Mannesmann Reports to Shareholders
26 November 1997
Mannesmann Reports to Shareholders; Mannesmann in the First Nine Months 1997
DUSSELDORF, Germany, Nov. 25 -- The following was released by
Mannesmann today:
Stronger portfolio - substantial profit improvement
-- All sectors contribute to the earnings improvement
-- Strong increase in investments to DM 5 bn
-- Mannesmann and Olivetti form joint venture for telecommunications in
Italy
-- Mannesmann VDO and Philips agree on acquisition of Philips Car Systems
by VDO
-- Mannesmann bundles its activities in plastics machinery
-- Mannesmann expects substantial improvement in result of ordinary
activities also for the full year 1997
Substantial Profit Improvement
Posting high increases in orders and sales, Mannesmann substantially
improved its result of ordinary activities in the period under review. All
sectors contributed to the positive earnings development. Mannesmann expects
the result of ordinary activities also for the full year 1997 to be
significantly higher than in 1996. The expectations of a substantial profit
improvement in Engineering and a further profit improvement in Automotive
remain unchanged. The earnings contribution of Telecommunications will
further increase due to the rise at Mannesmann D2. Tubes & Trading will
achieve a clear turnaround. Order intake until September was up by 15%
compared to the previous year's period. All sectors contributed to the
similarly high increase in sales. At DM 5 bn, investments grew to a very high
level, primarily due to the strong expansion of Mannesmann Telecommunications.
The number of employees rose by 5%
Jan.-Sept. Jan.-Sept. Change
1997 1996 %
DMm DMm
Orders Received 30.984 26.995 +15
Sales 27.386 23.892 +15
Domestic Sales 12.198 10.490 +16
International Sales 15.188 13.402 +13
Employees(9/30) 127.416 121.038 +5
Investments 4.994 1.707 +193
Order intake of the Group until September rose by 15% to DM 31 bn. All
sectors contributed to this growth. Automotive, Telecommunications as well as
Tubes & Trading achieved double digit growth rates. This also applies to the
serial business in Engineering. Sales also increased by 15% to DM 27.4 bn.
Here, too, all sectors achieved increases, which were particularly strong in
Telecommunications. The domestic business grew by 16% to DM 12.2 bn, while
foreign sales were up 13% to DM 15.2 bn.
All sectors of Mannesmann contributed to the substantial improvement of
the result of ordinary activities.
In Engineering, the rise was due to earnings improvements at Dematic,
Rexroth and Krauss-Maffei. Demag was able to reduce the high loss at
Metallurgy; overall, however, the high loss of the previous year's period has
not been reduced.
The profit growth in Automotive resulted from the increase at Mannesmann
Sachs, where all business areas showed better performance. Earnings at
Mannesmann VDO remained stable.
The profit for Telecommunications has further increased due to the
positive development at Mannesmann D2. As planned, the start-up costs of the
new activities (Mannesmann Arcor, Mannesmann Eurokom), which are currently
built up, were higher than in the previous year's period.
Tubes & Trading achieved a significant turnaround in earnings,
contributing a sizeable portion to Group profit.
Stronger Portfolio
At the beginning of September, Mannesmann and Olivetti agreed on founding
the joint venture OliMan for the Italian telecommunications market into which
Olivetti will contribute its controlling stakes in the mobile operator Omnitel
as well as the fixed line telecommunications company Infostrada. In two
stages, Mannesmann will acquire a 49.9% participation in this joint venture
and thus indirectly an additional 17.7% stake in Omnitel and a 33.3% stake in
Infostrada. At the end of September, Omnitel had around 1.7 million
subscribers.
In September, the closing of the contracts between Mannesmann and Cegetel
took place in France. The build up of SFR, the mobile operator belonging to
Cegetel, continues to proceed successfully. At the end of September, SFR had
more than 1.6 million customers.
In October, Mannesmann VDO and Philips agreed on the acquisition of a 65%
stake in Philips Car Systems (PCS) by VDO. PCS is the leading supplier of
in-car navigation and related communication systems as well as of audio
entertainment products. The combination creates one of the most important
global suppliers of integrated information, navigation and traffic telematic
systems.
The joint venture for hot rolled seamless tubes between Mannesmann and
Vallourec - Vallourec & Mannesmann Tubes - started operations on October 1,
1997.
