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Kendrion contact
Head Office
Kendrion N.V.
Vesta Building - 5th floor
Herikerbergweg 213
1101 CN Amsterdam
The Netherlands
Contact now

Q2 and half year results 2022

Kendrion revenue growth continues under challenging trading conditions
  • HY1 2022 revenue of EUR 256.8 million, an increase of 9% compared with EUR 234.6 million in HY1 2021

  • Q2 2022 revenue of EUR 126.9 million, 6% higher than the EUR 119.3 million of Q2 2021

  • Normalized HY1 2022 EBITDA of EUR 30.5 million, 4% lower than HY1 2021 (EUR 31.9 million)

  • Normalized Q2 2022 EBITDA of EUR 13.7 million (Q2 2021: EUR 15.8 million)

  • Stable value-added margin despite higher raw material costs

  • Excellent Industrial performance with 22% revenue growth and 28% higher EBITDA 

  • Automotive production successfully relocated from Eibiswald facility to Sibiu and Villingen

  • Construction of new manufacturing facility in Suzhou Industrial Park on schedule to open in Q1 2023

  • Investment in production capacity, and in software and electronics development capabilities continue as the push towards cleaner energy drives future growth opportunities

  • Healthy financial position with a leverage ratio of 2.6 despite significant capital investments

Key figures

 

Reported (in EUR million)Q2 2022Q2 2021delta HY1 2022HY1 2021delta
Revenue126.9119.36% 256.8234.69%
EBITDA13.415.7-15% 28.132.0-12%
EBITA7.69.7-22% 16.919.7-14%
Net profit3.75.4-31% 8.811.3-22%
EBITDA as a % of revenue10.6%13.2%  10.9%13.6% 
EBITA as a % of revenue6.0%8.2%  6.6%8.4% 
Return on invested capital (1) (12 months rolling)    11.4%14.0% 
Normalized (in EUR million) (2)Q2 2022Q2 2021delta HY1 2022HY1 2021delta
Revenue126.9119.36% 256.8234.69%
EBITDA13.715.8-13% 30.531.9-4%
EBITA7.99.8-19% 19.319.6-2%
Net profit before amortization 5.36.1-13% 12.912.53%
EBITDA as a % of revenue10.8%13.3%  11.9%13.6% 
EBITA as a % of revenue6.2%8.2%  7.5%8.4% 
Return on invested capital (1) (12 months rolling)    14.7%15.5% 

(1) Invested capital excluding intangibles arising from acquisitions.
(2) Normalized for one-off costs and benefits. The bridge from reported to normalized figures can be found on page 12 of the PDF.

Joep van Beurden, Kendrion CEO
“We had a solid first half-year, facing difficult market conditions including inflation, geopolitical uncertainty, supply chain and order volatility, and restrictive COVID measures in China. Revenue increased by 9%, despite the loss of approximately 6 weeks of production in China. We achieved a healthy EBITDA margin of 11.9%.

Our industrial business continues to perform well due to a strong demand for products supporting the transition towards cleaner energy. Industrial Brakes grew by 19% compared to the first half of 2021, despite the COVID-related production shutdown in China. The accelerating transition towards electrification continues to push the demand for industrial brakes in all segments and across all regions. Industrial Actuators and Controls grew by 25% or by 13% excluding 3T. Underlying demand is strong across most segments and the demand for new products such as rotary locks for industrial washing machines and inductive heating for industrial baking is increasing.

Within Automotive, trading continues to be difficult, due to high demand swings combined with lower volumes, semiconductor shortages and raw material price increases. We successfully protected our value-added margin and completed the relocation of our Eibiswald production lines to Sibiu and Villingen. In China, the construction of our new manufacturing facility at the Suzhou Industrial Park is progressing well, and we expect the site to become operational during the first quarter of 2023.

The market for products supporting the global push towards electrification and cleaner energy is strong. We continue to invest in products, capabilities, and production capacity to make full use of this opportunity. In Industrial and China, we are growing our R&D team and expanding our production capacity to support further organic growth. In Automotive we are investing in additional software and electronics development capabilities to support our product pipeline. At our Capital Markets Day on 8 September in Amsterdam we will elaborate on the opportunities related to these investments.

While we believe that the economic environment will remain unpredictable for the foreseeable future, we reiterate our medium-term financial targets: 5% organic growth between 2019 and 2025, an EBITDA of at least 15% in 2025, and an ROIC of at least 25% in 2025.”


Progress on strategy
Our development decisions and acquisitions over the years have transformed Kendrion into a global and innovative company focused on actuator products that support the transition towards cleaner energy. We operate in three Business Groups: Industrial Brakes (IB), Industrial Actuators and Controls (IAC) and Automotive Group (AG). While the Automotive Group and Industrial Brakes, and our Chinese market, focus on organic growth, the emphasis of Industrial Actuators and Controls lies on profitability and cash generation.

