CHRIST Completes FY 2008 Clean-Up of ‘Poison Projects’ and Restructuring and Takes Strategic Decisions
“The year 2008 turned out to be a challenging year for the CHRIST Group and was closed with an unexpected high net loss. A clear focus on profitability and cashflow as well as a reduction of risk and complexity meant a new orientation following the precedent time of growth and acquisitions, “ says Malek Salamor, CEO of the Christ Water Technology Group.
Based on the high order backlog and the consolidation of the Zeta Group, net sales grew by 10% to € 307.0 million in 2008 (2007: € 278.2 million).
Order intake of € 230.3 million was down by 29% compared to a record year 2007 due to a large desalination order booked. The first-time inclusion of the bio-pharma activities of the new subsidiary Zeta pushed up Pharma orders by 90% while the deliberate withdrawal in turnkey power projects reduced volume in the Ultrapure Water division. The order backlog amounted to € 151.8 million as of December 31st, 2008.
Earnings before interest, taxes and depreciation/amortisation (EBITDA) was negative at € -7.2 million after € +9.7 million last year. The completion of a number of turnkey power projects sold at fixed prices in the past as well as negative or inactive projects in the Food & Beverage Division led to excessive losses due to lengthy execution schedules and cost overruns in material and third party cost. The negative impact of such ‘poison projects’ on the EBIT summed up to € 16.5 million in 2008.
The transformation process of the Group required the closing or down-sizing of non profitable companies and termination of businesses activities with extra cost of € 4.1 million. The increase of depreciations from the previous year’s € 3.7 million to € 11.2 million, included € 5 million write-offs via impairments of goodwill mainly in Joint Ventures and intangible assets. Thus, EBIT was at € -18.4 million after € +6.0 million in the year 2007. Adjusting for the mentioned special effects of roughly € 24.6 million, – including other positive and negative one-time effects of net € +1.0 million – a ‘normalized EBIT’ would have been € 6.2 million.
The net result of € -27.5 million (2007: € +1.7 million) was also impacted by the write-off of deferred taxes of € 3.4 million following the negative development in loss making and restructured group companies.
A positive signal can be reported from the cash side. After years of negative cashflow developments, operating cash flow could be turned into positive at € +1.6 million (2007: € -15.6 million). Cash flow from investing activities amounted to € -5.7 million (2007: € -7.8 million) and included capital expenditures of € 5.0 million. Total financial liabilities of the CHRIST Group as at December 31st, 2008 amounted to € 73.9 million, whereof € 50 million stem from a corporate bond with duration until 2013 and a coupon of 5.25%. The net position including cash and cash equivalents gave net debt of € 54.7 million (2007: € 42.2 million including interest-bearing financial receivables).
Due to the net loss, equity was reduced as at December 31st, 2008 to € 37.0 million (i.e. 16% equity ratio) after € 63.8 million or 27.7% the year before. Gearing as the ratio of net debt to equity showed an increase from 66% to 148%. The major credit facilities were renegotiated recently.
“We have improved our flexibility and efficiency significantly during the past months and successfully executed our transformation concept which we started in September 2008. The number of employees has been reduced by 15% and through continuously reducing complexity we saved about € 10 million of cost. Our target is to return to profitability despite the current economic slow-down,” says Malek Salamor, CEO of the Christ Water Technology Group. “To accelerate in the process of refocusing the Group and to allow Van der Molen a sustainable future development in the market of process technology for the beverage industry, we have taken the decision to form an alliance in the Food & Beverage division. In this context also two Italian based companies were sold to local business partners with effect January 1st, 2009. Besides good project activities in the pharmaceutical industry, there are also positive signs in the public or municipal infrastructure and utility projects including water treatment and desalination projects. Headed by one of the biggest water treatment orders ever placed in South Africa worth approx. € 60 million, we can report a solid order intake in Q1 2009 of almost € 90 million (Q1 2008: € 69 million). Nevertheless, earnings guidance for 2009 is currently very difficult as the health of the global economy is still not clear. Based on the corrected negative developments of the previous periods and the prevailing framework, we expect an adequate decline of net sales. Due to the improved cost structure and the cleaned project environment the basis for positive net result is well prepared.”
Source: Ovivo Inc.