IFCO SYSTEMS Continues to Drive Strong Operational Profit and Cash Flow Growth in Q3 2009 with Group Sales at Previous Year Levels
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HOUSTON--(BUSINESS WIRE)-- IFCO SYSTEMS' currency adjusted operational profitability (EBITDA) continued to grow significantly in Q3 2009 by 24.2% to US $35.9 million (YTD 2009 by 17.1% to US $90.5 million). As a result IFCO SYSTEMS achieved strong EBITDA margin growth from 15.5% in Q3 2008 to 19.2% in Q3 2009 (from 14.6% YTD 2008 to 16.7% YTD 2009). Although RPC Management Services currency adjusted revenues grew by 10.5% in Q3 2009 (17.0% in YTD 2009), currency adjusted group revenues grew only slightly by 0.1% to US $186.6 million (YTD 2009 by 1.0% to US $541.4 million) due to weak demand in Pallet Management Services as a result of the effects of the US economic recession.
Currency adjusted revenues in RPC Management Services increased in Q3 2009 by 10.5% to US $105.7 million (YTD 2009 by 17.0% to US $284.5 million). These gains are the result of organic volume growth in our European RPC business, the YTD effects of the Q2 2008 STECO acquisition, increased volume in RPC South America and accelerating growth in our RPC US business. Revenues in Pallet Management Services declined in Q3 2009 by 11.0% to US $80.9 million (YTD 2009 by 12.2% to US $256.9 million). Although IFCO SYSTEMS continued to increase its market share by selling more key pallet product volumes compared to previous year, increasing pricing pressure resulting from weakened market demand drove average prices lower in this segment.
Gross profit margin on a group level increased in Q3 2009 by 0.5 percentage points to 19.2% (YTD 2009 grew 2.0 percentage points to 19.4%). RPC Management Services' gross profit margin grew from 22.6% in Q3 2008 to 23.5% in Q3 2009. RPC Management Services benefited in Europe from increasing synergies resulting from the integration of the former STECO organization. Gross profit margin improvements in Europe and the US were also achieved through lower per unit washing and transportation costs and sustainable economies of scale effects. Gross profit margin in the Pallet Management Services business fell to 13.6% from 14.4% in Q3 2008 due to the effects of lower customer prices partially offset by lower raw materials costs and fuel prices.
Currency adjusted group EBITDA increased in Q3 2009 by 24.2% to US $35.9 million (YTD 2009 by 17.1%) to US $90.5 million. EBITDA on a currency adjusted basis in RPC Management Services increased significantly in Q3 2009 by 39.5% to US $32.6 million (YTD 2009 by 37.7% to US $79.2 million). RPC Management Services EBITDA margin improved in Q3 2009 by 6.5 percentage points to 30.8%. EBITDA in Pallet Management Services decreased by 21.7% to US $5.7 million in Q3 2009 (YTD 2009 by 28.2% to US $17.8 million). EBITDA margin in this segment fell in Q3 2009 to 7.0% from 8.0% in Q3 2008.
Q3 2009 currency adjusted group EBIT grew by 30.1% to US $24.7 million (YTD 2009 increased by 32.5% to US $59.8 million). LTM Q3 2009 currency adjusted EBIT reached a level of US $82.4 million. EBIT margin increased significantly to a level of 13.2% in Q3 2009 (11.1% in YTD 2009) from 10.1% in Q3 2008 (8.4% in YTD 2008).
Net profit significantly increased from US $2.5 million in Q3 2008 to US $7.3 million in Q3 2009 (YTD 2009 decreased from US $8.4 million to US $5.2 million). On a YTD basis, gains in 2009 operating profit were more than offset by a higher non-cash deferred income tax provision and the one-time costs recognized in connection with IFCO SYSTEMS' comprehensive refinancing, which were included in net finance costs. Excluding these refinancing expenses, net profit for YTD 2009 would have been US $13.6 million.
IFCO SYSTEMS cash flow from continuing operations, excluding the cash flow effect of income tax payments and ICE related payments, increased significantly to US $84.4 million in YTD 2009 from US $32.3 million in YTD 2008. The lower 2008 result was primarily due to reduced refundable deposit levels and other related effects on working capital following the termination of the EDEKA contract in Europe during early 2008.
Our capital expenditure levels (excluding the cash paid for the STECO acquisition in Q2 2008) decreased by US $8.2 million, or 38.1%, to US $13.4 million during Q3 2009 (YTD 2009 decreased by 3.3% to US $38.2 million). The realization of the planned growth in the US and South America has led to continued investments in these RPC pools in 2009. Lower absolute RPC related capital expenditures in YTD 2009 compared to YTD 2008 are the result of significantly improved turns of our RPC pool. Additionally, significantly lower costs of raw materials for all of our RPC pools has reduced the average per unit acquisition cost of a new RPC during 2009.
ROCE from continuing operations, on a LTM basis, increased to 17.5% as of September 30, 2009, compared to 14.7% as of September 30, 2008. This development is due to improved utilization of the employed capital as well as an increased EBIT level.