With the ongoing Russia-Ukraine conflict, strict lockdowns in China, and rising inflation, market unpredictability and volatility dominated the economic environment. The strong performance of our Industrial Groups offset the challenges we faced in Automotive. The China lockdowns have not further impacted the construction of our 28,000 m² manufacturing facility in Suzhou’s renowned Industrial Park. We expect to start production in the new facility in the first quarter of 2023.

Despite the economic uncertainties, we continue to see organic growth opportunities in all three Business Groups as the global energy transition continues to accelerate. Going forward, we will proceed with our investments in developing products that leverage the push to clean energy and ACES while protecting our added-value margin. This will support us on our path to achieving our medium-term financial targets of 5% organic growth between 2019 and 2025, an EBITDA of at least 15% in 2025, and an ROIC of at least 25% in 2025.
 

Financial review

Revenue
Q2 2022
Revenue in Q2 2022 came in at EUR 126.9 million, up 6% compared to the second quarter of last year (EUR 119.3 million). Organic revenue at constant rates of exchange increased by 2%. As in the first quarter, price increases affected nominal growth and added 6% to the consolidated revenue. The China COVID lockdowns in April and May 2022 affected economic activity in the Shanghai area and had an estimated negative effect of 3% on Group revenue. 

Revenue growth was driven entirely by the Industrial Business Groups. Revenue in IB continued its strong growth and increased by 15%, despite the negative revenue impact of the China lockdowns. IAC revenue increased by 17% on a nominal basis, or by 5% when excluding 3T. 

The difficult market circumstances impacted our Automotive Group, as global car production in Q2 was slightly below that in Q1 2022.  Semiconductor shortages and China lockdowns affected global output. Automotive revenue decreased by 3% compared with Q2 2021 and increased slightly compared with the first quarter of the year. 

HY1 2022
Revenue for the first half of 2022 came in at EUR 256.8 million, an increase of 9% compared with the previous year. The revenue growth at constant rates of exchange, excluding the contribution of 3T was 5%. 

IB realized 19% growth in the first half year with revenue coming in at EUR 73.7 million (HY1 2021: EUR 61.9 million). Of the three Business Groups, IB was most affected by the Shanghai lockdowns, reducing half year revenue by an estimated 3%. However, this was more than offset by strong growth in Europe and the US where demand for automation and electrification solutions continues to increase across industries. Revenue in IAC increased by 25% to EUR 62.4 million (HY1 2021: EUR 49.7 million). IAC revenue grew by 13% when excluding the contribution from 3T. 

Revenue in Automotive in the first six months came in at EUR 120.7 million, 2% lower than the EUR 123.0 million revenue realized in the first six months of 2021. Automotive industry production levels have been under pressure due to supply shortages and most predominantly a shortage in semiconductors. According to IHS Markit, global car production fell by 2% in the first six months, with production in Europe, Kendrion’s most important market, 12% lower than in the first half year of 2021.  

Results 
Q2 2022
Normalized operating result before depreciation and amortization (EBITDA) came in at EUR 13.7 million, compared with EUR 15.8 million in the second quarter of the previous year. EBITDA as a percentage of revenue ended at 10.8%, compared with 13.3% in Q2 2021.

Despite the inflationary environment, we were able to protect our added-value margin in the second quarter. The added value as a percentage of the production value increased by 80 basis points to 48.9% because of sales price increases and a higher relative share of the industrial activities.

Staff and other operating expenses increased by 9% excluding the impact of 3T, of which 1.5% was caused by currency translation effects. Cost levels were affected by higher energy prices, the continuing imbalances in automotive demand and increasing production in the Industrial Business Groups. 

Depreciation charges decreased by EUR 0.2 million to EUR 5.8 million, leading to an EBITA of EUR 7.9 million (Q2 2021: EUR 9.8 million). 

EUR 0.3 million non-recurring operating expenses and EUR 0.6 million finance expenses were normalized in Q2. These reflected restructuring charges and the not yet amortized transaction costs related to the previous facility agreement, which was refinanced in Q2. Net of tax, the normalized amount was EUR 0.7 million (Q2 2021:  EUR 0.1 million). 

HY1 2022
Normalized EBITDA in HY1 2022 decreased by 4% to EUR 30.5 million (HY1 2021: EUR 31.9 million). EBITDA as a percentage of revenue ended at 11.9% compared with 13.6% in the first half year of 2021. EBITDA as a percentage of revenue reduced by 70 basis points due to the significant sales price inflation. 

The added value as a percentage of the production value increased by 0.4%, driven by the higher revenue share of Industrial business and effective passing on of input price increases in both the Industrial and Automotive Business Groups.  

