Strong EBITA margin of 11% despite US Dollar and weak economic environment
Second Quarter 2003 Financial Highlights :
- Sales at euro 158.0 million in line with management’s expectations for the quarter, but nevertheless 10.3% lower. At constant exchange rates, sales were almost flat with a decline of only 1.6%.
- EBITA down 20.5%, to euro 17.4 million, due to 19.1 % weaker USD. EBITA margin at 11% compared with 12.5% in 2Q02, but above management expectations of 10% for the quarter.
- Net income of euro 11.4 million, compared with a net loss of euro 12.3 million in 2Q02.
- Current earnings per share (operating result before amortization of consolidation goodwill plus interest income/expense divided by the average number of shares outstanding) were at euro 1.05 versus 1.37 the year before.
- Net earnings per share of euro 0.92, compared with a net loss per share of 0.99 in 2Q02.
- Fully diluted earnings per share of euro 0.86, versus – 0.94 the year before
Kortrijk, Belgium, August 22, 2003 – Barco n.v. (Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three- and six-month periods ended June 30, 2003.
Barco CEO, Martin De Prycker, commented: “Over the first half of 2003 we were able to increase EBITA to 10.6 % of sales compared to 10.0 % in 2002, despite lower sales and the negative economic environment. Without currency fluctuations sales would have increased 3% year on year, adding euro 9 million to EBITA.”
Regarding the outlook for the year, Mr. De Prycker, said: “The economic uncertainty continues to keep the investment climate weak in certain markets. Furthermore, the volatility of the US dollar and other currencies impacts both sales and EBITA, reducing predictability beyond one quarter. Sales for the third quarter of 2003 are expected to range between euro 140 million to euro 150 million, an increase of at least 3% at constant exchange rates, while EBITA margin is expected to be between euro 7 and 12 million, so relatively unchanged year on year.”
CONSOLIDATED RESULTS FOR THE QUARTER
Sales
Sales for the quarter declined 10.3% to euro 158.0 million, in line with management’s expectations of euro 150-160 million for the quarter. This was primarily the result of declines of 15.5% at BarcoProjection, 24.4% at BarcoSubcontracting and 6.9% at BarcoVision, which more than offset the 7.0% sales increase at BarcoView.
If the US dollar exchange rate had remained unchanged year on year, sales would have declined by only 1.6%.
Sales to Europe, Middle East and Africa represented 54.4% of consolidated sales, while 31.1% of sales were realized in the Americas and 14.5% in Asia Pacific.
Orders fell by 11% to euro 169.2 million, from euro 190.7 million in the year ago period. This was a result of the 19.1% devaluation of the US dollar against the euro and the overall weak economic environment, due to SARS and the war uncertainty. Excluding the impact of the devaluation of the US dollar against the euro, orders would have declined by 2.5%. Order levels however, picked up in June.
The book-to-bill ratio was 1.07, compared with 1.08 for the second quarter of 2002 and 1.05 for the first quarter of 2003. 
Gross Profit & Margin
Gross profit decreased to euro 70.9 million. Gross margin on a sequential basis remained relatively stable at 44.9% as pricing pressures were offset by cost reductions. Year on year, gross margin declined slightly from 45.5%.
Operating Results before Amortization of Consolidation Goodwill (EBITA)
Operating results before amortization of consolidation goodwill (EBITA) decreased by 20.5%, to euro 17.4 million or 11.0% of sales, exceeding management’s expectations of a 10% EBITA margin for the quarter. This compares to euro 22.0 million, or 12.5% of sales for the same period in 2002. Without currency fluctuations the EBITA would have been about euro 4 million higher.
General & administration expenses as a percentage of sales remained relatively unchanged year on year at 7.5%. Sales and marketing costs, however, increased to 16.3% of sales from 14.2% in the second quarter of 2002, reflecting higher sales coverage in North America (acquisition of Trans-Lux West) and Asia.
Other operating income improved to euro 2.0 million, from an expense of euro 2.2 million mainly due to currency fluctuations and provisions.
Income Taxes
Income taxes decreased from euro 5.3 million to euro 4.9 million year on year.
Current earnings per share (operating result before amortization of consolidation goodwill plus interest income/expense divided by the weighted average number of shares outstanding) for the quarter were at euro 1.05 versus 1.37 the year before.
