BARCO meets 3Q03 sales and EBITA targets
Despite continued weak US dollar and economic environment, YoY sales remained unchanged at euro 145.2 million and EBITA reached euro 10.1 million
Third Quarter 2003 Financial Highlights :- Sales at euro 145.2 million, in line with management’s expectations of euro 140-150 million, and unchanged year-over-year. At constant exchange rates, sales increased 6.2%.
- EBITA down 3.6%, to euro 10.1 million. EBITA margin down to 6.9% from 7.2% in 3Q02. For the nine months, EBITA margin was 9.4%, compared with 9.1% at the end of 3Q02.
- Total negative impact of currency fluctuations on EBITA was euro 5.4 million.
- Net income up to euro 6.7 million, from euro 5.9 million.
- Current earnings per share (operating result before amortization of consolidation goodwill plus interest income/expense, divided by the average number of shares outstanding) of euro 0.61 versus euro 0.59.
- Net earnings per share increased to 0.54, from euro 0.47 the prior year.
- Fully diluted earnings per share up to euro 0.51, from euro 0.45 in 3Q02.
Kortrijk, Belgium, November 6, 2003 – Barco n.v. (Euronext: BAR; Reuters: BARBt.BR; Bloomberg: BAR BB) today announced results for the three- and nine-month periods ended September 30, 2003.
Barco CEO, Martin De Prycker, commented: “Once again we met our quarterly targets for sales and EBITA, although results continued to be impacted by the depreciation of the USD and weak economic environment. Order levels were weak in July and August but picked up in September and have remained strong in October. Excluding the negative impact of currency fluctuations, sales would have increased 6.2% year on year and added euro 5.4 million to EBITA. The total negative impact of currency fluctuations on EBITA year to date thus amounts to euro 14.4 million.”
Regarding the outlook for the year, Mr. De Prycker, said: “For 4Q03 we expect orders between euro 175 and 190 million. At constant exchange rates this would mean an increase with at least 18% compared to 4Q02.
We expect sales to range between euro 173 and 183 million, so at constant exchange rates comparable to 4Q02.”
“EBITA is expected in the range of euro 23-29 million. This excludes a one-time provision of euro 2.5 million in restructuring charges related to Barco Manufacturing Services, formerly Barco Subcontracting. In order to streamline our operations, we are currently consolidating electronic sub-assembly from four locations in Belgium and one in the Czech Republic to one in Belgium for small series and one in the Czech Republic for larger series. This will result in cost savings of up to euro 2.5 million per year when the consolidation will be fully effective. These cost savings will be gradually realized during the restructuring process, which will take two to three years. For the full year 2003 we expect EBITA between euro 66 million and euro 72 million, before the provision for restructuring charges,” Mr. De Prycker concluded.
CONSOLIDATED RESULTS FOR THE QUARTER
Sales
Sales for the quarter remained relatively unchanged year on year at euro 145.2 million, and in line with management’s expectations of euro 140-150 million. Sales increases of 3.3% at BarcoProjection and 14.1% at BarcoView offset declines of 34.2% at BarcoVision and 12.9% at Barco Manufacturing Services.
At constant exchange rates, sales would have increased year on year by 6.2%.
Sales to Europe, Middle East and Africa represented 49.8% of consolidated sales, while 34.2% of sales were realized in the Americas and 16% in Asia Pacific.
Orders fell by 10% to euro 147.1 million, from euro 163.5 million in 3Q02. This was a result of the 12% depreciation in the US dollar and related currencies against the euro and the weak economic environment. At constant exchange rates, orders would have declined by only 4.1%. Order levels were weak in July and August, but picked up strongly in September, continuing into the fourth quarter.
The book-to-bill ratio was 1.01, compared with 1.12 for 3Q02 and 1.07 for 2Q03. The higher book-to-bill ratio in 3Q02 reflects significant long-term contracts in the Air Traffic Control and Defense markets.
