Sales and financial review
Bekaert achieved € 3.2 billion consolidated sales and € 4.0 billion combined sales in 2014, remaining stable over last year. The organic consolidated sales growth (+2.8%) was cancelled out in Bekaert’s top line by the effect of adverse currency movements, the Chilean peso in particular.
At the combined sales level, currency effects were highly negative due to the average depreciation of the Brazilian real for the full year 2014.
The Board of Directors will propose that the General Meeting of Shareholders on 13 May 2015 approve the distribution of a gross dividend of € 0.85 per share. The dividend will, upon approval by the General Meeting of Shareholders, become payable as of 19 May 2015.
Bekaert achieved an operating result before non-recurring items (REBIT) of € 164 million (versus € 166 million in 2013). This equates to a REBIT margin on sales of 5.1%. Non-recurring items amounted to € 7 million (compared with € -29 million last year), mainly related to the recognition of a negative goodwill on business combinations and the gains on the sale of property. Including non-recurring items, EBIT was € 171 million, representing an EBIT margin on sales of 5.3% (versus 4.3%). EBITDA reached € 342 million, representing an EBITDA margin on sales of 10.6% (versus 9.3%).
Selling and administrative expenses increased by € 12 million to € 265 million as a result of the significant reversal of bad debt provisions in 2013 and expenses incurred in 2014 in relation to the acquisition transactions. Research and development expenses decreased by € 3 million to € 59 million as a result of efficiency gains.
Interest income and expenses amounted to € -63 million (versus € -64 million) due to an average lower interest rate on the gross debt. Other financial income and expenses amounted to € -4 million (versus € -20 million), mainly due to currency movements.
Taxation on profit was € 42 million versus € 48 million last year.
The share in the result of joint ventures and associated companies decreased from € 30 million to € 25 million due to a difficult economic environment in Brazil.
The result for the period thus totaled € 88 million, compared with € 36 million in 2013. The result attributable to non-controlling interests was limited to € 0.4 million due to the losses and impairments on businesses in South East Asia. After non-controlling interests, the result for the period attributable to the Group was € 87 million, compared with € 25 million last year. Earnings per share amounted to € 1.51, up from € 0.42 in 2013.
As at 31 December 2014, shareholders’ equity represented 39.6% of total assets. The gearing ratio (net debt to equity) was 54.5% (versus 38.2%).
Cash flow statement
Cash from operating activities amounted to € 187 million (2013: € 306 million). Operating working capital increased by € 55 million. Cash flow attributable to investing activities amounted to € -225 million, of which € -133 million related to capital expenditure (PP&E) and € -110 million on new business combinations. Cash flows from financing activities totaled € 88 million (versus € -192 million in 2013) and were, among other elements, driven by € 194 million spent on interests, dividend and treasury shares and the issuance of the convertible bond (€ 300 million).
Investment update and other information
On 6 February 2015, Bekaert and Pirelli successfully closed the acquisition by Bekaert of the Pirelli steel cord plant in Izmit, Turkey. The deal closing in Turkey followed the ownership transfer of the steel cord plants in Figline (Italy), Slatina (Romania), and Sumaré (Brazil) as announced on 18 December 2014. The agreement between Bekaert and Pirelli also includes Pirelli's steel cord activities in Yanzhou (China). The closing of the acquisition of the steel cord entity in Yanzhou, China, will occur when the respective regulatory approvals are obtained. The financial results of the entities in Italy, Romania and Brazil are included in the consolidated statements of Bekaert as from 1 January 2015. The results of the plant in Turkey will be integrated as from 1 February 2015.
Bekaert announced, on 5 February 2015, the acquisition of the wire rope business of Arrium Ltd in Newcastle, Australia. The integration of the Australian ropes activities will enhance Bekaert's growth strategy in steel wire ropes in general and will enable the Group to take a leading global market position in mining ropes in particular. The transaction is estimated to add € 40 million to Bekaert's consolidated sales on an annual basis and has an enterprise value of approximately € 60 million. Bekaert and Arrium anticipate a deal closing in the course of the first quarter of 2015. Upon deal closure, the Australian ropes activities will be integrated in the Bekaert Rope Group. In this newly established Group, Bekaert and their Chilean partners, through Matco Cables SpA, now hold 65% and 35% respectively of all ropes entities in Canada, Chile, Peru, Brazil and the US.
In addition to the 1 652 677 treasury shares held as of 31 December 2013, Bekaert purchased 2 622 333own shares in the course of 2014. None of those shares were disposed of in connection with stock option plans or cancelled in 2014. As a result, the company held an aggregate 4 275 010 treasury shares at the end of 2014.
Net debt increased from € 574 million to € 853 million as a result of capital expenditure and acquisitions. The acquisition impact of the Pirelli steel cord plants accounted for € 207 million of the increase. Net debt on EBITDA was 2.5. Excluding the Pirelli impact, net debt on EBITDA was 1.9, unchanged from last year.