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Market demand for Picanol Weaving Machines plunges in H1

23
Sep '08
During the first half of 2008, the Picanol Group achieved a consolidated turnover of 173.1 million euros, a decrease of 22% compared to 222.5 million euros over the same period last year.

The Picanol Group was faced with a decline in the demand for weaving machines that was stronger than expected during the first half of 2008. Decisions relating to the investment in new weaving machines are being scaled down or postponed worldwide as a result of the general economic unrest. Despite the extremely challenging market situation, Picanol has managed to strengthen its market share.

The OEM-division (Manufacturing & Mechatronics) succeeded in further developing its activities for third parties during the first six months, although not to a sufficient extent to compensate for the effect of the declining demand in the weaving machines division.

To cope with the current economic downturn and in order to compensate for the negative effects of the turnover decrease, a worldwide costreduction plan is in progress. This plan represents a saving of 15 million euros, of which half will be realized in 2008. The plan includes the more efficient organization of business processes, an adaptation of the production capacity, a reduction in personnel and further cost control measures.

The Picanol Group concludes the first half of the year with a net result of -1.3 million euros, compared to 5.9 million euros during the same period in 2007.

The Picanol Group is not expecting a positive upturn in the market during the rest of 2008, which could continue to have a negative effect on the annual result.

In the context of the long-term strategy, the Picanol Group confirms its diversification ambitions, with the aim of making its activities less prone to cyclical effects in the long run.

In order to support further development for third parties, Proferro has started to construct a new moulding line in Ypres (an investment plan of 16 million euros, over the next 3 years).

During the first half of 2008, the Picanol Group achieved a consolidated turnover of 173.1 million euros, a decrease of 22% compared to 222.5 million euros during the same period last year. The turnover for weaving machines dropped by 27%, which is only partially compensated by the increasing turnover for third parties in Manufacturing and Mechatronics.

Gross profit dropped by 42% to 23.4 million euros compared to 40.2 million euros during the first six months of 2007. The gross margin percentage declined from 18.1% to 13.5% due to the fact that the fixed production costs did not decrease in proportion to the lower turnover.

The operating cash flow (EBITDA) decreased from 15.2 million euros to 3.3 million euros. The operating result (EBIT) decreased from 10.3 million euros to -1.6 million euros, or an EBIT margin of -0.9% versus 4.6% in the first half of last year. The decrease of the gross margin is partially compensated by a saving on the general and sales expenses.


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