AEG Power Solutions (FWB:3W9):
| (in million) | 12M 2013 | 12M 2012 | ? in % | |||||
| Order backlog | 88.1 | 131.1 | -32.8 | |||||
| Orders | 238.3 | 384.7 | -38.1 | |||||
| Revenue | 271.0 | 383.1 | -29.3 | |||||
| Book to Bill | 0.88 | 1.00 | -12.5 | |||||
| EBITDA | (30.4) | 11.2 | na | |||||
| EBITDA margin | -11.2% | 2.9% | ||||||
| Normalized EBITDA | (10.2) | 21.6 | na | |||||
| Normalized EBITDA margin | -3.8% | 5.6% | ||||||
| (in million) | Q4 2013 | Q4 2012 | ? in % | Q4 2013 | Q3 2013 | ? in % | ||||||||
| Order backlog | 88.1 | 131.1 | -32.8 | 88.1 | 104.0 | -15.3 | ||||||||
| Orders | 54.1 | 114.9 | -52.9 | 54.1 | 58.0 | -6.8 | ||||||||
| Revenue | 64.9 | 116.7 | -44.4 | 64.9 | 53.9 | 20.4 | ||||||||
| Book to Bill | 0.83 | 0.98 | -15.2 | 0.83 | 1.08 | -23.1 | ||||||||
| EBITDA | (14.0) | 0.7 | na | (14.0) | (11.6) | -20.7 | ||||||||
| EBITDA margin | -21.5% | 0.6% | -21.5% | -21.5% | 0.25 | |||||||||
| Normalized EBITDA | 1.2 | 5.0 | -77.1 | 1.2 | (8.4) | na | ||||||||
| Normalized EBITDA margin | 1.8% | 4.3% | -58.7 | 1.8% | -15.6% |
| Historical numbers have been represented to reflect the change in classification of the telecom converter business (CVT/LED). It is included in the reported financials. |
3W Power S.A. (ISIN LU0953526265, 3W9), the holding company of AEG Power Solutions Group B.V., a global provider of power electronics systems and solutions for industrial power supplies and renewable energy applications, today announced results for Q4 and fiscal year 2013.
Group results for fiscal 2013
AEG Power Solutions finished fiscal 2013 with €238.3 million of orders, €271.0 million of revenue and a negative 3.8% Normalized EBITDA margin. Compared to fiscal 2012, orders were down 38.1% (2012: €384.7 million) and revenue was down 29.3% (2012: €383.1 million). Normalized EBITDA of -€10.2 million (2013 EBITDA: -€30.4 million) was down from 2012 Normalized EBITDA of €21.6 million (2012 EBITDA: €11.2 million).
Renewable Energy Solutions (RES)
| (in million) | 12M 2013 | 12M 2012 | ? in % | |||||
| Order backlog | 14.1 | 57.2 | -75.4 | |||||
| Orders | 57.4 | 195.3 | -70.6 | |||||
| Revenue | 96.1 | 190.9 | -49.6 | |||||
| Book to Bill | 0.60 | 1.02 | -41.7 | |||||
| EBITDA | (6.8) | 32.7 | na | |||||
| EBITDA margin | -7.1% | 17.1% | ||||||
| Normalized EBITDA | 1.1 | 32.7 | -96.6 | |||||
| Normalized EBITDA margin | 1.2% | 17.1% | ||||||
| (in million) | Q4 2013 | Q4 2012 | ? in % | Q4 2013 | Q3 2013 | ? in % | ||||||||
| Order backlog | 14.1 | 57.2 | -75.4 | 14.1 | 17.0 | -17.0 | ||||||||
| Orders | 9.2 | 70.5 | -86.9 | 9.2 | 14.0 | -34.3 | ||||||||
| Revenue | 10.4 | 64.0 | -83.8 | 10.4 | 12.4 | -16.1 | ||||||||
| Book to Bill | 0.89 | 1.10 | 19.2 | 0.89 | 1.13 | -21.2 | ||||||||
| EBITDA | (8.9) | 8.3 | na | (8.9) | (5.2) | -71.1 | ||||||||
| EBITDA margin | -86.2% | 13.0% | -86.2% | -41.7% | ||||||||||
| Normalized EBITDA | (1.1) | 8.3 | na | (1.1) | (5.0) | 78.0 | ||||||||
| Normalized EBITDA margin | -10.9% | 13.0% | -10.9% | -40.5% |
| Historical numbers have been represented to reflect the change in classification of the telecom converter business (CVT/LED). It is included in the reported financials. |
Orders in RES were €57.4 million in 2013, down 70.6% year-on-year (2012: €195.3 million). RES order backlog was €14.1 million in 2013, down 75.4% year-on-year (2012: €57.2 million).