Gross Profit & Margin
Gross profit decreased year on year by 4.8% to euro 61.6 million, with gross margin down to 42.4% from 44.4% principally due to an unfavorable product mix. Year-to-date, gross margin remained unchanged at 43.9%.
Operating Results before Amortization of Consolidation Goodwill (EBITA)
EBITA decreased 3.7% to euro 10.1 million, or 6.9% of sales, in-line with management’s expectations of euro 7-12 million. This compares to euro 10.5 million, or 7.2% of sales, for 3Q02. Excluding currency fluctuations, EBITA would have increased year on year by 48% to euro 15.5 million.
General & administration expenses as a percentage of sales declined year on year by 20 basis points to 8%. Sales and marketing costs, however, increased to 16.9% of sales from 15.9% in 3Q02, reflecting higher sales coverage in North America (acquisition of Trans-Lux West) and Asia.
Other operating income improved to euro 1.7 million, from an expense of euro 1.3 million, mainly due to currency fluctuations and provisions.
Income Taxes
Income taxes decreased to euro 2.8 million from euro 3.5 million year-on-year as a result of an effective tax rate of 27.2% for 3Q03 compared with 32.1% for 3Q02.
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 increased to 0.61 from euro 0.59 for 3Q02.
Net Income
Net income for the quarter improved to euro 6.7 million, or a net margin of 4.6%, from euro 5.9 million for 3Q02. Net income reflects an extraordinary gain of euro 0.7 million from the sale of Machine Vision in July 2003 and a decline in income taxes of euro 0.7 million as a result of a lower effective tax rate for the period.
Net earnings per ordinary share (EPS) improved year on year to euro 0.54, from euro 0.47 in 3Q02. Fully diluted net earnings per share were euro 0.51, compared with euro 0.45.
Capital Expenditures (CAPEX)
Capex for the quarter was euro 4.6 million, including euro 2.4 million for the construction and expansion of BarcoView’s plants in Belgium and Georgia, US. For 4Q03, management expects capex of approximately euro 10 million, also including the construction and expansion of these plants.
CONSOLIDATED RESULTS FOR THE NINE MONTHS
Sales
Sales declined 4.2% to euro 454.3 million. This was primarily the result of declines of 13% at BarcoProjection and 10.6% at BarcoVision, which more than offset the 24.5% increase at BarcoView.
Excluding currency fluctuations, sales would have increased 4.1%.
Gross Profit & Margin
Gross profit declined 4.1% year on year to euro 199.2 million, from euro 207.7 million. Gross margin remained unchanged at 43.9% during the same period.
Operating Results Before Amortization of Consolidation Goodwill (EBITA)
EBITA declined by 0.8% to euro 42.9 million, from euro 43.3 million, reflecting the 3.7% decline in EBITA recorded for 3Q03. EBITA margin, however, improved to 9.4% from 9.1% in the first nine months of 2002.
General & administration expenses, as a percentage of sales, remained unchanged at 7.8%. Sales & marketing expenses, however, increased year on year to 16.4% from 15.2%. Research & development costs increased to 11.4% of sales from 11.1% in the year-ago period.
Other operating income, net, improved to a gain of euro 5.4 million from an expense of euro 2.3 million principally due to currency fluctuations and provisions.
Income Taxes
Income taxes increased to euro 12 million from euro 11.8 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) were at euro 2.59 for the nine months, compared with euro 2.60 in the same period of 2002.
Net Income
Net income improved to euro 27.8 million, from euro 0.3 million in the same period of 2002. Net earnings per ordinary share (EPS) increased to euro 2.25, from euro 0.03. Fully diluted net earnings per share were euro 2.12, compared with euro 0.03 in the year-ago period.
OUTLOOK FOR 4Q03
The following statements are forward looking and actual results may differ materially.
For the fourth quarter of 2003, Barco expects to achieve sales of between euro 173-183 million. This means at constant exchange rates, sales at a comparable level with 4Q02.
