Mannesmann Announces Results
13 August 1998
Mannesmann Achieves Strong Earnings Growth
DUSSELDORF, Germany, Aug. 13 -- The following information was
released today by Mannesmann AG:
-- Results from ordinary activities up significantly to DM 1.146 bn
(+ 64 %);
-- All sectors, particularly Engineering and Telecommunications,
contribute to improved earnings
-- Profit after taxes increased by 42% to DM 443 m;
-- Investments to date at DM 2.9 bn;
-- Marked rise in results from ordinary activities expected for the full
year
Mannesmann - working for your future
Significantly improved profits
Mannesmann boosted its results from ordinary activities in the first
half-year to DM 1,146 m (previous year: DM 700 m). This was an increase of
DM 446 m (+ 64%). All four group sectors contributed to the improvement, in
particular Engineering and Telecommunications. At DM 443 m (previous year:
DM 311 m), the profit after taxes was up by DM 132 m or 42%. Mannesmann
increased its order intake by 12%. Sales grew by 22%. Mannesmann invested some
DM 2.9 bn in the first half-year. At the end of June 1998, the number of
employees stood at about 131,100 (+9%). The increase reflects, above all, the
acquisition of companies.
Jan.- June Jan.-June Change
MANNESMANN 1998 1997 %
DMm DMm
Orders received 22,536 20,121 +12
Sales 21,132 17,285 +22
Domestic sales 9,465 7,595 +25
International sales 11,667 9,690 +20
Employees (31.3.) 131,085 120,203 +9
Investments 2,862 3,800 -25
Result of ordinary activities 1,146 700 +64
Extraordinary results -8 -50 +64
Pre-tax profit 1,138 650 +75
Corporate income tax -695 -339 +105
Net profit 443 311 +42
Mannesmann was able to significantly expand its business. The Group has
especially continued to take advantage of the opportunities arising in
European telecommunications, in particular in Germany. The sectors which are
active worldwide, in particular Engineering and Automotive, have performed
successfully. The strong economy in Europe and North America overcompensated
for the market weaknesses in Asia, which were noticeable for Mannesmann's
business as well. At DM 22.5 bn, orders received were up by 12%. The
Automotive and Telecommunications sectors made above-average contributions to
this growth. In Engineering bookings in serial business showed a marked
increase. All sectors shared in the 22% rise in sales to DM 21.1 bn, each
reporting sizeable growth rates. Domestic and foreign business rose
significantly by 25% and 20%, respectively.
Mannesmann achieved results from ordinary activities in the first
half-year of DM 1,146 m compared with DM 700 m in the same period last year.
The marked increase of 64% derived from considerable improvements in all group
sectors. In absolute terms, Engineering and Telecommunications made the
largest contributions to the increase totalling DM 366 m. After extraordinary
expenses of DM 8 m and income taxes of DM 695 m, the profit after taxes
amounted to DM 443 m. This was an improvement of DM 132 m or 42%.
Jan.-June Jan.-June Change
Results from ordinary activities 1998 1997 %
Mannesmann DMm DMm
Demag -78 -124 +37
Dematic 65 16 +306
Rexroth 199 149 +34
Krauss-Maffei 54 17 +218
Engineering 240 58 +314
VDO 62 75 -17
Sachs 164 81 +102
Automotive 226 156 +45
Mobilfunk 1,069 792 +35
Arcor -199 -175 -14
Eurokom -173 -104 -66
Telecommunications 697 513 +36
Tubes & Trading 79 41 +93
Other Companies -96 -68 -41
MANNESMANN 1,146 700 +64
The table above presents the earnings development by division for the
first time at a half-year stage.
Engineering achieved a strong increase in earnings in the first half-year
of DM 182 m to DM 240 m. Dematic, Rexroth and Krauss-Maffei made major
contributions to the growth. Demag succeeded in reducing its loss. Automotive
boosted earnings by DM 70 m to DM 226 m. At Mannesmann VDO, the acquisition
and integration of Philips Car Systems (now renamed VDO Car Communication)
kept profits below the corresponding level of the previous year. By contrast,
Mannesmann Sachs reported a marked improvement.
