PKC Group Oyj - Interim report (Q1 and Q3)

PKC GROUP’S INTERIM REPORT 1-3/2014: BRAZIL WEAKENED OPERATING PROFIT, REVENUE LOWER THAN IN COMPARISON PERIOD AS ESTIMATED

PKC Group Plc       INTERIM REPORT          8 May 2014  8.15 a.m.



PKC GROUP'S INTERIM REPORT 1-3/2014:

BRAZIL WEAKENED OPERATING PROFIT, REVENUE LOWER THAN IN COMPARISON PERIOD AS
ESTIMATED 



JANUARY - MARCH 2014 HIGHLIGHTS

  -- Revenue decreased 9.5% on the comparison period (1-3/2013), totalling EUR
     203.8 million (EUR 225.2 million).
  -- EBITDA before non-recurring items was EUR 12.1 million (EUR 18.8 million)
     and 5.9% (8.3%) of revenue.
  -- EBITA** was EUR 7.6 million (EUR 14.2 million) and 3.8% (6.3%) of revenue.
     During the report period PPA depreciation and amortisation totalled EUR 2.0
     million (EUR 2.9 million).
  -- Operating profit before non-recurring items was EUR 5.6 million (EUR 11.3
     million) and 2.8% (5.0%) of revenue.
  -- Diluted earnings per share were EUR 0.04 (EUR 0.14).
  -- Cash flow after investments was EUR -18.4 million (EUR 0.2 million).



PKC GROUP'S OUTLOOK FOR 2014

  -- PKC Group estimates that 2014 revenue and comparable EBITDA will be lower
     than in 2013. In 2013, PKC's revenue was EUR 884.0 million and comparable
     EBITDA before non-recurring items was EUR 70.3 million.
  -- Revenue estimate is based on current business structure. Revenue will be
     affected by light vehicle build-outs in North America and by changes in
     exchange rates. As a result of the above, comparable EBITDA is expected to
     be lower than in 2013. Comparable EBITDA in 2014 will also be affected by
     reorganisation and program transfers in Europe and expenditures related to
     the implementation of PKC's growth strategy.





KEY FIGURES                             1-3/14     1-3/13    Change %    1-12/13
EUR 1,000 (unless otherwise noted)                   
Revenue                                203,813    225,161        -9.5    883,986
EBITDA*                                 12,094     18,768       -35.6     70,341
% of revenue                               5.9        8.3                    8.0
EBITA**                                  7,649     14,234       -46.3     52,461
% of revenue                               3.8        6.3                    5.9
Operating profit*                        5,613     11,316       -50.4     40,873
% of revenue                               2.8        5.0                    4.6
Non-recurring items                     -2,735     -5,389       -49.3    -10,409
Operating profit                         2,878      5,927       -51.4     30,463
% of revenue                               1.4        2.6                    3.4
Profit before taxes                      1,354      4,710       -71.2     21,562
Net profit for the report period           907      3,109       -70.8     13,947
Earnings per share (EPS), EUR             0.04       0.14       -74.0       0.62
Cash flow after investments            -18,355        204                 24,941
ROI,%                                      9.1       14.4                   14.7
Gearing, %                                 8.6       32.4                   -1.1
Average number of personnel             18,806     19,535        -3.7     19,206
* before non-recurring items                                        
** operating profit before PPA depreciation and amortisation and non-recurring  
 items                                                                          







MATTI HYYTIÄINEN, PRESIDENT & CEO:



Revenue in the first quarter remained lower than in the comparison period at
EUR 203.8 million. Although North American truck production started to grow
during the period, revenue fell short of the comparison period because of the
build-outs of the light vehicle programmes announced previously, and because of
a rescheduling production shut-down carried out during the period by one of
PKC's North American  customers lasting almost one month. In Europe, the volume
of truck production fell significantly compared to the last quarter of 2013 but
was slightly higher than in the comparison period. European revenue was also
affected by the decision made by one customer during the period to transfer the
production of a bus wiring harness program back to itself. In Brazil,
production volumes for heavy-duty trucks fell short of the comparison period.
The exchange rates for the key currencies, the US dollar and the Brazilian
real, from PKC's point of view, with respect to the euro were significantly
more unfavourable than during the comparison period. 



PKC's operating profit before non-recurring items, EUR 5.6 million, was below
that of the comparison period owing to the low production utilisation rates and
particularly to the deepening losses at the Brazilian unit. In Brazil, the
price agreements with our main customers have expired and negotiations for new
agreements have been ongoing during the period. In a very challenging
environment, PKC is working to improve its operations and implement reinforced
measures. However, a prerequisite for future profitable business are price
agreements that will take into account Brazil's significantly increased labour
costs and the effects of exchange rates. 



