ElringKlinger expands revenue amid global market downturn

- Revenue in first quarter of 2019 increases by 2.4% year on year to EUR 441.1 million; organic revenue growth stands at 2.6%

- Global automobile production contracts by 3.7% in first quarter, particularly due to market weakness in China

- EBIT before purchase price allocation totals EUR 6.9 million - earnings affected mainly by high commodity prices, US duties and follow-on costs at highly utilized NAFTA plants

- Guidance for fiscal 2019 confirmed

Dettingen/Erms (Germany), May 7, 2019 +++ ElringKlinger AG succeeded in further expanding its revenue in the first quarter of 2019 amid an increasingly challenging business environment. Driven in particular by sustained buoyancy in demand within North America, sales revenue increased by 2.4% to EUR 441.1 million compared to the same quarter a year ago (EUR 430.7 million). In this context, currency effects - primarily from the translation of the US dollar into the euro as the Group currency - contributed 1.3 percentage points to growth. By contrast, revenue was diluted by 1.4 percentage points as a result of the sale of the Hug subgroup and new enerday GmbH in the preceding year. Organic revenue growth, i.e., the figure adjusted for currency effects and M&A activities, thus stood at 2.6%.

Global market contraction - North America as growth driver for ElringKlinger
While ElringKlinger maintained its forward momentum, the market as a whole trended considerably lower. In the first three months of 2019, global automobile production fell by 3.7% compared with the same period a year ago. On this basis, ElringKlinger managed to exceed the change in global vehicle production by 6.3 percentage points in organic terms in the first quarter of 2019.

Revenue growth developed along very different lines in the respective regions covered by ElringKlinger. The market downturn in Europe and Asia-Pacific was reflected in the Group's revenue figures. Revenue from sales in Europe fell by 2.5% adjusted for currency effects, while business in Asia-Pacific declined by 5.8%. The lethargic state of the world's largest vehicle market, China (-5.1%), was a key factor in this context. By contrast, the Group continued to record strong demand in North America. Revenue generated by ElringKlinger from sales in the North American market, whose vehicle production output fell by 2.4% in the first quarter of 2019, expanded by 26.5% to EUR 101.6 million during the same period; adjusted for currency effects, growth stood at 19.9%.

"The downturn in global vehicle production continued at the beginning of the year, as anticipated, and the second quarter is only likely to see a slight improvement compared to the first three months. Markets aren't expected to pick up more rapidly before the second half of the year," explains Dr. Stefan Wolf, CEO of ElringKlinger AG, in outlining market expectations for the year as a whole.

Group earnings impacted by external and internal factors
ElringKlinger's earnings were again impacted by external and internal factors in the first quarter of 2019. Tariffs imposed by the US administration on certain raw materials, so-called antidumping and countervailing duties on aluminum imports from China, had an adverse effect on earnings. At the same time, higher commodity prices, particularly for plastic granules but also with regard to steel and aluminum, had an impact on the bottom line. In addition, the Group still had to contend with follow-on costs attributable to persistently high capacity utilization at its North American plants.

As a result of these factors, earnings before interest, taxes, depreciation, and amortization (EBITDA) fell to EUR 34.8 million in the first quarter of 2019, down from EUR 61.1 million in the same period a year ago. Depreciation and amortization were up by 19.9% year on year at EUR 28.3 million following the first-time application of the new International Financial Reporting Standard 16. Consequently, earnings before interest and taxes (EBIT) stood at EUR 6.9 million before purchase price allocation, which corresponds to a margin of 1.6%. The comparative prior-year figure for the first quarter was EUR 38.4 million (margin: 8.9%). However, it included the gain on disposal of EUR 21.1 million from the sale of the Hug subgroup.

Net finance costs down, income taxes up, net income in negative territory
The Group's net finance costs fell to EUR -1.0 million in the first quarter of 2019 (Q1 2018: EUR -5.3 million) due to a substantial year-on-year increase in the net result from currency translation. At EUR 6.5 million, income tax expenses were slightly above prior-year's figure (Q1 2018: EUR 5.7 million). This is attributable to losses incurred by subsidiaries for which no deferred tax assets were recognizable.

