NUREMBERG (dpa-AFX) - Leoni AG (LEOGN) withdrew a 2019 outlook, unveiled job cuts as well as possible divestments. The company's Chief Financial Officer would resign. The company said that its profit for fiscal year 2018 declined from last year.
Leoni said its board decided that, given the greater costs incurred due to ramp-up difficulties at the plant in Merida, persistently poor operating performance in the Wiring Systems Division and a further downturn in the market, it is no longer able to maintain its outlook for fiscal 2019 presented on 7 February. At this time the company is not providing an updated guidance for 2019. The detailed guidance issued in the annual report for 2018 is therefore no longer valid.
Leoni now estimates about 50 million euros burden due to Merida for 2019. In addition, anticipated performance improvements at other plants have not materialised. Overall, the company is facing a further challenging market environment, particularly in China. In addition, certain OEMs have significantly reduced their delivery expectations for the next months with respect to the Wiring Systems Division.
Furthermore, the Board of Directors today to implement its VALUE 21 performance and strategy programme. The objective is to sustainably improve both profitability and cash flow as well as to align the Company to promising and profitable business areas, the company said.
As of 2022, VALUE 21 is expected to deliver full run rate structural savings of around 500 million euros annually compared with 2018. To some extent, the savings will be offset by factors such as wage cost increases and price reductions.
In a stable market environment, the net benefit of VALUE 21 should lead to an EBIT margin improvement of 2 to 3 percentage points compared with 2018 over the course of the next three years. Similarly, free cash flow should increase by 4 to 5 percentage points. The programme entails restructuring costs amounting to about 120 million euros, around half of it related to headcount and most of which will incur in the 2019 and 2020 financial years.
In addition, the Board of Directors has identified business areas with annual sales of up to 500 million euros for which the Company is considering all options.
Furthermore, Leoni intends to change its corporate structure into a finance holding company that is lean and geared to functions relevant to the capital market with two divisions that operate entrepreneurially and are managed on a stand-alone basis.
Other immediate measures include the planned headcount reductions of about 2,000 employees worldwide, of which 500 are in high-wage countries, particularly in indirect functions, and other personnel-related measures such as a group-wide hiring freeze, as well as a delay of salary increases for non-tariff employees and managers. The employee representatives will be consulted regarding all personnel relevant measures.
Karl Gadesmann announced that, in agreement with the Company, he has resigned his mandate as Leoni AG's Chief Financial Officer, which runs until 31 December 2019 with immediate effect.
Karl Gadesmann has been the Chief Financial Officer of Leoni AG since 1 October 2016 and was additionally responsible for the Corporate Information Management, Corporate Information Security, Corporate Internal Audit, Corporate Risk & Insurance and Corporate Taxes departments. The search for a replacement will be started immediately. In the short term, his responsibilities will be taken over by the CEO Aldo Kamper on an interim basis, the company said.
Leoni reported that its consolidated net income of 73 million euros for the 2018, compared to 146 million euros in 2017.
Earnings before interest and taxes (EBIT) dropped to 144 million euros from 227 million euros in 2017. The prior year result included a non-recurring gain of 30 million euros. The principal reason for this decline involved the exceptional charges incurred at the new production facility in Mexico in the fourth-quarter. Higher raw materials prices, increased spending on customer-specific research & development as well as unsatisfactory efficiency in the Wiring Systems Division also adversely affected the result.
Sales were 5.1 billion euros in the 2018 financial year, compared to 4.9 billion euros last year.
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