At Telecommunications, earnings climbed DM 184 m to DM 697 m. Due to the
dynamic business development, Mannesmann D2 achieved a 35% improvement to
DM 1,069 m. The start-up costs at Mannesmann Arcor and the telecommunications
operations Omnitel and Infostrada in Italy as well as Cegetel in France
developed as planned.
At Tubes & Trading, the rise in earnings by DM 38 m to DM 79 m resulted
from the business expansion as well as from successful cost-cutting measures.
Important events
Mannesmann acquired a 74.8% interest in the Austrian fixed network
telecommunications operator tele.ring from the Austrian power utility
Osterreichische Elektrizitatswirtschafts-AG and the Austrian Federal Railway.
Mannesmann reached an agreement with the German railway operator Deutsche
Bahn AG to move the contractually agreed purchase by the Mannesmann consortium
of an additional 25.1% interest in Mannesmann Arcor planned for 1999 forward
to July 1, 1998.
Mannesmann Dematic acquired the postal automation business from Alcatel
S.A. (Alcatel Postal Automation Systems). With this acquisition, the world
market leader in the field of material handling, Mannesmann Dematic,
supplements its product range.
Mannesmann confirms the forecast of an improved result for the full year
1998 announced in April. As of today, the result from ordinary activities will
be significantly better than in 1997.
Engineering is expected to achieve a significant earnings improvement. At
Automotive, the positive development of Mannesmann Sachs looks set to boost
profits well above the 1997 level. Earnings in Telecommunications will also
improve significantly. Mannesmann expects that the increase in start-up costs
at the international activities planned for this year will be more than offset
by an increased profit contribution from Mannesmann D2. The start-up costs of
Mannesmann Arcor will decline as scheduled. Tubes & Trading is also expected
to improve on the already good results of the previous year.
Orders Received
Jan.-June Jan.-June Change
ORDERS RECEIVED 1998 1997 %
Mannesmann DMm DMm
Demag 2,285 2,886 - 21
Dematic 2,181 2,114 + 3
Rexroth 2,680 2,320 + 16
Krauss-Maffei 1,803 1,216 + 48
Engineering 8,949 8,536 + 5
Serial business 5,404 4,797 + 13
Long-term projects 3,545 3,739 - 5
VDO 3,343 2,259 + 48
Sachs 2,249 2,104 + 7
Automotive 5,592 4,363 + 28
Mobilfunk 3,324 2,520 + 32
Arcor 803 468 + 72
Eurokom 1 0 --
Telecommunications 4,117 2,987 + 38
Tubes & Trading 3,365 3,691 - 9
Other Companies 539 576 - 6
Total 22,562 20,153 + 12
Intercompany orders 26 32 - 19
MANNESMANN 22,536 20,121 + 12
Engineering
At DM 8.9 bn, order intake in Engineering was up by 5% on the previous
year's level. Serial business increased by 13% to DM 5.4 bn. Mobile Cranes at
Dematic and Brueninghaus Hydromatik (Drive Hydraulics), Deutsche Star and
Rexroth Mecman at Rexroth reported above-average growth in order intake. In
long-term projects (-5%), the strong gains at Defence Engineering could not
fully compensate for the decline in orders at Petrochemicals and Refinery
Technology (KTI) and Compressors. With the exception of Demag, all divisions
contributed to the increase in order backlog of 2% to about DM 20.2 bn.
Adjusted for Plastics Machinery, which was deconsolidated in January 1998,
and the sold business unit Verdichter Wittig, order intake at Mannesmann Demag
was down by 8% compared to the same period last year. The decline was caused
by Petrochemicals and Refinery Technology (-27%) and Compressors (-18%).
