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PALFINGER, markets outside Europe facilitated record revenue in 2012

In the 2012 financial year, PALFINGER recorded the highest revenue in the Group’s history and thus, in time for its 80th anniversary, another record year. This was made possible by the consistent internationalization policy pursued in recent years, which has been a major pillar of PALFINGER’s corporate strategy.

Moreover, PALFINGER achieved a milestone in its strategy that is also going to influence the further development of the Group, namely the agreement on two joint ventures with the Sany Group, one of China’s industrial giants. Operations were started in the third quarter and will have a positive effect on the Group’s development in the future.

Revenue increased by 10.6 per cent, from EUR 845.7 in the previous year to EUR 935.2 million. This increase was supported primarily by the business areas North America, South America, CIS and the globally operating Marine business area. A positive trend was observed in the other non-European regions as well. In Europe, the high revenue level achieved in the previous year was maintained.

"Business development in Europe was marked by rising uncertainty and a decrease in enterprises’ preparedness to invest. We generated our growth in the AREA UNITS segment, with a 42 per cent increase in revenue and, for the first time, a clearly positive result. In the EUROPEAN UNITS segment, the strong performance of the globally operating Marine business area made it possible to maintain constant development, at least. The stability of the Group’s result, even though resources were stepped up outside Europe, was due to the measures taken to increase flexibility and cut costs," says Herbert Ortner, CEO of PALFINGER AG, explaining the basis for success.

Financial position, cash flows and result of operations
EBIT for the 2012 financial year came to EUR 68.5 million, after EUR 67.9 million in the previous year, which corresponds to an increase of 0.8 per cent. However, the EBIT margin decreased from 8.0 per cent in 2011 to 7.3 per cent. The reasons for this development included primarily the regional shift in revenue and the lower margins in the non-European areas, which are still at the development stage. The shift in product mix in Europe – from large cranes with a high contribution to earnings to smaller systems – also contributed to the margin becoming lower. On the other hand, however, the expansion of contract manufacturing brought about a boost in productivity while at the same time increasing financial flexibility.

The performance of the individual quarters shows the (partly seasonal) fluctuations of revenue (Q1: EUR 223.9 million; Q2: EUR 241.2 million; Q3: EUR 223.1 million; Q4: EUR 247.0 million) and earnings (Q1: EUR 17.7 million; Q2: EUR 19.5 million; Q3: EUR 14.8 million; Q4: EUR 16.5 million).

In line with PALFINGER’s dividend policy, which provides that approximately one third of the annual profit is to be distributed to shareholders, the Management Board has proposed that a dividend of EUR 0.38 per share be distributed this year (previous year: EUR 0.38 per share).

In the 2012 financial year, cash flows from operating activities amounted to EUR 55.4 million, compared to EUR 37.7 million in the previous year. This change was caused to a large extent by the fact that the rise in net working capital compared to the increase in revenue was lower than in the previous year. Cash outflows for investing activities came to EUR 70.6 million, which means that the previous year’s figure of EUR 34.6 million was more than doubled. Apart from the payment of the outstanding purchase price from the acquisition of the marine unit of Palfinger systems GmbH, the increase in shares held in Palfinger Russland GmbH and the acquisition of the Dreggen Group in Norway, investments were also made for the purpose of stepping up resources in Europe and the USA. As a consequence, free cash flows were reduced from EUR 11.7 million in the previous year to -EUR 3.1 million in 2012.

Due to the fact that total assets increased, the equity ratio, at 44.8 per cent, was lower than in the previous year, when it was 47.7 per cent. The issue of a promissory note loan in October 2012 in the amount of EUR 77.5 million contributed to higher net debt. Consequently, the gearing ratio rose to 59.6 per cent, as compared to 47.3 per cent on the 2011 reporting date.

Key events
The most important event in the 2012 financial year was the signing of the agreements on the establishment of two joint venture companies with the Chinese heavy equipment manufacturer Sany Group. Sany Palfinger SPV Equipment Co., Ltd., with its registered office in China, develops and produces PALFINGER products for the Chinese market. Business operations started in the third quarter, the first crane models have already been sold. During the same period, Palfinger Sany International Mobile Cranes Sales GmbH was founded in Austria to distribute mobile cranes produced by Sany in Europe and CIS.

In September, PALFINGER agreed to take over a 100 per cent share in Tercek Usinagem de Precisão Ltda., headquartered in Caxias do Sul, Brazil, thereby strengthening PALFINGER’s market presence in South America. Tercek develops electric-powered bus lifts under the brand name Líbero. Good market growth is expected for this product segment in connection with the further expansion of the infrastructure.

At the end of October 2012, PALFINGER reached another milestone, this time for the globally operating Marine business area. The acquisition of the Norwegian Bergen Group Dreggen AS (Dreggen), a renowned manufacturer of marine and offshore cranes, is an important growth step that will open up additional opportunities and new markets to the Group in these areas. Dreggen specializes in tailor-made crane solutions for the shipbuilding, oil and gas industries. In order to expedite the integration of Dreggen and realize synergies, the Management Board has agreed with Palfinger systems GmbH on an early payment of the purchase price share for the marine unit taken over in 2010, which would originally have been due in 2016.

In October 2012, PALFINGER issued a promissory note loan payable in several tranches and was thus able to optimize its financing structure. Interest in the issue was substantial, and as a result a total volume of EUR 77.5 million was specified.

As a consequence of the growth achieved in recent years, the dimensions of the PALFINGER Group’s present headquarters in Salzburg, Austria, have been too small for some time now. In March 2012, PALFINGER finalized the purchases and purchase options for the plots of land on which modern Group headquarters will be built in the years to come. The new headquarters in Bergheim, Salzburg, will not be far from the present location, and the employees are scheduled to move into the new building at the end of 2014.

In 2012, the market presence of the PALFINGER Group was fully revised and thus strengthened. The core measure was a Group-wide brand project with a view to clearly structuring the multitude of different product brands that had resulted from the growth achieved in recent years. Henceforth, almost all products will be marketed under the umbrella brand of PALFINGER. The transition will be gradually implemented and will result in numerous synergies on the market. A strong brand is a major factor for success, in particular in times of economic uncertainty. LIFETIME EXCELLENCE is the promise made by PALFINGER.

Outlook
It was the PALFINGER Group’s global orientation that enabled the growth recorded in 2012. The management considers this a confirmation of its strategic decision to grow not only in North America but also towards the BRIC countries. PALFINGER’s consistent strategy of internationalization, especially outside Europe, is therefore being continued.

The Chinese joint venture with the Sany Group, which started operations in the third quarter of 2012, will have a positive effect on future business performance. The foundation for a successful entry into the Chinese market was thus laid in time to celebrate the 80th anniversary of the PALFINGER Group in 2012, and it is assumed that the Group’s leading position worldwide has been sustainably safeguarded through this step.

The Group’s flexibility will be continuously developed in all fields, as this is becoming increasingly important in view of the more rapidly changing market environment.

2013 will also be marked by the new brand architecture. PALFINGER regards its strong brand as a major factor for success, alongside the development and manufacture of its premium products. The more precise positioning that has now been defined is intended to guarantee the brand’s value for the future and to generate further synergies from PALFINGER’s market operations.

Against the backdrop of the uncertain development of the economy and of demand, the visibility of the business was reduced in 2012. Under the current economic conditions, the management expects a moderate increase in revenue, coming primarily from the business areas outside Europe and the Marine business area, for the 2013 financial year.

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