RES revenue was €96.1 million in 2013, down 49.6% compared to the previous year (2012: €190.9 million). The drop in Solar and Power Controller solutions (POC) orders and sales contributed significantly to 2013 results. Solar orders fell by 76.9% year on year and sales fell by 43.4%. Solar did not record any growth in emerging markets and despite the fact that the Company continues to maintain its strong relationship with its major Eastern European customer, no upside to the overall negative trend is envisaged. The Company's weak financing situation is hindering the development of new business. Orders for POC fell by 44.9% and sales fell by 59.7%. Backlog from end of 2013 has been fully utilized. The Power Control business has some success in new applications for industrial processes and continues to engage with its polysilicon customers.
RES Normalized EBITDA in 2013 came to €1.1 million (2013 EBITDA: -€6.8 million), down from Normalized EBITDA in 2012 of €32.7 million (2012 EBITDA: 32.7 million). Lower volume, a change in the product mix and the high level of operational expenses led to the drop in EBITDA. The reversal of the €8.5 million for a bad debt allowance taken in 2012 was offset by a strategic provision for slow moving inventory of €7.8 million.
The Group maintained €31.9 million in cash and cash equivalents as at 31 December 2013.
Energy Efficiency Solutions (EES)
| (in million) | 12M 2013 | 12M 2012 | ? in % | |||||
| Order backlog | 74.0 | 73.9 | 0.1 | |||||
| Orders | 180.9 | 189.4 | -4.5 | |||||
| Revenue | 174.9 | 192.2 | -9.0 | |||||
| Book to Bill | 1.03 | 0.99 | 5.0 | |||||
| EBITDA | (6.2) | (4.5) | -40.0 | |||||
| EBITDA margin | -3.6% | -2.3% | ||||||
| Normalized EBITDA | 0.8 | 2.0 | -59.5 | |||||
| Normalized EBITDA margin | 0.5% | 1.0% | ||||||
| (in million) | Q4 2013 | Q4 2012 | ? in % | Q4 2013 | Q3 2013 | ? in % | ||||||||
| Order backlog | 74.0 | 73.9 | 0.1 | 74.0 | 87.0 | -15.0 | ||||||||
| Orders | 44.9 | 44.3 | 1.3 | 44.9 | 44.1 | 1.9 | ||||||||
| Revenue | 54.5 | 52.7 | 3.4 | 54.5 | 41.4 | 31.5 | ||||||||
| Book to Bill | 0.82 | 0.84 | -2.1 | 0.82 | 1.06 | -22.6 | ||||||||
| EBITDA | 2.3 | (3.0) | na | 2.3 | (3.0) | na | ||||||||
| EBITDA margin | 4.2% | -5.7% | 4.2% | -7.3% | ||||||||||
| Normalized EBITDA | 6.1 | (0.8) | na | 6.1 | (0.0) | na | ||||||||
| Normalized EBITDA margin | 11.2% | -1.4% | 11.2% | 0.0% |
| Historical numbers have been represented to reflect the change in classification of the telecom converter business (CVT/LED). It is included in the reported financials. |
Orders in EES were €180.9 million in 2013, down 4.5% year-on-year (2012: €189.4 million). While sales in Industrial and Commercial UPS remained relatively stable, the volume is insufficient to offset lower volumes in DC Converters and Telecom. The order backlog stood at €74.0 million in 2013, up 0.1% year-on-year (2012: €73.9 million). Revenue was €174.9 million in 2013, down 9.0% compared to the prior year (2012: €192.2 million) due to lower DC Converters and Telecom activity. Industrial and commercial business in EES is growing and is less cyclical, however DC Converters and Telecom activity continues to suffer from price erosion and falling volume.
Normalized EBITDA in EES in 2013 was €0.8 million (2013 EBITDA: -€6.2 million) down 59.5% from €2.0 million in 2012 (2012 EBITDA: -€4.5 million). The drop in EBITDA relates to lower volume in telecom converters, an impairment charge of €3.9 million in working capital offset by a lower amount for restructuring charges in 2013 of €3.1 million (2012: €6.3 million) and high operating expenses.
Financial distress
The business situation of AEG Power Solutions deteriorated towards the end of 2011 with the collapse of the poly silicon capex cycle. The Company invested heavily in its solar expansion, and failed to realize sustainable growth necessary to cover its costs. The Company's past restructuring efforts failed to improve the profitability of its industrial activities. Management continued to pursue growth and development of new ideas in the face of mounting risks. Persistent losses of legacy activities in telecommunications and telecom converters were a distraction.