Continuing the strategy of portfolio optimisation and concentration on the
international automotive supply business, Mannesmann Sachs has sold the
bicycle component business at the beginning of November.
Mannesmann bundles its activities in plastics machinery, which so far have
been carried out partly by Mannesmann Demag and partly by Krauss-Maffei, into
Mannesmann Plastic Machinery. The joint shareholders are Krauss-Maffei and
Mannesmann Demag, whereby Krauss-Maffei will hold the majority of the shares.
The aim of bundling the five entities Billion, Netstal, Van Dorn Demag, Demag
Ergotech (Demag Kunststoffmaschinen) and Krauss (Krauss-Maffei
Kunststoffmaschinen) is to further expand the already today worldwide leading
market position for injection moulding machinery. In future, the business
units of Mannesmann Plastic Machinery will continue to be managed separately
on an operating level as well as continue to act separately in the market
place.
ORDER INTAKE
Engineering
At DM 12.6 bn, order intake in Engineering was up by 3% on the previous
year's level. The 13% decrease in long-term projects to almost DM 5.6 bn
mainly resulted from the order drop in the long-term businesses of Demag as
well as in Defence Technology at Krauss-Maffei. The serial business grew by
20% to DM 7.1 bn. Above average growth was recorded by, again, Mobile Cranes
at Dematic, by Brueninghaus Hydromatik (Drive Hydraulics) at Rexroth as well
as by Krauss-Maffei's business units Plastic Machinery and Surface Technology.
All divisions except Krauss-Maffei contributed to the 6% increase in order
backlog to DM 20.5 bn. Particularly, Systems Engineering and Mobile Cranes at
Dematic achieved strong growth.
ORDERS RECIEVED
Jan.-Sept. Jan.-Sept. Change
1997 1996 %
DMm DMm
Mannesmann
Demag 4.470 5.093 -12
Dematic 2.955 2.296 +29
Rexroth 3.421 2.856 +20
Krauss-Maffei 1.799 2.089 -14
Engineering 12.645 12.334 +3
VDO 3.374 2.813 +20
Sachs 3.285 2.942 +12
Automotive 6.659 5.755 +16
Mobilfunk 4.025 2.961 +36
Arcor 716 0 --
Eurocom 0 0 0
Telecommunications 4.737 2.961 +60
Tubes & Trading 6.082 5.078 +20
Other Companies 906 917 -1
Total 31.029 27.045 +15
.I. Intercompany
orders 45 50 -10
Mannesmann 30.984 26.995 +15
The sale of Compressed Air Technology accounted for 2 percentage points in
the order drop at Mannesmann Demag. While the serial business posted a high
increase at Plastic Machinery (+ 32%), the long-term project business
experienced a strong decrease, in particular, at Metallurgy (- 37%).
At Mannesmann Dematic, all business units continue to exceed the figures
of the previous year. Above all, Systems Engineering (+ 38%) and Mobile
Cranes (+ 46%) posted strong growth.
At Mannesmann Rexroth, foreign demand remained clearly positive (+ 23%),
but the domestic business (+ 13%) was also stable. The largest business
units, Rexroth Hydraulics (Control Hydraulics) and Brueninghaus Hydromatik
(Drive Hydraulics), achieved increases of 20% and 40%, respectively. The
other business units also experienced double digit growth rates.
The 14% decrease in orders at Krauss-Maffei was still caused by the
absence of larger orders in Defence Technology (-71%). In the civilian
businesses, however, total orders were up by 23% to DM 1.6 bn. Worth
mentioning are Plastic Machinery (+ 23%) as well as Surface Technology
(+ 65%).
ORDERS RECEIVED Jan.-Sept. Jan.-Sept. Change
1997 1996 %
DMm DMm
Engineering
Long-Term Projects
Demag 3.862 4.503 -14
Dematic 1.402 1.015 +38
Rexroth -- -- --
Krauss-Maffei 300 899 -67
Total 5.564 6.417 -13
Serial Manufacture
Demag 608 590 +3
Dematic 1.553 1.281 +21
Rexroth 3.421 2.856 +20
Krauss-Maffei 1.499 1.190 +26
Total 7.081 5.917 +20
Total 12.645 12.334 +3
Automotive
Automotive increased orders by 16% to DM 6.7 bn.