Net Income
Net income for the quarter improved to euro 11.4 million, or a net margin of 7.2%, from a net loss of euro 12.3 million for the second quarter of 2002. Results for the second quarter of 2002 reflect non-operating results in connection with the decline in Barco’s participation in Esko-Graphics. On a sequential basis net income improved by 16% from euro 9.8 million in the first quarter of 2003, or a 6.50% net income margin.
Net earnings per ordinary share (EPS) for the quarter improved to euro 0.92, from a loss of euro 0.99 in the second quarter of 2002, and a gain of euro 0.79 for the first quarter of 2003.Fully diluted net earnings per share was euro 0.86, compared to a loss of euro 0.94 in the year ago period.
Capital Expenditures (CAPEX)
Capex for the quarter was euro 2.5 million. Total capex for the third and fourth quarters will include a maximum of euro 15 million, reflecting the construction and expansion of the BarcoView plants in Belgium and Georgia, US.
CONSOLIDATED RESULTS FOR THE SIX MONTHS
Sales
Sales declined 5.9% to euro 309.1 million. This was primarily the result of declines of 19.8% at BarcoProjection and 17.6% at BarcoSubcontracting that more than offset increases of 29.8% at BarcoView and 1.7% at BarcoVision.
Without currency fluctuations sales would have risen by 3.1%.
Gross Profit & Margin
Gross profit declined 3.7% year on year to euro 137.6 million, from euro 142.9 million. Gross margin remained relatively stable at 44.5% during the same period.
Operating Results before Amortization of Consolidation Goodwill (EBITA)
Operating results before amortization of consolidation goodwill remained relatively unchanged year on year at euro 32.9 million. EBITA margin, however improved slightly to 10.6% from 10.0% in the first half of 2002.
General & administration expenses, as a percentage of sales, remained relatively unchanged year on year at 7.6%. Sales and marketing expenses, however, increased to 16.2% of sales from 15.0% in the first half of 2002. Research & development costs increased to 11.2% from 10.6% of sales.
Other operating income improved to euro 3.6 million from a loss of euro 1 million in the year ago period principally due to currency fluctuations and provisions.
Income Taxes
Income taxes increased to euro 9.2 million from euro 8.3 million year on year.
Current earnings per share (operating result before amortization of consolidation goodwill plus interest income/expense divided by the weighted average number of shares outstanding) for the 1st half of 2003 were at euro 1.98 versus euro 2.01 the year before.
Net Income
Net income improved year on year to euro 21.2 million, from a loss of euro 5.6 million in the same period of 2002. Net earnings per ordinary share (EPS) improved to euro 1.70, from a net loss per ordinary share of euro 0.44 for the first half of 2002. Fully diluted net earnings per share for the first half of the year was euro 1.61, compared with a loss of euro 0.42 in the year ago period.
OUTLOOK FOR 3Q03 AND REMAINDER OF FISCAL 2003
Ongoing economic uncertainty continues to negatively impact the investment climate in a number of markets. In addition, results are also affected by the volatility of the US dollar and other currencies, as 45% of consolidated sales are tied to the US currency and these currencies.
For the third quarter of 2003, Barco expects to achieve sales of between euro 140 million and euro 150 million. This means an increase of at least 3% year on year. Assuming the value of the US dollar does not further decline relative to the euro, the Company expects to achieve an operating result before amortization of consolidation goodwill between euro 7 and 12 million, so comparable to the third quarter of 2002.
Management expects to continue improving internal processes to enhance delivery performance and reduce non-quality costs as well as sales coverage, particularly in China, Japan and Canada. Barco is also focused on new product development to benefit from the economic rebound.
DIVISIONAL RESULTS FOR THE QUARTER
BarcoProjection
Sales declined by 15.5% year on year as a result of the uncertainty in the overall economic environment, which mainly affected the utilities market for control rooms and civil flight simulation. In addition, the home theater market was negatively affected by the fast market transition from CRT to DLP. Orders received in the second quarter, however, exceeded sales by 12.6%.
Gross profit margin remained stable around 45% on a sequential basis. EBITA margin, however, decreased year on year to 7.3%, from 12.5%, as a result of lower sales. The decline in orders in Home theater prompted a restructuring of the sales force of this business unit.