Orders for 4Q03 are expected to range between euro 175 million and euro 190 million, so at constant exchange rates, at least 18% higher than orders of 4Q02.
Assuming the value of the US dollar does not further depreciate relative to the euro, the company expects to achieve an operating result before amortization of consolidation goodwill in the range of euro 23-29 million. This excludes the provision for the one-time restructuring charges at Barco Manufacturing Services of euro 2.5 million.
DIVISIONAL RESULTS FOR THE QUARTER
BarcoProjection
Sales increased by 3.3% year-on-year, with higher sales to the US and European Media markets. Control Rooms sales have been picking-up in Asia, while the Simulation market remains weak, particularly in Civil Aviation.
The book-to-bill ratio was 1.14 driven by strong orders, especially in Control Rooms for broadcast solutions in the U.S. and Japan as well as in Traffic & Surveillance worldwide. Barco’s market leadership in Events was further confirmed by increased sales both in Europe and the U.S. The Presentation market also had a good order level.
Gross profit margin decreased to 42% from 45% in the previous quarter, due to an unfavorable product mix. This resulted in an EBITA margin of 5.4%, compared with 10.0% in 3Q02. Management expects that the transition of the manufacturing of large volume LED walls from Belgium to China-based Barco-Leyard by 1Q04 will allow the company to reduce costs as well as sensitivity to fluctuations in the USD exchange rate.
A number of new products were introduced during the quarter, including a high resolution LED wall (3 mm pitch) for media applications, a world-record light output projector for the events market, and MiPIX, a modular intelligent LED pixel block, which measures only 4cm by 4cm and can be used to create intelligent effects on large-scale backdrops of any form, shape or size. During the quarter Barco also introduced prepackaged solutions at its Simulation business unit.
BarcoView
Sales at BarcoView rose 14.1% year-on-year. On a sequential basis, sales to the Medical Imaging market improved, both in Europe and the U.S. Sales at Air Traffic Control and Defense & Security were strong compared to 3Q02, but somewhat lower versus 2Q03.
Although orders in Air Traffic Control and Defense & Security remain low, management expects increased commercial activity to result in higher order levels for 4Q03. In the Medical market, although order levels remain high, customers are not placing advance orders, reducing the book-to-bill ratio.
Gross profit margin increased to 45% from 44% on a sequential basis. EBITA margin improved to 10.5% from 4.2% in 3Q02.
During the quarter Barco introduced the Coronis 3MP Duralight, a new backlight technology which extends the lifetime of medical LCD displays.
BarcoVision
Sales at BarcoVision declined year on year by 34.2%. Results for 3Q03 exclude sales and orders of Machine Vision, the Company’s former food sorting business unit as it was divested and deconsolidated as of July 1. Results for 2Q03, however, include sales of euro 6.0 million and EBITA of euro 1.1 million for Machine Vision. Sales volumes to the textile market were weak reflecting the down part of the cycle, which is expected to continue well into 2004. However, at ITMA 2003, the cutting edge show for the global textile machinery industry, interest in new Barco products such as the on-loom inspection system Cyclops, was very high.
EBITA margin, however, increased at 12.4%, compared with 9.7% for 3Q02, due to a better product mix.
The divestiture of Machine Vision generated a non-operating result of euro 0.7 million.
PARTICIPATIONS
As previously announced, Barco is currently talking to interested parties with the intention of deconsolidating dotrix nv. This is the only subsidiary in the Graphics market in which Barco still has majority participation.
In addition to the participation in dotrix nv, Barco still has a total exposure of euro 17 million in the Graphics market. This market is still negatively impacted by the unfavorable economic environment.
CONFERENCE CALL
Barco will host a conference call with investors and analysts on November 6, 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 JP 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 10 p.m. Brussels time (4 p.m. EST).
ABOUT BARCO
Barco is 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 “9 months ended September 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
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