publication interim results 2012

Aalberts realises more than EUR 1 billion revenue and 8% higher net profit

• revenue + 6% to EUR 1,030 million
• further increase in the order position
• operating profit (EBITA) + 4% to EUR 113.1 million
• net profit before amortisation + 8% to EUR 78.1 million
• earnings per share before amortisation + 7.5% to EUR 0.72
• Industrial Services realises growth and maintains good profitability
• Flow Control realises organic growth with retention of operational margin

Wim Pelsma, Chief Executive Officer: “During the first six months of 2012 we realised a revenue of more than EUR 1 billion for the very first time. Operating profit increased to EUR 113.1 million with an EBITA margin of 11.0%. Net profit amounted to EUR 78.1 million, an increase of 8% compared to the first half of 2011. This means an increase of 7.5% in earnings per share to EUR 0.72. The order position continued to increase, the added-value margin remained at a high level, and balance sheet ratios are healthy. Capital expenditure increased by 20% to EUR 43.3 million.

Our market positions have been strengthened as a result of a continuous focus on reinforcing our marketing and sales approach, and continual improvement of our portfolio of products and technologies. At the same time, we have accelerated the pace of innovation and product development and the implementation of projects to improve the production efficiency.

Revenue at Industrial Services increased by 10%. Volumes remained at a good level due to the implementation of investments and a major increase in new product and process developments. Despite reductions in volume for several major customers, particularly in France, an EBITA margin of 13.8 % was realised.

Flow Control realised profitable revenue growth by 4%, while maintaining an EBITA margin of 9.8% in challenging market conditions. This was the result of increasing our market share, focusing on growth, and expanding our product portfolio in market segments such as gas, district heating, industry, and irrigation.

With a well-filled order book and many initiatives we look forward to the future with confidence.”

financial results
Revenue  The revenue for the first half-year of 2012 amounted to EUR 1,029.6 million (1H2011: EUR 973.8 million), an increase of 6%.

Added-value  The added-value (revenue minus raw materials and work subcontracted) increased during the first half of 2012 by 6% to EUR 613.3 million (1H2011: EUR 580.8 million). The added-value margin could be maintained at the high level of 59.6% of revenue (1H2011: 59.6%).

Operating profit  Operating profit before depreciation and before amortisation (EBITDA) increased by 6% to EUR 151.3 million (1H2011: EUR 143.1 million), 14.7% of revenue (1H2011: 14.7%). Operating profit after depreciation and amortisation (EBITA) increased by 4% to EUR 113.1 million (1H2011: EUR 108.6 million), 11.0% of revenue (1H2011: 11.2%).

Net interest expense  The net interest expense remained virtually the same at EUR 10.7 million (1H2011: EUR 10.8 million), despite the acquisitions realised in 2011.

Balance sheet ratios  Total equity in mid-2012 amounted to 44.2% of the balance sheet total (1H2011: 39.8%). Net debt was EUR 684.0 million, compared to EUR 715.2 million in mid-2011. During the last 12 months the primary financial ratios developed as follows:

- Leverage ratio: Net debt/EBITDA (12-months’ rolling) from 2.48 to 2.34;

- Interest cover ratio: EBITDA/net interest expense (12-months’ rolling) remained at 12.8;

- Gearing: Net debt/total equity from 0.9 to 0.7.

Net profit  Net profit increased by 8% and amounted to EUR 78.1 million (1H2011: EUR 72.3 million) and earnings per share increased by 7.5% to EUR 0.72 (1H2011: EUR 0.67).

Capital expenditure and cash flow  In the first six months capital expenditure amounted to EUR 43.3 million (1H2011: EUR 36.0 million). Net working capital amounted to EUR 466.5 million (1H2011: EUR 439.1 million) and the cash flow (net profit plus depreciation plus amortisation) amounted to EUR 116.3 million (1H2011: EUR 106.8 million).

operational developments
Industrial Services Revenue at Industrial Services increased during the first six months by 10% to EUR 313.0 million (1H2011: EUR 284.0 million). Organic growth of revenue was 3% negative, compared to a strong first half-year in 2011. Operating profit (EBITA) amounted to EUR 43.1 million (1H2011: EUR 41.3 million), or 13.8% of revenue (1H2011: 14.5%).

During the first half of 2012, there was a varied market picture at Industrial Services. The volume remained at a generally good level, and the strong market positions could be maintained in the various countries and markets. Many new product and market initiatives were launched and implemented. The acceleration of these initiatives is essential to realise continued growth.

The market trend towards more strategic global partnerships, better local service, and the provision of excellent quality with rapid delivery times, is becoming increasingly more visible. Industrial Services responds to this with its global network of locations and combined (key account management) provision of customised products, processes, and subassemblies, which enables realisation of more added-value.

Investment projects have been started for new and existing customers in Germany, Scandinavia and the United States. During the third quarter, the first orders will be delivered from new locations in India and Poland. Preparations are well underway for a new production location in China.

Market demand has been good in the semiconductor industry. The need at strategic partners for more complete systems with more added-value is becoming increasingly clearer. One example is the growth potential in the joint provision of frames, vibration control systems, and high purity gas systems to key accounts. A targeted approach could enable more vacuum chambers to be sold in these and other industries.