Our sources of liquidity currently include cash from operations, cash and cash equivalents on hand, amounts available under our RCF and certain factoring agreements. As of September 30, 2009, our liquidity more than doubled to US $116.0 million compared to US $53.5 million as of December 31, 2008. We believe that these sources are sufficient to finance our future capital and operational requirements in accordance with our business plans.
US $ in thousands, % % LTM Q3 except per Q3 2009 Q3 2008 Change YTD 2009 YTD 2008 Change 2009 share amounts Revenues 186,634 190,343 (1.9%) 541,367 556,105 (2.7%) 721,150 Revenues currency 186,634 186,521 0.1% 541,367 535,850 1.0% 729,430 adjusted Gross profit 35,870 35,555 0.9% 104,866 96,630 8.5% 140,413 Gross profit 19.2% 18.7% 19.4% 17.4% 19.5% margin EBITDA 35,863 29,572 21.3% 90,518 81,002 11.7% 120,560 EBITDA currency 35,863 28,873 24.2% 90,518 77,329 17.1% 122,478 adjusted EBITDA 19.2% 15.5% 16.7% 14.6% 16.7% margin EBIT 24,683 19,273 28.1% 59,826 46,618 28.3% 81,003 EBIT currency 24,683 18,977 30.1% 59,826 45,152 32.5% 82,378 adjusted EBIT margin 13.2% 10.1% 11.1% 8.4% 11.2% Net profit 7,290 2,466 195.6% 5,206 8,440 (38.3%) (9,272) (loss) Net profit (loss) per 0.14 0.05 201.1% 0.10 0.16 (37.6%) (0.17) share - basic Net profit (loss) per 0.14 0.05 201.8% 0.10 0.16 (36.5%) (0.17) share - diluted Operating cash flows from 50,264 26,687 88.3% 76,092 26,135 191.2% 107,099 continuing operations Capital expenditures from 13,356 21,465 (37.8%) 38,185 68,807 (44.5%) 58,331 continuing operations Return on capital 17.5% 14.7% employed (ROCE)
Outlook: As the financial crisis that unfolded in 2008 spread to the worldwide economy in 2009, IFCO SYSTEMS has experienced challenging economic climates in many of its markets so far during 2009. While the economies in both Europe and the United States, its two key markets, have remained in weakened states in 2009, it is expected that these economies will begin to recover in 2010.
IFCO SYSTEMS believes that its RPC Management Services business will not materially suffer from the worldwide economic downturn, as the grocery food retail industry, which is IFCO SYSTEMS' main customer base, has not been as strongly affected as other industries.
Accordingly, the European RPC Management Services business will continue to leverage IFCO SYSTEMS' leadership position and market experience to meet or exceed overall market development. The Company will increase its sales initiatives and continue to expand geographic presence in Western Europe, Central Eastern Europe (CEE) and South America. In the United States, IFCO SYSTEMS has seen increases in the overall RPC penetration among grocery food retailers and expects to grow in excess of this market development. Based on the Company's solid RPC business model, the RPC Management Services businesses will continue to grow for the remainder of 2009. Therefore, IFCO SYSTEMS has, and will continue to, invest in its RPC pool during 2009 in anticipation of continued growth in 2010. These investments, however, will be carefully aligned with IFCO SYSTEMS' business development and are targeted to continually increase the return on IFCO SYSTEMS' invested capital.
IFCO SYSTEMS Pallet Management Services business has clearly been negatively affected by the overall economic decline in the United States in 2009, primarily as a result of pressure on prices from lower market demand. Although the Company remains confident that the key competitive advantages of Pallet Management Services business - the breadth of service offerings, the national network and the value proposition at a national and local level - have not changed and will allow its Pallet Management Services segment to increase revenues and profitability in 2010, it is expected that the pallet market will remain weak in Q4 2009 and in line with previous quarters.
Despite the dramatic economic downturn in 2009, IFCO SYSTEMS believes that the above described trends will result in overall flat revenues but significantly increased operational profitability in 2009 as compared to 2008.
Financially, IFCO SYSTEMS is in a position to be able to fund its capital, operational and debt service requirements through its own operational cash flows.
For further explanations, please see IFCO SYSTEMS' quarterly report, which will be filed with the Deutsche Borse AG on or about November 11, 2009, and will be available on the Company's website www.ifcosystems.com or www.ifcosystems.de. The Company will hold a conference call on November 17, 2009. The details will be available on the Company's website.
This release contains forward-looking statements that reflect Management's current view with respect to future events. All statements contained in this release that are not clearly historical in nature or necessarily depend on future events are forward-looking. The words "anticipate", "believe", "expect", "estimate", "planned" and similar expressions are generally intended to identify forward-looking statements. These statements are based on current expectations, estimates and projections of the Management on currently available information. Many factors could cause the actual results, performance or achievements to be materially different from those that may be expressed or implied by such statements. We do not assume any obligation to update the forward-looking statements contained in this release.
Source: IFCO SYSTEMS
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