The 20% rise in orders at Mannesmann VDO was primarily influenced by the
strong growth at the foreign subsidiaries (+ 30%). Control Systems,
Information Systems for Passenger Cars and for Commercial Vehicles as well as
Fuel Systems contributed particularly to this increase. Aftermarket as well
as Heating, Ventilation and Airconditioning Control posted weaker orders than
in the first nine months of 1996.
Adjusted for Kronprinz Wheels (Michelin acquired majority stake), orders
at Sachs grew by 20%. In the original equipment business for shock absorbers,
clutches and torque converters the previous year's level was overall exceeded
by 23%. Trading as well as Gas Springs and Rubber Metal Parts also
experienced double digit growth rates.
Telecommunications
At the end of September 1997, approx. 3.1 million customers were using the
network of Mannesmann D2. With average monthly net additions of more than
100,000 customers, the positive development of subscriber growth continued in
the third quarter. As of September 1, the monthly subscription fee in the D2-
Classic24-tariffs was lowered while the attractive off-peak time in the D2-
Fun24-tariffs now starts one hour earlier at 5 p.m. and thus runs for 15 hours
on business days.
By the end of September, the number of roaming partners increased to 85 in
56 countries. According to current business plans, beginning in September of
next year, D2-customers can be reached via satellite worldwide under their D2-
number based on an agreement between Mannesmann D2 and the satellite network
operator Iridium. Mannesmann D2 increased its market presence through the
expansion of its branch network.
In the third quarter 1997, Mannesmann Arcor received a large order from
Deutsche Bahn for a new call center in DB Cargo's customer service center in
Duisburg. With the implementation in 1998, one of the largest call centers in
Europe will be created.
With the decision on the price for using Deutsche Telekom's local access
network (approx. 2 Pfennigs per minute) on September 12, 1997, the Federal
Ministry for Post and Telecommunications as regulator has set a further
milestone on the way towards liberalization of the telecommunications market.
Deutsche Telekom has filed an appeal against this decision with the Cologne
Administrative Court on October 13, 1997.
In a further proceeding, which is related to the unbundled access to the
subscriber line, the Munster Higher Administrative Court has indicated in a
hearing on September 29, 1997, that it completely shares the new competitors'
view and that it intends to dismiss Deutsche Telekom's appeal against the
ruling of the Cologne Administrative Court. Following this, Deutsche Telekom
submitted a technically and commercially detailed offer to Arcor on October
13, 1997. This offer is currently under internal evaluation.
Tubes & Trading
At Tubes & Trading, all product groups contributed to the 20% increase in
order intake to DM 6.1 bn. The bookings in large diameter pipes, which were
able to book further partial orders for the Jamal natural gas pipeline, have
increased by 83%. Furthermore, substantial increases were posted by semi-
finished products (+ 75%), hot rolled tubes (+ 15%) and Brazil (+ 36%).
Sales
In the first three quarters of 1997, sales rose by 15% to DM 27.4 bn.
Excluding changes in Group consolidation, in particular the first time
consolidation of Mannesmann Arcor, sales increased by 13%. Sales of foreign
subsidiaries grew by 13% to DM 15.2 bn, while domestically, the 16% increase
to DM 12.2 bn was predominantly affected by the expansion of the
telecommunications business.
SALES Jan.-Sept. Jan.-Sept. Change
1997 1996 %
Mannesmann DMm DMm
Demag 2.952 3.231 -9
Dematic 2.237 1.896 +18
Rexroth 3.201 3.063 +5
Krauss-Maffei 1.865 1.430 +30
Engineering 10.126 9.492 +7
VDO 3.133 2.698 +16
Sachs 3.086 2.941 +5
Automotive 6.208 5.634 +10
Mobilfunk 4.025 2.961 +36
Arcor 716 0 --
Eurocom 0 0 0
Telecommunications 4.737 2.961 +60
Tubes & Trading 5.527 5.018 +10
Other Companies 1.098 1.134 -3
Total 27.696 24.239 +14
.I. Intercompany sales
between sectors 310 347 -11
External sales
Mannesmann 27.386 23.892 +15
Domestic sales 12.198 10.490 +16
Foreign sales 15.188 13.402 +13
The sales rise in Engineering is attributable to Krauss-Maffei, Dematic
and Rexroth. Adjusted for the elimination effect of Compressed Air
Technology, sales at Mannesmann Demag were down 3%. This resulted
predominantly from the decreases in the areas of Metallurgy (- 19%), Energy
and Environmetal Technology (- 18%) and KTI (- 33%), whereas the business
units Compressors (+ 38%) and Plastic Machinery (+ 25%) could increase their
sales.