Metallurgy and Energy and Environmental Technology, on the other hand,
reported order entry on the same level as in the previous year.
Excluding the new activities Kranservice Rheinberg and Crane America
Service (USA), orders received by Mannesmann Dematic matched the previous
year's high level. While Mobile Cranes and Cranes and Handling Equipment
increased their order intake by 16% and 12%, respectively (adjusted for
acquisitions), weaker foreign demand caused orders at Systems Engineering to
fall by 12%.
Mannesmann Rexroth continued to profit from the positive development in
the mechanical engineering sector and boosted its order intake in the first
half 1998 by 16%. The first-time inclusion of Uchida (Japan) accounted for
five percentage points of the overall growth. Marked increases were reported
by Brueninghaus Hydromatik, Deutsche Star and Rexroth Mecman.
At Krauss-Maffei, 33 percentage points of the increase in orders received
(+48%) were accounted for by the newly established business unit Mannesmann
Plastics Machinery. Within this group, Krauss-Maffei Plastics Technology
boosted orders by 17%. Due to a major follow-up order, order intake at Defence
Engineering rose by 81%.
Automotive
The Automotive sector increased its orders by 28% to DM 5.6 bn.
At Mannesmann VDO, the inclusion of Philips Car Systems contributed
35 percentage points to the rise in orders received. Information Systems for
Passenger Cars, Control Systems and Cockpit Systems showed particularly strong
development.
Adjusted for the effects of portfolio optimization, in particular the
first-time consolidations of the Mexican shock absorber manufacturer Aralmex
and Eagle-Picher-Boge (USA), orders received at Mannesmann Sachs rose by 5%.
The increase was carried essentially by the original equipment business in
shock absorbers and clutches as well as by Rubber Metal Parts and Gas Springs.
Telecommunications
At the end of June 1998, approximately 4.6 million customers were using
the D2-network of Mannesmann Mobilfunk. Subscriber growth has significantly
accelerated. In the second quarter 1998, on average, approx. 190,000 net new
customers per month were added. The rise in the number of subscribers since
the beginning of this year amounts to almost 90% of the total increase in
subscribers in 1997. The prepaid tariff D2-CallYa made a major contribution to
this positive development, accounting for approx. 20 % of gross additions. The
share of 24-month contracts and the customer loyalty activities led to a churn
rate of 1 % in the first half 1998. This is the lowest rate since the start of
Mannesmann Mobilfunk. In customer satisfaction surveys, D2 takes the top
position. By the end of June, the number of roaming partners had risen to
102 in 70 countries.
New products like D2-UniversalNumber and D2-BestCityPlus underline D2's
leadership in innovation. Coming into effect at the end of September 1998,
Mannesmann Mobilfunk has launched two new tariffs, D2-BestCity and D2
BestCityPlus. The rates per minute for calls into a "favourite local network"
chosen by the subscriber or within the local network where the subscriber is
located at the time of the call will amount to DM 0.69 during peak hours and
DM 0.39 in off-peak times. A D2-Fun customer saves more than 60% during peak
time compared to the regular tariff. Starting already on August 31, 1998,
D2-Classic subscribers will benefit from a drop of about 30% in the basic
monthly fee as well as on calls to national fixed line numbers during off-peak
times. In addition, during peak times subscribers to the new D2-ClassicPremium
tariff will pay favourable DM 0.69 per minute for calls to fixed network
customers in Germany.
Mannesmann Arcor has taken the lead among the new competitors in the
telecommunications market since it was liberalized at the beginning of this
year. In the course of this year, the volume of billed minutes has been
continuously increased and amounted to more than 7.5 m minutes per day at the
end of June; currently, Arcor handles in its network approx. 8.5 m voice
minutes per day. New products were launched during the second quarter 1998:
Arcor now also offers its customers 800 and 180 service telephone numbers.
Moreover, since June 5, 1998, Arcor's directory inquiry service can be reached
nationwide on 11870.
