Biesse: approves the Quarterly Report to 30 September 2013.

The Board of Directors Biesse S.p.A. has today approved the Financial report for the 3rd Quarter of 2013 and examined the results for the nine month period to 30 September 2013.

Results

The results for the Biesse for the period 1/7/13 – 30/9/13 are as follows:

• Net consolidated revenues of € 88.2 million (+10.3% compared with the same period of 2012)
• Value Added € 33.6 million (+12.8% compared with the same period of 2012) representing a margin on revenues of 38.1% (37.3% in 2012)
• Gross Operating Margin (EBITDA) € 7.6 million (+168.2% compared with the same period of 2012) representing a margin on revenues of 8.7% (3.6% in 2012)
• Operating Result (EBIT) € 3.6 million (compared to a negative figure of € 3.2 million in the same period of 2012) representing a margin on revenues of 4.1%
• Pre-tax profit of € 2.2 million (compared to a negative figure of € 4.4 million in the same period of 2012) representing a margin on revenues of 2.5%
• Net profit of € 0.8 million (compared to a negative figure of € 5.3 million in the same period of 2012) representing a margin on revenues of 0.9%

Consequently the results for the nine months to 30 September 2013 are as follows:

• Net consolidated revenues of € 268.5 million (-1.3% compared with the same period of 2012)
• Value Added € 103.0 million (+2.1% compared with the same period of 2012) representing a margin on revenues of 38.4% (37.1% in 2012)
• Gross Operating Margin (EBITDA) € 19.2 million (+56.8% compared with the same period of 2012) representing a margin on revenues of 7.2% (4.5% in 2012)
• Operating Result (EBIT) € 8.8 million (compared to a negative figure of € 2.3 million in the same period of 2012) representing a margin on revenues of 3.3%
• Pre-tax profit of € 5.9 million (compared to a negative figure of € 5.9 million in the same period of 2012) representing a margin on revenues of 2.2%
• Net profit of € 2.0 million (compared to a negative figure of € 8.6 million in the same period of 2012) representing a margin on revenues of 0.7%

Net Financial Position and Balance sheet Data

Group Net Debt at 30 September 2013 was € 50.4 million, which represents a huge improvement (€ 21.6 million) compared with the figure at the same point in 2012. The reduction in Net Debt compared to the position at the start of 2013 amounted to € 5.8 million. The counter-cyclical improvement in the Net Financial Position compared to the position at end-June (€ 0.9 million) is particularly notable since the reduction was achieved in spite of Biesse’s traditional seasonal pattern.
Total cash flow management in the first 9 months of 2013 –including negative extraordinary items totalling € 1.2 millionresulted in positive cash flow generation due to the improved profitability as well as a significant reduction in Net Operating Working Capital. This was a reversal of the situation in the first 9 months of 2012, which revealed total cash absorption of € 21.6 million.
Group Gearing at 30 September 2013 was 0.46 compared to 0.51 at December 2012.

• Net Invested Capital € 159.7 million
• Net Shareholders’ Funds € 109.3 million
• Net Operating Working Capital € 76.3 million.

Breakdown of revenues

The geographical breakdown of consolidated revenues reveals a continued contraction in sales in Western Europe (representing 37.4% of the total) and within that a contribution from the domestic market (representing 11.7% of the total) which is substantially stable compared with the recent past. The potential positive effects of the recently approved incentives (article 2 Decree Law no. 69) are yet to be evaluated.
Compared to the same period of 2012 the results show growth in the proportion of sales generated both in Asia-Australasia (representing 21% of the total), and, even more significantly, in North-America (representing 13.4% of the total).
The Biesse generated revenues in the B.R.I.C. countries alone (Brazil-Russia-India-China) amounting to 20.1% of total consolidated sales, representing an increase compared to to both the 18.3% achieved in September 2012, and the 19.4% achieved in December 2012. Biesse’s performance was particularly positive in China which now accounts for 8.4% of sales (5.5% in 2012 – 4.4% in 2011).

Order book

At 30 September 2013 the aggregate Group order inflow rose by 4.9% compared to that for the first nine months of the previous year, while in the third quarter of 2013 alone the order intake was 5.8% higher than that reported in the same period of the previous year. Compared with 2011 the aggregate Group order inflow at 30 September was 7.1% higher with a rise of +27.5% in the III Q alone.
The Group backlog at end-September 2013 amounted to € 81.1 million (+0.6% compared with the position at June 2013 and substantially unchanged compared with the start of the year).

Market

UCIMU - the Italian machine tools producers’ trade association – reported a net decline in orders of 5.7% in the third quarter alone compared with the same period of the previous year, but noted that prospects are moderately positive for the domestic market despite continuing difficulties faced in finding suitable financial support for investment in capital goods. According to preliminary forecasts prepared by Oxford Economics, machine tool demand in Italy is expected to rise by 4.5% in 2014 and by 7.1% in 2015 which therefore confirms a higher average rate of increase than that expected in Western Europe in general.
The latest press release issued by the Italian woodworking machinery and tools manufacturers’ trade association, ACIMALL – which Biesse recently rejoined – indicated total growth in orders for III Q 2013 of 3% for which the Italian market component was markedly higher (14.4%) than the foreign component (0.3%). This situation – in many ways anomalous – does not for the moment alter what Acimall itself called the structural pessimism in the industry, but gives hope for a natural rebound from levels that had reached an historical minimum. The stall in order inflow does not yet appear to be easy to overcome, at least until the effects of industrial support initiatives to be put in place by the Government become tangible. Forecasts based on a consensus of Italian operators have become more positive both for foreign markets and the domestic market (in the short and medium term) although, on a historic basis, current values remain significantly lower than the average reported over the preceding decade. According to VDMA (the German mechanical engineering trade association) the aggregate data to 30 September 2013 –despite a slowdown in the third quarter- imply a total increase in order intake of 9% with improved growth projections in the immediate future. As far as the German trade association is concerned the most significant phenomenon is the more rapid recovery in the domestic market compared to foreign markets.

Events

Corroboration of July’s positive result at the AWFS in Las Vegas - Association of Woodworking & Furnishings Suppliers where Biesse received the Visionary Award 2013 for its Air Force System cutting edge technology- came from the favourable outcome of the BiesseInside (wood) and Vitrum Milano (glass) events/trade fairs during which Biesse achieved significant results both from the perspective of participation in the events and orders received.

Forecast

In view of the results achieved to date, taking into account the global macro-economic outlook and the progressive implementation of planned initiatives, expectations for the current year are as follows:

• Consolidated revenues: expected range € 365 - 370 million
• Ebitda: expected range € 25 - 28 million
• Ebit: expected range € 12 - 15 million
• Net Debt: expected range € 40-42 million

Following the board meeting, Mr Stefano Porcellini, the Chief Executive Officer of Biesse, stated: “the figures for these first nine months are decidedly comforting given the actions undertaken; it is now evident that for the current year we have been faithful to the promises made to our shareholders regarding profitability and cash generation. This is a satisfying result because it was achieved in the absence of support from demand in Italian and European markets (which represent more than 50% of our total end market) which have remained weak throughout the 2013 financial year to date. As previously stated, - while keeping costs under close surveillance – now our challenge is to achieve growth and our investments are being directed towards that commercial objective. It should furthermore be noted that more than 2/3 of Biesse’s operating result is absorbed by financial charges and taxes. Biesse operates in a competitive arena in which it has to compete against German companies that benefit from a more balanced cost of financing and taxation, which leaves room for investment in innovation and youth employment that would be unsustainable for an Italian company required to support an inefficient domestic economic system.”