On December 14, 2013, following a significant change in shareholdings and the departure of the previous management team, four experienced and seasoned executives joined the Board of Directors under the leadership of newly appointed Chairman Dr. Dirk Wolfertz.
The Company commenced with the building blocks of developing an operational and financial restructuring program and appointed Jeffrey Casper as Chief Restructuring Officer (CRO) to lead the implementation. Both restructuring plans are to be executed during 2014 with the goal to improve the Company's short term liquidity situation and to safeguard the Company's future existence. The operational restructuring is seeking to de-risk and simplify the business by selling or closing non-performing, non-core assets, reducing headcount to re-balance with existing sales volume and to simplify management structures. The Company will introduce a tedious process of continuous improvement aimed at attaining benchmark profitability.
Restructuring achievements
On January 8, 2014, the Group placed into administration its subsidiary in Lannion, AEG Power Solutions (France) S.A.S. The entity was structurally loss making which the Group could no longer financially support. Lannion's accumulated (EBITDA) losses over five years, which were fully supported by the Group, reached €27 million, €11.1 million occurring in the last two years.
On January 15, 2014, the Group initiated plans to close down its R&D and sales office located in Richardson, Texas. The entity was consistently loss making and continued to consume cash that the group could no longer afford to support. The existing products and activities were subsequently transferred to the Group's German subsidiary and the office closed at the end of April 2014. The Group maintains a sales and support presence in the United States. The resulting action saves the group €4 million per year.
On January 27, 2014 AEG Power Solutions GmbH, the Group's German subsidiary, divested its power control modules business to Advanced Energy Industries Germany, GmbH, Metzingen, Germany, a subsidiary of Advanced Energy Industries, Inc. (Advanced Energy Industries) Colorado, USA. Under the agreement, Advanced Energy Industries acquired the Thyro-Family product line for €22 million in cash plus a one year cash earn-out of up to €1 million, if the EBITDA target for the product line is met in the first twelve months after closing. The Company entered into a long-term manufacturing agreement for manufacturing the modules for Advanced Energy Industries.
On February 28, 2014, the Group agreed with a South African investor to sell its 3W Power facility in Cape Town and partner to develop the sales of AEG Power Solutions global range of power systems on the South-African market. The transaction closed in the last week of April with effect from January 1, 2014.
On March 19, 2014 the Group agreed with significant holders of its €100 million Notes payable (ISIN DE000A1A29T7, 3W9A) the key economic principles for a fundamental restructuring of the bond. The agreement is subject to the required approval of the bondholders at the upcoming bondholders' meetings. The key elements of the restructuring plan are a debt-to-equity swap of 50 of the outstanding bond nominal, the issuance of a new €50 million bond, a cash capital increase by contribution of €4 million (rounded) with subscription rights by the current shareholders and the implementation of a comprehensive operational restructuring program. Furthermore, AEG Power Solutions will implement a management incentive program focused on the sustainable improvement of equity value and, therefore, bondholders' recovery. Shareholders will vote on the restructuring as soon as bondholders have approved the plan and all legal formalities have been met. If bondholders and shareholders both agree with the plan with more than 75% and two-thirds (respectively) majorities, the plan will be accepted and can be implemented. The Board of Directors of the Company and major shareholders fully support the financial restructuring.
On March 14, 2014 AEG Power Solutions in Warstein-Belecke, Germany agreed on a social plan and balance of interest with the works council. By May 31, a total of approximately 160 employees will be made redundant. For the elder employees who are close to retirement, a transitional company (Transfergesellschaft) was created that respective employees could enter as of April 1, 2014 for a maximum period of twelve months in order to bridge the period until their official retirement starts. The Group total headcount reduction by year-end is expected to reach approximately 580 employees.
Remaining operational restructuring steps
The Company will continue closing non-core affiliates and unprofitable subsidiaries and may elect to complete some more non-strategic asset divestitures. After layoffs and divestitures, total headcount is expected to be approximately 900 by year-end compared to 1,521 at year-end 2013.