On June 15, 1998, the regulator decided on the preselection charge.
According to this decision, Deutsche Telekom may demand a preselection charge
of DM 27 per subscriber until the end of 1998. This will drop to DM 20 in 1999
and to DM 10 in the year 2000. Arcor will reimburse its customers for this
fee. Thus, telephone subscribers in Germany will continue to be able to switch
to Mannesmann Arcor free of charge.
In the second quarter, Mannesmann Eurokom acquired 74.8% of the shares of
the Austrian fixed network telecommunications operator tele.ring from the
Austrian power utility Osterreichische Elektrizitatswirtschafts-AG and the
Austrian Federal Railway. The international activities continued their
positive development. By the end of June, Omnitel Pronto Italia, the Italian
mobile telephone network operator, had boosted the number of subscribers to
about 3.9 m. On July 10, 1998, Omnitel welcomed its 4,000,000th customer. At
the beginning of April, the fixed network operator Infostrada signed a
contract with the Italian state railways on the rights-of-way along the rail
network and on the rights to use the fibre-optic network. At SFR, the French
mobile network operator, the number of subscribers rose by about 400.000 to
over 2.9 m in the second quarter. The voice services provider Cegetel 7
acquired some 220,000 subscribers by mid-year. At the beginning of June,
Cegetel signed a contract with Canal Plus, America Online and Bertelsmann on
the establishment of an Internet joint venture. Furthermore, at the beginning
of June, Mannesmann Autocom and Schenker Eurocargo agreed upon the fitting
of, in total, 1,800 vehicles with the fleet management system PASSO FLEET.
Tubes & Trading
The 9% decline in orders received by Tubes & Trading was mainly due to the
marked reduction in large diameter pipes, which had been on a very high level
in the previous year, mainly due to large orders from Russia and Western
Europe. By contrast, orders for welded hot rolled tubes and special tubes
developed significantly better than in the first half 1997.
Sales
Mannesmann boosted sales in the first half-year 1998 by 22% to DM 21.1 bn.
Changes in Group consolidation, in particular the addition of Philips Car
Systems (PCS), accounted for five percentage points of the increase. The 25%
growth in domestic business to DM 9.5 bn was driven to a large extent by
Telecommunications (+38%). Foreign sales were up by 20%.
Dematic and Rexroth, in particular, were responsible for the sales growth
in Engineering.
On a comparable basis, sales at Mannesmann Demag rose by 20%. While Energy
and Environmental Technology and Petrochemicals and Refinery
(-19% and -15%, respectively) failed to match the previous year's figures in
the first half- year, Metallurgy and Compressors achieved growth rates of 51%
and 24%, respectively.
The sales increase at Mannesmann Dematic was driven particularly by the
business units Mobile Cranes (+42%), Cranes and Handling Equipment (+31%) and
Systems Engineering (+23%).
Without the first-time consolidation of Uchida, sales at Mannesmann
Rexroth would have risen by 14%. Domestic sales were up by 16%, while foreign
sales climbed 13%.
Sales at Krauss-Maffei (+38%) rose by 33 percentage points due to the
takeover of the plastics machinery activities from Mannesmann Demag. With the
exception of Plastics Machinery and Defence Engineering Transport Technology,
invoicing was down.
Jan.-June Jan.-June Change
SALES 1998 1997 %
Mannesmann DMm DMm
Demag 1,857 1,888 - 2
Dematic 1,711 1,365 + 25
Rexroth 2,511 2,100 + 20
Krauss-Maffei 1,650 1,193 + 38
Engineering 7,646 6,463 + 18
Serial business 4,784 3,986 + 20
Long-term projects 2,862 2,477 + 16
VDO 3,240 2,117 + 53
Sachs 2,210 2,005 + 10
Automotive 5,443 4,115 + 32
Mobilfunk 3,324 2,520 + 32
Arcor 803 468 + 72
Eurokom 1 0 --
Telecommunications 4,117 2,987 + 38
Tubes & Trading 3,515 3,249 + 8
Other Companies 672 666 + 1
Total 21,393 17,480 + 22
Intercompany sales
between sectors 261 195 + 34
External sales
MANNESMANN 21,132 17,285 + 22
Domestic sales 9,465 7,595 + 25
Foreign sales 11,667 9,690 + 20
NOTE: Because of interdivisional sales the sum of divisional sales in the
Engineering, Automotive and Telecommunications sectors does not equal total
sales for the respective sector.