Normalized EBITDA in the Industrial segment increased by 28% to EUR 24.4 million (HY1 2021: EUR 19.1 million). Normalized EBITDA as a percentage of revenue increased by 80 basis points to 17.9% in the first six months of the year. 

Normalized EBITDA in Automotive came in at EUR 6.1 million, down from EUR 12.8 million in the first six months of 2021. Normalized EBITDA as a percentage of revenue dropped to 5.0% (HY1 2021: 10.4%). Both normalized EBITDA in absolute terms and as a percentage of revenue improved compared with the second half year of 2021 when semi-conductor shortages started to severely impact global car production. High order volatility, energy price increases and R&D costs on won projects impeded the Automotive Group’s ability to reduce its cost base in response to lower order volumes. 

Depreciation charges decreased by EUR 1.1 million, leading to a normalized EBITA of EUR 19.3 million (HY1 2021: EUR 19.6 million). Normalized net finance costs came out EUR 0.6 million lower than in the first six months of 2021 as positive currency results in the first six months of 2022 compared with negative currency results in the first half year of 2021. The normalized tax rate over the first six months came in at 28.3%, compared with 29.3% a year earlier. Normalized earnings before amortization ended at EUR 12.9 million, up from EUR 12.5 million in the same period last year. Normalized earnings per share slightly increased to EUR 0.87 (HY1 2021: EUR 0.85). 

EUR 2.4 million operating expenses and EUR 0.6 million finance expenses were normalized from the results in the first six months and mainly related to severance costs related to the closure of the Automotive plant in Eibiswald and costs triggered by the refinancing completed in Q2 2022. The net of tax amount came in at EUR 2.3 million (HY1 2021: -/-EUR 0.1 million). Annex 2.5 provides a reconciliation of normalized to reported results. 

Financial position 
Total net debt increased with EUR 8.6 million in the second quarter to EUR 145.6 million at the end of Q2 2022. The increase in net debt was mainly caused by EUR 7.1 million cash portion of the optional dividend paid out in May 2022. 

Free cash flow in the first six months came in at EUR 7.6 million negative compared with EUR 4.2 million negative in the first half year of 2021. The higher operating cash flow of EUR 3.6 million was more than offset by EUR 7.0 million higher capital investments. Free cash flow in the first half year of the year is traditionally impacted by higher working capital levels compared with year-end. Inventory levels increased, coming in 29% higher compared with end Q2 2021. The quarter-end inventory included EUR 5 million temporary buffer stocks related to the relocation of the production lines of the Eibiswald Automotive plant. Other contributors to the higher inventory were increased Industrial activity levels and supply chain shortages. 

The leverage ratio based on the definitions in the group finance arrangements increased from 2.4 at the end of Q1 2022 to 2.6 at the end of Q2 2022, well below the financial covenant of 3.25. 

Capital expenditure in the first six months was EUR 16.5 million (HY1 2021: EUR 9.5 million), of which EUR 5.3 million relating to the construction of the new production facility in China. We expect investments to increase significantly in the second half of the year as we expect to finalize the factory and office infrastructure, funding all capex with operating cash flow. 
 

Number of employees
The number of employees at the end of the second quarter was 2,747, including 165 temporary employees, compared to 2,647 employees at the end of Q2 2021. Of the additional 100 FTE, 83 came from the acquisition of 3T. 


Outlook
While we expect the markets to remain volatile in the foreseeable future, we continue to see significant growth opportunities for products contributing to the acceleration of the global transition towards electrification and green energy. We continue to invest in these opportunities as we firmly believe the energy transition will drive organic growth in all our Business Groups. 

We remain optimistic that our strong position in the growth markets of Industrial Brakes, and selected segments of Industrial Actuators and Controls, Automotive and China, will help us deliver our medium-term financial targets of on average 5% organic growth per year between 2019 and 2025, an EBITDA of at least 15% in 2025, and an ROIC of at least 25% in 2025.


Analysts’ meeting and live webcast
Kendrion CEO Joep van Beurden and CFO Jeroen Hemmen will present the interim results on Wednesday, 24 August 2022 at 11:00 a.m. CET in Amsterdam. A live webcast with playback functionalities will be available on this page: Kendrion NV Q2HY results.


Capital Markets Day
Kendrion will hold a Capital Markets Day for analysts, investors, and shareholders on Thursday, 8 September 2022 at 2.00 p.m. CET in Amsterdam. To participate in the live webcast, go to: Kendrion Capital Markets Day 2022.
 

Amsterdam, 24 August 2022

The Executive Board


For more information, please contact:
Kendrion N.V.
Mr Joep van Beurden
Chief Executive Officer 
Tel: +31 6 8330 1112
Email: IR@kendrion.com

 

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