 411.0
===============
Shareholders´equity and liabilities 31.12.2004 31.03.2004
EUR mn EUR mn
Shareholders´equity
Subscribed capital 26.0 26.0
Additional paid-in capital 73.1 73.1
Earnings reserves 198.3 182.5
297.4 281.6
Minority interests 2.1 1.5
Provisions
Provisions for pensions 16.4 15.9
Provisions for taxes and other provisions 38.5 33.2
54.9 49.1
Liabilities
Liabilities to banks 22.8 26.8
Trade liabilities 24.1 23.1
Other liabilities 18.5 13.8
65.4 63.7
Deferred tax liabilities 16.2 15.1
436.0 411.0
===============
Consolidated Statement of cash flow based on IFRS 2004/2005 2003/2004
Nine months 2004/05 (April 1 to December 31, 2004) EUR mn EUR mn
Net income for the period 24.0 25.8
Depreciation and amortization 20.6 19.3
Changes in provisions 5.8 -2.7
Changes in deferred taxes 0.4 3.4
Other income/expenses not affecting cash flow -0.7 -0.6
Proceeds from the disposal of fixed assets 0.3 0.0
Proceeds from the disposal of securities held as current assets 0.0 0.0
Changes in inventories -15.5 -25.3
Changes in Receivables and other assets -1.2 -5.2
Changes in minority interests 0.6 0.1
Changes in liabilities 5.8 7.4
Cash flow provides by operating activities 40.1 22.2
Proceeds from the disposal of property, plant and equipment 0.4 0.0
Payments for investments in property, plant and equipment -26.4 -20.6
Payments for investments in intangible assets -8.3 -4.7
Payments or proceeds from government subsidies 0.0 0.0
Proceeds from the disposal of financial assets 1.0 0.1
Payments of investments in financial assets -0.7 -1.4
Payments for the acquisitions of consolidated companies 0.0 -26.4
Proceeds from financial assets as part of temporary financial
management 0.2 1.8
Payments for financial assets as part of temporary financial
management 0.0 0.0
Cash flow used for investing activities -33.8 -51.2
Payment for dividend -11.0 -11.0
Payments to proprietors for the purchase of treasury stock 0.0 0.0
Proceeds from the sale of treasury stock 0.0 1.9
Additions to financial liabilities 0.1 10.1
Repayments of financial liabilities -4.1 -3.4
Cash flow used for financing activities -15.0 -2.4
Changes in cash and cash equivalents affecting cash flow -8.7 -31.4
Changes in cash and cash equivalents not affecting cash flow 0.1 1.2
Changes in cash and cash equivalents due to consolidated group 0.0 0.0
Cash and cash equivalents at beginning of period 102.0 112.5
Cash and cash equivalents at the end of period 93.4 82.3
Group cash flow based on IFRS 2004/05 2003/04
First-Half 2004/05 (April 1to December 31, 2004) EUR mn EUR mn
Net income 24.0 25.8
Depreciation and amortization 20.6 19.3
Change in long-term provisions 0.5 0.4
45.1 45.5
Sales revenues and EBIT by segment
(distribution channels) based on IFRS
2004/05
2003/04
First-Half 2004/05 (April 1 to December 31, 2004) EUR mn EUR mn
OEM
Sales
EBIT
179.5
24.6
155.6
22.2
Aftermarket
Sales
EBIT
85.2
18.0
76.3
17.9
General Industry
Sales
EBIT
Adjsuted EBIT
17.0
0.3
-4.8
17.0
0.0
0.0
Total
Sales
EBIT
281.7
38.1
248.9
40.1

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