The sales increase at Mannesmann Dematic was still mainly driven by
Systems Engineering.
At Mannesmann Rexroth, Indramat (NC-Drive Technology) could achieve above
average growth.
At Krauss-Maffei, all product areas contributed to the sales increase of
the civilian businesses (+ 21%). Sales in Defence Technology were up 67%.
SALES Jan.-Sept. Jan.-Sept. Change
1997 1996 %
DMm DMm
Engineering
Long-Term Projects
Demag 2.395 2.663 -10
Dematic 925 706 +31
Rexroth -- -- --
Krauss-Maffei 572 340 +68
Total 3.892 3.709 +5
Serial Manufacture
Demag 557 568 -2
Dematic 1.312 1.190 +10
Rexroth 3.201 3.063 +5
Krauss-Maffei 1.293 1.090 +19
.I. Intercompany
sales 129 128 +1
Total 6.234 5.783 +8
Total 10.126 9.492 +7
In Automotive, Mannesmann VDO increased sales by 16%, whereby the foreign
subsidiaries posted significantly higher sales increases than the domestic
companies.
Sales at Mannesmann Sachs, adjusted for the elimination of Kronprinz, grew
by 13%. Sales in the overall original equipment business grew by 15%.
In Telecommunications, 24 percentage points of the sales increase were
attributable to the first time consolidation of Mannesmann Arcor.
With an average subscriber base of approx. 2.717 million, Mannesmann D2
achieved sales of approx. DM 4 bn in the first nine months. Thus the average
monthly total revenue (including terminals business) per subscriber amounted
to approx. DM 165.
Compared to the second quarter 1997 (DM 239 m), Mannesmann Arcor increased
sales by 4% to DM 248 m in the third quarter.
Almost all product areas contributed to the sales growth in Tubes &
Trading.
Employees
At the end of September, the number of employees amounted to 127,416.
Excluding changes in Group consolidation, personnel adjustments in the sectors
Engineering and Tubes & Trading would have lead to a decrease of about 900
employees (- 1%).
Sept. 30, Sept. 30, Change
1997 1996 %
Employees
Demag 16.590 18.579 -11
Dematic 12.204 11.753 +4
Rexroth 19.031 18.993 0
Krauss-Maffei 6.780 6.691 +1
Engineering 54.605 56.016 -3
VDO 16.190 15.669 +3
Sachs 18.616 19.432 -4
Automotive 34.806 35.101 -1
Mobilfunk 5.559 4.451 +25
Arcor 7.369 0 --
Eurocom 257 189 +36
Telecommunications 13.185 4.640 +184
Tubes & Trading 20.736 20.938 -1
Other Companies 4.084 4.343 -6
MANNESMANN 127.416 121.038 +5
Domestic companies 85.325 79.092 +8
Foreign companies 42.091 41.946 0
Personnel expenses rose by 11% to DM 7.9 bn. The 10% domestic increase
primarily resulted from a higher number of employees in Telecommunications as
well as increases in remuneration and social contributions. The 13% rise
abroad was mainly due to exchange rate fluctuations.
Investments
In the first nine months of 1997, DM 3.8 bn, i.e. approx. three quarters,
of the extraordinarily high investment volume were related to
Telecommunications. The largest amounts resulted from the first time
consolidation of Mannesmann Arcor (an addition of approx. DM 1.8 bn in assets)
and the acquisition of the Cegetel-participation, for which up to now
DM 1.1 bn have been spent.
Jan.-Sept. Jan.-Sept. Change
1997 1996 %
DMm DMm
Investments
Demag 78 305 -74
Dematic 92 46 +100
Rexroth 177 227 -22
Krauss-Maffei 36 90 -60
Engineering 383 668 -43
VDO 180 134 +34
Sachs 185 159 +16
Automotive 365 293 +25
Mobilfunk 523 437 +20
Arcor 2.095 0 --
Eurocom 1.189 120 +891
Telecommunications 3.807 557 +583
Tubes & Trading 319 149 +114
Other Companies 120 40 +200
MANNESMANN 4.994 1.707 +193
Domestic companies 4.653 1.270 +266
Foreign companies 341 437 -22
SOURCE Mannesmann AG