A number of new products were introduced during the quarter, such as streaming video for traffic and security control rooms, the 2K digital cinema projector and a digital projector with interactive stereo.
During the quarter, the Company successfully completed the integration of US-based Trans-Lux West. The acquisition of Leyard, in China, has been delayed due to SARS and unresolved legal issues. The Company expects to close this acquisition during September, 2003.
BarcoView
Sales at BarcoView rose 7.0% year on year driven by higher sales to the air traffic control market, enabling the Company to maintain its share in that market substantially above 50%. Sales to the medical imaging market were slightly weaker as Barco’s clients depleted their inventory levels.
Avionics orders were strong. The defense & security market remains slow, although it is expected to pick up in the second half of 2003.
The book-to-bill ratio for the quarter was 1.06.
Gross profit margin remained stable at 46% on a sequential basis. EBITA was 14.6% compared to 15% in the second quarter of 2002.
During the quarter, Barco introduced a mid-range medical LCD flat panel (NIO) and a multifunctional rugged display for defense and security.
BarcoVision
Sales at BarcoVision declined 6.9% year on year, due to a downturn in textile subcontracting, with textile activity continuing to perform well. However, a book-to-bill ratio of 0.88 was evidence of the first sign of a decline in the business cycle in the textile market.
Gross profit margin remained relatively stable at 44% on a sequential basis. EBITA improved to 19.1% from 5.7% in the second quarter of 2002. This improvement reflects a better product mix for the quarter.
In October, 2003, Barco expects to launch several new products at ITMA 2003, the cutting edge show for the global textile machinery industry, to take place in Birmingham, England. New products include a polypropylene sensor, extended range of on-loom inspection (Cyclops), and a new family of wireless data collection & monitoring systems.
On July 31, 2003 the Company sold Machine Vision to BEST n.v., resulting in a marginal non-operating profit to be reflected in third quarter 2003 results. For the first half of the year, Machine Vision had sales of euro 8.5 million with low profitability. With an estimated market share of 15%, management believes it was unlikely to bring MachineVision to the Company’s average profit margin levels over a reasonable period of time.
SHARE BUY-BACK PROGRAM
As approved at the General Shareholder’s meeting held on May 14, 2003, Barco has established a share buy-back program to offset the dilution of its share option programs. At July 31, 2003, Barco had bought back 95,928 shares for a total of euro 4.98 million.
PARTICIPATIONS
On August 18, 2003, the only graphics activity in which Barco still has a majority participation, dotrix nv, announced a strategic partnership with Rock-Tenn Company from Norcross, Georgia USA. Rock-Tenn Company is one of North America’s leading manaufacturers of packaging products, merchandizing displays and recycled paperboard. Under the present agreement, Rock-Tenn has not only agreed to purchase equipment, but will work with dotrix to help define inkjet technology developments for the packaging and display industries.
Besides the participation in dotrix nv, Barco still has a total exposure of euro 17 million in the graphics market.This market is still in an unfavorable economic situation.
CONFERENCE CALL
Barco will hold a conference call with investors and analysts on August 22, 2003, starting at 4 p.m. Brussels Time (10 a.m. EST), to discuss the results for the quarter. The call will be hosted by the Company’s CEO, Mr. Martin De Prycker, Mr. Antoon Van Petegem, Chief Financial Officer and J.P. Tanghe, Vice President Corporate Communication and Investor Relations.
An audiocast of this conference call will be available on the Company’s website www.barco.com at 4 p.m. EST (10 p.m. Brussels time).
ABOUT BARCO
Barco is an international imaging technology company headquartered in Kortrijk, Belgium, with a network of subsidiaries, distributors and agents in almost 100 countries. Barco focuses on three key areas: large screen visualization, display solutions for life-critical applications, and systems for visual inspection. For fiscal year 2002, Barco posted net sales of euro 669.0 million, with EBITA margin of 10.6%.
Barco’s ordinary shares are listed on the Brussels/Euronext stock exchange. Share information may be accessed on Bloomberg under the symbol BAR BB and on Reuters under BARBt.BR. Barco is a BEL 20 and a Next 150 company.
For more information and the full report “6 months ending June 30, 2003”, with comments on the changeover to IFRS in annex please visit the Company’s website at www.barco.com
The accounting information taken up in this press release has not been reviewed by the statutory auditor
For more information, please contact