Adjusted for changes in Group consolidation, sales in Automotive were up
by 13%.
Mannesmann VDO boosted sales by 53%, adjusted for the addition of PCS by
15%. The domestic companies expanded their sales by 18%, the foreign
companies by 10%.
On a comparable basis, sales at Mannesmann Sachs rose by 9%. In the
overall original equipment business as well as in Rubber Metal Parts, Gas
Springs and Trading, sales significantly topped those of the first half-year
1997.
In Telecommunications, Mannesmann Mobilfunk posted first half-year sales
of about DM 3.3 bn with an average number of subscribers of around
4.1 million. This puts the average total monthly revenue (including terminals
business) per subscriber to about DM 135.
Mannesmann Arcor was able to boost sales by 72% compared to the same
period last year. This was due to very strong sales growth in the business
with third-party customers.
The sales increase at Tubes & Trading was driven, above all, by large
diameter pipes and special tube and pipe as well as trading in rolled steel.
Employees
At the end of June 1998, the number of employees amounted to 131,085.
Solely due to changes in Group consolidation, approx. 7,400 employees were
added. In addition, some 3,500 new employees were hired. Reductions in the
workforce due to adjustments at Demag and Tubes & Trading were countered by
increases at the other divisions. Adjusted for the exclusion of
1,077 employees who had carried out non telecommunications-related tasks for
Deutsche Bahn, staff at Arcor would have risen by about 250. Personnel
expenses rose by 8% to around DM 5.4 bn. The 4% rise in Germany was mainly the
result of staff additions as well as increases in remuneration and social
security costs. Abroad (+19%), the development was mainly influenced by staff
increases.
June 30, June 30, Change
EMPLOYEES 1998 1997 %
Demag 13,520 16,661 - 19
Dematic 12,570 12,140 + 4
Rexroth 20,925 18,958 + 10
Krauss-Maffei 9,069 6,502 + 39
Engineering 56,084 54,261 + 3
VDO 22,941 16,189 + 42
Sachs 20,093 17,673 + 14
Automotive 43,034 33,862 + 27
Mobilfunk 6,476 5,247 + 23
Arcor 6,467 7,298 -11
Eurokom 247 246 0
Telecommunications 13,190 12,791 + 3
Tubes & Trading 14,996 15,357 - 2
Other Companies 3,781 3,932 - 4
MANNESMANN 131,085 120,203 + 9
Domestic companies 81,025 78,762 + 3
Foreign companies 50,060 41,441 + 21
Investments
The high level of investments was mainly due to acquisitions in the
Automotive sector (Philips Car Systems, Aralmex). In the previous year, the
numbers had been exceptionally high because of special effects (first-time
consolidation of Arcor, acquisition of the interest in Cegetel) in
Telecommunications.
Jan.-June Jan.-June Change
INVESTMENTS 1998 1997 %
DMm DMm
Demag 54 34 + 59
Dematic 64 71 - 10
Rexroth 198 157 + 26
Krauss-Maffei 24 23 + 4
Engineering 340 285 + 19
VDO 1,151 113 + 919
Sachs 263 135 + 95
Automotive 1,414 248 + 470
Mobilfunk 355 336 + 6
Arcor 395 2,007 - 80
Eurokom 159 787 - 80
Telecommunications 909 3,130 - 71
Tubes & Trading 150 80 + 88
Other Companies 49 57 - 14
MANNESMANN 2,862 3,800 - 25