DGAP-News: Robust fourth quarter expected
paragon AG / Key word(s): Quarter Results
Q3 revenues characterized by customer plant holidays
Delbrück, November 20, 2013 - In the first nine months of 2013, paragon AG generated revenue of EUR 52.2 million (prior year: EUR 54.5 million.) As expected, revenue was lower than in the second quarter by EUR 2.6 million due to plant holidays of automotive manufacturing customers. 'With regard to both revenue and EBIT, we anticipate a strong fourth quarter of 2013. It is expected that development costs to customers incurred in 2013 will be settled in the fourth quarter, so that the forecast for the year can be confirmed from the present perspective,' said CEO Klaus Dieter Frers.
While revenue declined slightly, as had been forecast by the Management Board, inventories were increased by approximately EUR 1.2 million compared to the second quarter. In total, there were only minor deviations from the plan. A positive trend is seen in the order books. Among most key customers, paragon currently has a higher order backlog than on the same date (September 30) of 2012. The total increase is 12.4% across all customers. For the first quarter of 2014, the current order backlog is even 15.6% higher than in the first quarter of 2013.
The third quarter of 2013 was substantially similar to the third quarter of 2012, with the difference that the material component was higher due to the increased sales of tools. This growth is only temporary, since it is due to the announced new product launches. If the cost of materials is adjusted to include the tooling costs, the cost of materials ratio was even reduced by 0.8% during the reporting period compared to 2012 (47.3% compared to 48.1%). Personnel expenses remained almost constant at EUR 14.5 million (prior year: EUR 14.3 million).
paragon invested almost EUR 2.0 million (prior year: EUR 1.0 million) in the new business segments Electromobility and Body Works Kinematics in the first nine months of 2013. This year-on-year comparison shows that a higher margin would have been possible. paragon has accepted lower earnings in order to lead the new business segments to succeed under their own power.
Overall, paragon reported EBIT of EUR 3.6 million in the first nine months of 2013 (prior year: EUR 7.3 million) and EBITDA of EUR 6.9 million (prior year: EUR 10.3 million). The EBIT margin thus reached a value of 6.9% (prior year: 13.5%); as of September 30, 2013, the EBITDA margin was 13.2% (prior year: 18.9%). In the Management Board's view, these only temporarily declining earnings figures are substantially in line with the internal planning.
Total assets as of September 30, 2013 increased by 15.1% to EUR 50.9 million (prior year: EUR 44.2 million). The reason for the increase was the first-time recognition of the corporate bond on the balance sheet as of the reporting date. The bond was placed in July 2013 at a volume of EUR 10.0 million. The increase in total equity and liabilities and the dividends paid out for fiscal years 2011 and 2012 in the amount of EUR 2.5 million reduced the equity-to-assets ratio to 26.2% (prior year: 32.7%).
The operating cash flow amounted to EUR 1.3 million in the third quarter. Thus, the turnaround achieved with regard to operating cash flow in the second quarter was shown to be sustainable. paragon generated a total operating cash flow in the first nine month of 2013 of EUR 0.9 million (prior year: EUR 4.5 million).
As of September 30, 2013 paragon AG recorded net income in accordance with IFRS of EUR 1.8 million (prior year: EUR 4.7 million). This resulted in earnings per share of EUR 0.43 (prior year: EUR 1.13).
On September 30, 2013 paragon employed 388 own workers and 50 temporary staff members in Germany. Compared to the prior-year reporting date, the total number of employees thus remained nearly constant (September 30, 2012: 382 employees and 48 temporary staff members). Compared to the previous quarter (June 30, 2013: 377 employees and 46 temporary staff workers), the number of employees has also changed little. The locations accounted for the following figures (own workers/temporary staff members) as of September 30, 2013: Delbrück (94/1), Suhl (209/45), Nuremberg (32/3), and St. Georgen (53/1).
The development of paragon AG so far in 2013 has confirmed the Management Board's projections. A slow start was followed by a satisfactory second quarter; moreover, the well-filled order books allow for a positive outlook on the future. Based on the current order situation, the Management Board continues to expect an increase in sales compared to last year of about 5 % and a stable EBIT margin of approximately 11%.
The Sensors business segment with a focus on air quality is likely to benefit over the medium term from a recent study by the International Agency for Research on Cancer (IARC) of the World Health Organization (WHO), which for the first time has classified air pollution as a trigger for cancer. It is expected that vehicle manufacturers worldwide will now increase their demand for systems that improve air quality in the vehicle interior. paragon is clearly the world market leader in this area and can count on substantial opportunities in the market, particularly in Asia. The Company also collaborates with vehicle manufacturers in developing additional new products that will greatly enhance the protection of passengers and come to market as early as 2015.
paragon is pushing forward intensively with the further internationalization of its business activities. The sales office in China will be expanded to include an application engineer as of December 1, 2013. Specific discussions are already underway concerning the construction of a production facility in China in cooperation with partners. For cost reasons, paragon is not currently planning to construct its own plant.
New orders from the automotive industry will make a local production facility necessary in Mexico starting in 2015. This production facility will be completed together with a German partner that already produces locally.
In anticipation of highly attractive orders for battery packs from the U.S., paragon is also investigating the possibilities for building its own plant in Texas that will operate in conjunction with the German plants and the future production facility in Mexico. The Management Board expects that the new U.S. plant can be operational during the first half of 2014.
In terms of acquisitions, paragon has pressed ahead with ongoing processes and, together with a management consulting firm, has identified and investigated numerous new potential acquisition targets. In any case, this involves an expansion of existing business segments and not new product lines. 'The pipeline of M&A projects is being filled. The Management Board is confident that paragon will be able to significantly increase the value of the Company in the next six months,' said Frers.
Listed in the Prime Standard segment of the German Stock Exchange in Frankfurt, paragon AG develops, produces and markets innovative solutions in the field of automotive electronics. The portfolio of the direct supplier to the automotive industry includes products in the business segments sensors, acoustics, cockpit, electromobility and body works kinematics. An outstanding product is the air quality sensor AQS which is by far the world market leader. In addition to its headquarters in Delbrück (North Rhine-Westfalia), paragon maintains branches in Suhl (Thuringia), Nuremberg (Bavaria) and St. Georgen (Baden-Württemberg) and a sales office in Shanghai (China).
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