The activities for the automotive industry remained at a high level during the first half-year. Demand from key customers in France declined. The German market showed a continuing good development. Growth-oriented investment projects are currently being implemented at many customers, from which Galvanotechnik Baum has also reaped good benefits. The increased number of customer projects has resulted in investments to expand production capacity.

Market demand has developed well in machine building. Full benefits have been reaped from the good market position of Industrial Services in the German machine building industry. Previous investments have resulted in additional revenue and orders. The continued increase in long-term customer contracts has enabled expansion of the capacity in Germany.

The activities in the turbine and aerospace industry showed strong growth, especially in North America, France, and the United Kingdom. Investments are planned for growth and complementary technologies in these countries. In France, the activities in the area of surface treatment did well through canvassing new customers, the implementation of efficiency improvements, and the strengthening of the management, partly due to the acquisition of DEC. Market demand for vacuum brazing of components for aircraft engines and gas turbines in North America has continued to increase; production capacity has been further expanded.

The activities in the metal and electronics industry showed strong growth in China and Poland. The commercial activity in these regions will be further strengthened. To cope with reduced demand from French key accounts, many innovative product developments – considerably higher in number than last year – have been started at existing and new customers.

In the energy market, including the oil & gas industry, new market initiatives have led to an increase in the number of projects.

The activities in the medical sector also did well.

Flow Control  Revenue increased during the first six months of 2012 by 4% to EUR 716.6 million (1H2011: EUR 689.8 million). The organic revenue growth amounted to 2% at constant exchange rates. Operating profit (EBITA) amounted to EUR 70.0 million (1H2011: EUR 67.3 million), or 9.8% of revenue (1H2011: 9.8%).

The markets for Flow Control presented a mixed picture. The challenging circumstances remained unchanged in the construction and installation segment in Western Europe and North America. There was good growth in Eastern Europe. Strong growth could be realised in the market segments of gas, district heating, industry, irrigation, and beer & soft drinks. Further progress has been made in North America with the completion of the product portfolio for the various market segments in combination with the strengthening of the joint marketing and sales approach. The projects for improving production efficiency have been intensified, and new additional projects have been launched or are being developed. There has been further reinforcement of the key account management for wholesale and larger installers.

The construction and installation segment remained difficult, especially for new buildings. The renovation, repair, and maintenance market remained at a reasonable level. The number of projects for commercial buildings in Western Europe declined. The market in Eastern Europe was good, but was still very poor in Southern Europe, and it expanded in North Africa and the Middle East, and remained at a stable but low level in North America. The market share was further increased due to the continuing focus on rapidly growing product lines and provision of complete energy-efficiency systems, in which as many Flow Control products as possible are integrated and provided for the benefit of systems for heating, cooling, drinking water, and gas. A lot of attention is also being paid to the further strengthening of the sales organisations, product branding, the product and system portfolio, the specification of projects, and the training and acquisition of new end users. The activities in the market for under-floor heating systems increased strongly. The same applied for fire protection systems, partly due to a combined offering of metal and plastic piping systems.

In the utilities market, especially during the first months of the year, there was satisfactory progress, with the exception of Spain. The revenue from gas piping systems with associated regulator valves increased in Belgium and Germany. An action plan has been launched for further improvement of the product offering on the basis of a more European approach, in which several group products are being added and developed. To accelerate the product and market development and realise more growth, the management of the group companies active in this segment has been combined under a single management.

The district heating activities did very well due to the recent years’ significantly expanded and improved product portfolio, increased sales and project specification activities, and strengthening of the management. Good growth was realised in the markets in Eastern Europe, including Russia, and in China. Western and Northern Europe also benefited from the extensive product portfolio and increased market activities.

Strong growth has been realised in the gas market as a result of the expansion of the product portfolio of regulator valves for larger diameters and higher pressures. The market itself also grew strongly with an increasing number of projects in Eastern Europe, especially Russia, and also in countries such as Turkmenistan, Kazakhstan and Azerbaijan. During the first half-year, the production capacity was further increased at locations in Poland and Russia to enable demand to be met. In view of the growth potential, there are plans in preparation for the activities to be further expanded to other countries.

The industrial markets also did well in both Europe and the United States. Sales of regulator valves showed strong growth in markets including power stations, oil & gas, pulp & paper, chemicals, and other manufacturing industries. The factory investments increased as a result, on the one hand, of the good market development and, on the other, because of catching up with necessary renovation and maintenance of factories for connection systems and associated regulator valves. In this segment, new initiatives in the area of cross selling will be launched during the coming period.

The activities in the beer & soft drinks market developed strongly. Further initiatives have also been taken to accelerate growth in this area by the combined offering of the portfolio in various countries.

The irrigation activities also had a good first half-year, especially in North America, due to the introduction of various new products. New connection technologies were combined with existing plastic connection systems and regulator valves of the North American companies, making use of strong brand names. These new developments will lead to continued growth in this segment.

outlook
On the basis of the intensive market contacts, the broad spread of the market portfolio, the solid order position, an ever-increasingly active market approach, the development of numerous new products and technologies, and a high number of initiatives to continue improving production efficiency, barring unforeseen circumstances, an improvement in earnings per share is anticipated for the whole of 2012 compared to 2011.