2023 Full Year Results
Bekaert delivers strong cash generation and improved margins
Sales at € 4.3 billion • EBITu of € 388 million (margin 9.0%) • FCF up 40% • Leverage remains low at 0.5x Net debt/EBITDAu • Proposed dividend of € 1.80 per share (+9%)
Bekaert delivered a resilient financial performance in 2023, further improving profit margins (EBITu margin at 9.0%, up 80bps vs FY2022) and delivering strong cash flows (Free Cash Flow of € 267 million, up +40% y-on-y). Despite lower volumes and weaker conditions in many of its end markets, the business continues to benefit from the successful execution of Bekaert's strategy, maintaining pricing discipline, enhancing the mix of higher margin products, and driving cost efficiencies. Looking ahead, the repositioning to target new growth opportunities linked to the energy transition and decarbonization trends continues and supports the company's ambitious financial targets for 2026.
Financial Highlights
- Consolidated sales of € 4.3 billion (-13.5%) and combined sales of € 5.3 billion (-13.9%), driven primarily by the reversal of raw material cost inflation, lower volumes and an unfavorable impact from exchange rate movements
- The reversal of previous input cost inflation reduced sales by € -437 million and lower volumes (-3.7%) reduced sales by € -188 million. Currency effects had an impact of € -152 million.
- Successful focus on price and mix optimization towards higher margin products increased sales by € +101 million.
- Gross profit underlying remained stable despite lower sales (€ 745 million vs € 749 million in FY2022) at a margin of 17.2% (vs 15.0% in FY2022)
- Strong operating result and margin performance, driven by ongoing business mix improvements including the contribution of higher margin growth applications
- EBITDAu of € 561 million (-5.1%), delivering a margin on sales of 13.0% (improvement of +120bps vs FY2022)
- EBITu of € 388 million (-5.3%), resulting in a margin of 9.0% (vs 8.2% in FY2022)
- EPS from continued operations of € 4.75 (up +5.5% vs € 4.50 in FY2022)
- Strong cash conversion, despite lower sales
- Free Cash Flow (FCF) of € 267 million, up +40% compared to € 191 million in FY2022, benefiting from further improved working capital management
- Net debt of € 254 million (€ 380 million in FY2022) including proceeds of the disposal of Steel Wire Solutions businesses in Chile and Peru, resulting in net debt to EBITDAu of 0.5x
- Proposed dividend of € 1.80 per share (+9% y-on-y)
Operational and strategic highlights
- Strong pricing progress from ongoing mix improvements with higher added value products and applications, minimizing the impact of lower volumes
- Intense focus on cost efficiencies and operational excellence, including reduced procurement costs as part of an ongoing range of initiatives, as well as further footprint rationalization including:
- Closure of a Rubber Reinforcement plant in China in Q3 2023
- Decision to close two Steel Wire Solutions plants in India and Indonesia in December 2023
- Ongoing successful strategic execution, re-positioning the business towards higher margin, higher growth and less commoditized sectors, and focusing on growth markets, innovation, and sustainability:
- Increased customer penetration of higher margin 4D and 5D Dramix® products
- Continue to scale production in Currento® (porous transport layer for hydrogen electrolyzers) having doubled sales in 2023
- Significant customer interest in Armofor® in both traditional and clean energy applications
- Signed agreement with Toshiba to move downstream into membrane electrode assembly, growing Bekaert's capabilities in hydrogen electrolysis
- Partnership with ABB to deliver predictive maintenance services for mine hoist systems
- 12 MWp solar power farm at the production plant in Burgos, Spain, now fully operational
- The disposal of Steel Wire Solutions businesses in Chile and Peru completed
Outlook
The financial performance delivered in 2023 and the company's robust financial position give us confidence in our ability to further deliver on our strategic priorities. Whilst economic uncertainties continue and a number of end markets remain challenging, our trading in 2024 has started well across the majority of our business units and management anticipates modest sales growth and at least stable margins in 2024.
Looking beyond 2024, we also remain confident in our targets of a sales growth rate of more than 5% per year in the mid-term and from 2026 an EBITu margin of more than 10%, ROCEu of more than 20% and over 50% of sales generated from sustainable solutions.
Committed to return value to our shareholders
The Board of Directors is committed to maintaining a strategic capital allocation policy, balancing investment in future growth and innovation, with maintaining a strong balance sheet and growing shareholder returns over time. Over the last two years Bekaert has successfully returned more than € 400 million, through share buyback programs of approximately € 240 million and a significantly increased dividend, up 50% in 2022, and a further 10% increase in 2023.
The continued successful execution of the strategic plan in recent years has strengthened Bekaert's financial performance, operational resilience and consistency, balance sheet position, cash generation potential, and the returns to shareholders.
Whilst this strategic plan remains clear and unchanged, the arrival of the new CEO, Yves Kerstens, in September 2023, has been a catalyst for the Board to review capital allocation priorities. Building on the strong foundations of business and financial improvements in recent years, the Board has concluded that it is now the right time to accelerate this plan and Bekaert's transformational agenda, to take advantage of growth opportunities. Therefore, the Board intends to prioritize investment in the business in the next 12-24 months, both organically and inorganically, and has taken the decision to pause the share buyback program.
The group intends to maintain its policy of progressively growing the dividend year-on-year and today announces a gross dividend of € 1.80 per share (an increase of 9% y-on-y), to be proposed by the Board at the Annual General Meeting of Shareholders in May 2024.
Conference Call
The CEO and the CFO of Bekaert will present the 2023 results to the investment community at 10:00 a.m. CET on Friday March 1st. This presentation can be accessed live upon registration via the Bekaert website (bekaert.com/en/investors) and will be available on the website after the event.
