Bekaert accelerated the efforts to enhance its global operational excellence and innovation strategy, close to its customers. Continued growth in emerging markets and fast growing industries contributed to sustained profitability in 2009. Notwithstanding a difficult economic environment, Bekaert succeeded in raising EBIT and EBITDA margins to record levels.
Fast and effective implementation of inventory restriction and cost saving measures led to a substantial reduction of working capital and net debt, so that Bekaert’s strong balance sheet was even further improved.
Sales
Compared with the exceptional year 2008, Bekaert’s consolidated sales were down a limited 8.5%, with major differences among regions. Weak market demand, primarily during the first half of 2009, and lower raw material prices year-on-year drove an organic sales decline of 16.9%. This was partly compensated by the integration of Prodac (Peru) and Ideal Alambrec (Ecuador) in Latin America, which added 5.9%, and a minor positive effect of currency movements, which contributed 2.5%1.
Combined sales2 decreased 16.6% in comparison with 2008. Lower market demand resulted in an organic decline of 17.5%, while the effect of currency movements was almost neutralized (+0.9%).
Financial Review
5% dividend increase
In light of Bekaert’s robust performance in 2009 and confidence in its future, the Board of Directors will propose that the General Meeting of Shareholders on 12 May 2010 approve the distribution of a gross dividend of € 2.940 per share, compared with € 2.800 last year. If this proposal is accepted, the net dividend per share will amount to € 2.205 and the net dividend on shares with VVPR strip, entitling the holder to reduced withholding tax of 15%, will be € 2.499. The dividend will be payable as from 19 May 2010.
Strong financial results
Bekaert achieved a record operating result (EBIT) of € 232 million, compared with € 210 million for the financial year 2008 (+10%). This equates to an EBIT margin on sales of 9.5%. The operating result before non-recurring items (REBIT) amounted to € 257 million, representing a margin of 10.5%. Non-recurring expenses related to restructuring programs announced in 2008 (€ 11 million), as well as to asset impairments and other realignment programs (€ 14 million).
EBITDA amounted to € 386 million, representing a record EBITDA margin on sales of 15.8%.
- All comparisons are made relative to the financial year 2008, of which the fi gures were readjusted according to the new segment reporting.
- Combined sales are sales of consolidated companies plus 100% of sales of joint ventures and associates after intercompany elimination.
Bekaert implemented stringent cost saving measures, both at the level of its manufacturing organization as well as in selling and administrative expenses. While selling and administrative expenses increased firstly as a result of the integration of Ideal Alambrec and Prodac (adding € 13 million), Bekaert managed to lower these expenses at the total consolidated level by 8.3%. Research and development expenses remained high (€ 63 million), in accordance with Bekaert’s continuous innovation strategy.
The increase in interest expenses was mainly due to increased average debt and interest rates and the integration of Prodac and Ideal Alambrec. Taxation on profit amounted to € 34 million compared with € 25 million in 2008. The overall effective tax rate thereby increased from 15.8% to 20.4%.
The transfer of Ideal Alambrec and Prodac to the consolidated perimeter and lower profits in the Brazilian and Chilean activities reduced our share in the results of joint ventures and associated companies to € 38 million (2008: € 56 million).
The result for the period thus reached € 170 million. After third-party minority interests (€ 19 million), the result for the period attributable to the Group was € 152 million.
Healthy balance sheet
As at 31 December 2009, shareholders’ equity represented 48.5% of total assets. Net debt was brought down by 37% to € 395 million, mainly as a result of the strong reduction of working capital. The gearing ratio (net debt to equity) was 28.8% compared with 53.5% as at 31 December 2008.
Cash flow statement
Cash from operating activities amounted to € 497 million (2008: € 222 million). Operating working capital decreased by € 196 million due to the substantial reduction of inventory. Cash flow attributable to investing activities amounted to € 127 million: € 158 million related to expenditure from investments in, amongst others, Asia Pacific, Slovakia, Russia and Belgium, while dividends received from joint ventures represented a positive cash flow of € 41 million.
Investment Update
On 1 February 2010 Bekaert announced the acquisition of two Bridgestone tire cord plants (in Sardinia, Italy and in Huizhou, China) and a multi-year supply agreement. The transaction, with an enterprise value of approximately € 70 million, includes all of the personnel and assets of the two manufacturing sites and is expected to complete in the second quarter of 2010.
Several expansion projects came into effect to support the growth in the emerging markets. Capital expenditure amounted to € 158 million in 2009 and is expected to increase in 2010. Capacity increases in China, India and Russia, and the planned integration of the Bridgestone tire cord plants will raise Bekaert’s total tire cord capacity from 625 000 tons at present (of which 350 000 in China) to an estimated 700 000 tons by the end of 2010 (of which 400 000 in China).
Bekaert further maintained its high investments in research and development, totaling € 63 million in 2009 (3% of sales). These R&D expenses applied to the activities of the international technology centers in Deerlijk (Belgium) and Jiangyin (China). Investments in venture capital were temporarily put on hold.