After deducting income taxes, net income for the first quarter of 2019 stood at EUR -1.1 million (Q1 2018: EUR 26.4 million), while net income attributable to the shareholders of ElringKlinger AG amounted to EUR -1.5 million (Q1 2018: EUR 25.7 million). Earnings per share stood at EUR -0.02 (Q1 2018: EUR 0.41).

As Dr. Wolf explains, "Against the backdrop of weak markets and difficult business conditions, we were anticipating a sluggish start to the year, although obviously we are not happy with our bottom-line results. We will continue to press ahead with our optimization measures in order to implement the improvements we set out to achieve and have further intensified internal cost streamlining. However, one of the key prerequisites for our earnings performance in 2019 is that markets recover as predicted over the course of the year."

Guidance for fiscal 2019 confirmed
Despite the expected sluggish start to the year with regard to revenues in Europe and Asia as well as earnings, the order situation at the ElringKlinger Group remained robust in the first three months of 2019. Adjusted for currency effects, order intake rose by 0.5% to EUR 476.7 million (Q1 2018: EUR 474.2 million), while order backlog as of March 31, 2019, increased by 2.6% to EUR 1,054.1 million (Q1 2018: EUR 1,027.2 million). Against this background, the Group remains confident that it can outpace the expansion in global automobile production by 2 to 4 percentage points in terms of organic revenue growth. The coming quarters are expected to see an improvement in earnings performance, as planned, meaning that the EBIT margin range of around 4 to 5% before purchase price allocation, as targeted by the Group, will be achieved. Among the elements expected to support this are Group-wide cost streamlining, the stabilization of commodity prices, including tariffs, and positive effects from optimization measures. However, if these earnings projections are to be achieved, it is essential that no other external effects occur in the form of significant downside factors and that global markets recover noticeably in the second half of the year as expected.

Key financials for Q1 2019

* Incl. gain from sale of Hug subgroup (EUR 21.1 million before taxes)

For further information, please contact:
ElringKlinger AG
Dr. Jens Winter
Strategic Communications
Max-Eyth-Straße 2
72581 Dettingen/Erms (Germany)
Phone: +49 7123 724-88335
Fax: +49 7123 724-85 8335
E-mail: [email protected]

About ElringKlinger AG
As an independent and globally positioned supplier, ElringKlinger is a powerful and reliable partner to the automotive industry. Be it passenger car or commercial vehicle, equipped with an optimized combustion engine, with hybrid technology, or with an all-electric motor - we offer innovative solutions for all types of drive system. In doing so, we are making a committed contribution to sustainable mobility. Our lightweighting concepts help to reduce the overall weight of vehicles. As a result, vehicles powered by combustion engines consume less fuel and emit less CO₂, while those equipped with alternative propulsion systems benefit from an extended range. Developing cutting-edge battery and fuel cell technology as well as electric drive units, we were among the frontrunners when it came to positioning ourselves as a specialist in the field of e-mobility. At the same time, we are committed to evolving our sealing technology for a wide range of applications. Our shielding systems are designed to ensure high-end temperature and acoustics management throughout the vehicle. Dynamic precision parts developed by ElringKlinger can be used in all types of drive system. Additionally, the Group's portfolio includes engineering services, tooling technology, and products made of high-performance plastics, which are also marketed to industries beyond the automotive sector. These efforts are supported by a dedicated workforce of more than 10,000 people at 44 ElringKlinger Group locations around the globe.

Disclaimer
This release contains forward-looking statements. These statements are based on expectations, market evaluations and forecasts by the Management Board and on information currently available to them. In particular, the forward-looking statements shall not be interpreted as a guarantee that the future events and results to which they refer will actually materialize. Whilst the Management Board is confident that the statements as well as the opinions and expectations on which they are based are realistic, the aforementioned statements rely on assumptions that may conceivably prove to be incorrect. Future results and circumstances depend on a multitude of factors, risks and imponderables that can alter the expectations and judgments that have been expressed. These factors include, for example, changes to the general economic and business situation, variations of exchange rates and interest rates, poor acceptance of new products and services, and changes to business strategy.