PKC is continuing to develop its manufacturing footprint in order to ensure
cost-competitive solutions for its customers. During the period, we opened a
new plant in Serbia, where production has increased rapidly. During the period,
a new wiring harness factory also began production at Suzhou in China. We also
made the decision to close the factory at Nogales in Mexico, owing to the
build-outs of some light vehicle programmes. We also decided to establish a
wiring systems company in Lithuania. During this year, we will evaluate the
future European manufacturing footprint in the light of experience to be gained
in Serbia and Lithuania. 



In North America, the truck market was healthy and production forecasts for the
whole year have been increased somewhat. It is expected that production volumes
for heavy-duty class-8 trucks will increase so that, in the last quarter of
2014, predicted production volumes will be about 10% higher than production
achieved in the first quarter. Production volumes for medium-duty trucks are
forecast to remain at the present level until the end of the year. 



In Europe, the transition to the Euro 6 emission standard at the beginning of
the year meant that the market was quieter than before. The production volume
forecast for the whole year has been lowered further. It is expected that
production volumes for the remainder of the year will on average remain at
roughly the same level as in the first quarter. With regard to the remainder of
the year, PKC's product range will focus more on medium-duty vehicles than
previously. 



In Brazil, customers' order books have been on a good level. In terms of the
whole year, production volume forecasts have been further downgraded and a
growing uncertainty about the development of truck demand will dominate the
market during the latter part of the year. A sign of the increasing uncertainty
is the reduction of daily production volumes planned by some customers. 



Our work to implement PKC's strategy 2018 is continuing and we are working
towards some projects to become concrete during the year. 



PKC's personnel have once again been committed in their work, for which I
express my sincerest thanks. 



MARKET OUTLOOK



In 2014 the production of heavy-duty trucks in Europe is expected to decline by
11% and production of medium-duty trucks by 9% compared to the level of 2013. 



Production of heavy-duty trucks in North America is expected to increase by
16%, production of medium-duty trucks by 5% and production of light vehicles to
increase slightly compared to 2013. 



Production of heavy-duty trucks in Brazil is expected to decline by 5%, and
production of medium-duty trucks to increase by 33% compared to 2013. The
governmental incentive program to support the purchase of new trucks continues
to be valid until further notice, although the terms have been weakened
somewhat. 



The market demand for Electronics segment's products is expected to remain at
the present level. 



PKC GROUP'S OUTLOOK FOR 2014



PKC Group estimates that 2014 revenue and comparable EBITDA will be lower than
in 2013. In 2013, PKC's revenue was EUR 884.0 million and comparable EBITDA
before non-recurring items was EUR 70.3 million. 



Revenue estimate is based on current business structure. Revenue will be
affected by light vehicle build-outs in North America and by changes in
exchange rates. As a result of the above, comparable EBITDA is expected to be
lower than in 2013. Comparable EBITDA in 2014 will also be affected by
reorganisation and program transfers in Europe and expenditures related to the
implementation of PKC's growth strategy. 



DISCLOSING PROCEDURES OF FINANCIAL REVIEWS



PKC Group Plc follows the disclosure procedure enabled by Standard 5.2b
published by the Finnish Financial Supervision Authority, and discloses
relevant information related to its Interim Report with this release. PKC's
interim report for January - March 2014 is attached to this release and is also
available on company's website at www.pkcgroup.com. 



PKC GROUP PLC

Board of Directors



Matti Hyytiäinen

President & CEO



For additional information, contact:

Matti Hyytiäinen, President & CEO, PKC Group Plc, +358 400 710 968



PRESS CONFERENCE



A press conference on the interim report will be arranged for analysts and
investors today, 8 May 2014, at 10.00 a.m., at the address Event Arena Bank,
Unioninkatu 20, Helsinki. 



ATTACHMENT

PKC interim report Q1 2014



DISTRIBUTION



NASDAQ OMX

Main media

www.pkcgroup.com



PKC Group is a global partner, designing, manufacturing and integrating
electrical distribution systems, electronics and related architecture
components for the commercial vehicle industry and other selected segments. The
Group has production facilities in Brazil, China, Estonia, Finland, Germany,
Mexico, Poland, Russia, Serbia and the USA. The Group's revenue in 2013
totalled EUR 884.0 million. PKC Group Plc is listed on NASDAQ OMX Helsinki Ltd.

Attachments:

PKC interim report Q1 2014.pdf