Key operational restructuring steps that AEG Power Solutions is focusing on are:
- Prioritize R&D activities with an emphasis on better execution
- Upgrade and enhance selling skills, processes, directions and disciplines
- Establish continuous improvement in supply chain, logistics and manufacturing
- Improve financial discipline and cost control with an emphasis on cash flow
- Apply best practice in workforce management
- Introduce up to date IT architecture
- Upgrade management functions and capabilities
- Align incentives and governance across stakeholders
Outlook
With its operational restructuring efforts, AEG Power Solutions will reduce complexity, focus on areas of competitive strength, competence and new emerging applications in the field of power electronics. Specifically, these activities will consist of traditional Industrial and Commercial UPS systems, rectifiers and services and also advance power electronic solutions utilizing the Company's deep expertise in mid to high AC/DC power applications and power control technology.
At its core, AEG Power Solutions is a power electronics company delivering high quality Industrial and Commercial uninterruptable power supply systems and solutions. The Group is active in key vertical markets such as oil gas, transportation, power generation and general industry. Industrial UPS comprises the core area of AEG Power Solution's competitive strength, is the source of much of the Company's technology and provides a solid and resilient revenue base with approximately €150 million in revenues for 2014. In order to solidify its business, worldwide sales activities in the industrial markets are in the process of being reinforced and redeployed to fit the new strategy. Sales and Services of Commercial UPS systems in Data and IT markets form a smaller part of AEG Power Solution's UPS business, however, with differentiated product releases and an incremental increase in service activities in place, the Company hopes that this will contribute a growing share of revenues.
Advanced power supply systems and solutions focus on renewable energies and next generation distributed power generation. These include industrial processes requiring precise heat or power over time, distributed power generation, network management as well as Solar and other renewables. These new applications will follow mega trends and have some promising applications in areas such as ballast water treatment, energy storage, and grid stabilization.
In 2010, the Company used its power electronics know how to expand into solar systems. AEG Power Solutions will focus on profitable opportunities in Solar and continue to harvest sales; however Solar revenues are likely to remain far below previous levels.
With so many changes to the Group structure and activities, providing a fully reliable financial forecast is difficult. However, with the specific measures in mind, the financial outlook for the Group is expected to improve after the full implementation of the financial and operational restructuring program. As of today, management forecasts revenues of approximately €220 million in 2014, €224 million in 2015 and above €240 million in 2016. EBITDA (after extraordinary expenses) is expected to increase from an anticipated negative €24 million in 2014 to a positive €17 million in 2015 and above €20 million thereafter. At the end of fiscal year 2014 the Company expects to have liquidity of approximately €20 million.
Dr. Dirk Wolfertz, Chairman of the Board of Directors comments, "We have made a lot of progress in a very short time and are confident that we are on the right path. It is a long process to change culture and business practice after so many years and it will require a broad and persistent effort. With the continued stability in our core end markets, I believe we can create a solid base to provide best in class products, services and solutions to our customers around the world."
About 3W Power/AEG Power Solutions:
3W Power S.A. (WKN A1W2L4 ISIN LU0953526265), based in Luxembourg, is the holding company of AEG Power Solutions Group. The Group is headquartered in Zwanenburg in the Netherlands. The shares of 3W Power are admitted to trading on Frankfurt Stock Exchange (ticker symbol: 3W9).
AEG Power Solutions (AEG PS) Group is a global provider of power electronics systems and solutions for all industrial and demanding commercial power requirements offering one of the most comprehensive product and service portfolios in the area of uninterruptible power supply and power management.
Thanks to its distinctive expertise bridging both AC and DC power technologies and spanning the worlds of both conventional and renewable energy, the company creates innovative solutions for next generation distributed power generation
For more information, visit www.aegps.com.
This communication does not constitute an offer or the solicitation of an offer to buy, sell or exchange any securities of 3W Power. This communication contains forward-looking statements which include, inter alia, statements expressing our expectations, intentions, projections, estimates, and assumptions. These forward-looking statements are based on the reasonable evaluation and opinion of the management but are subject to risks and uncertainties which are beyond the control of 3W Power and, as a general rule, difficult to predict. The management and the company cannot and do not, under any circumstances, guarantee future results or performance of 3W Power and the actual results of 3W Power may materially differ from the information expressed or implied in the forward-looking statements. As a result, investors are cautioned against relying on the forward-looking statements contained herein as a basis for their investment decisions regarding 3W Power.
3W Power undertakes no obligation to update or revise any forward-looking statement contained herein.
Contacts:
Katja Buerkle
Investor Relations Financial Communications
AEG Power Solutions
Tel.: +31 20 4077 854
Mobile: +31 6 1095 9019
Email: investors@aegps.com
or
Christian Hillermann
Hillermann Consulting
IR consultancy of AEG Power Solutions
Tel.: +49 40 320 279 10
Mobile: +49 173 5379660
Email: office@hillermann-consulting.de
