HWA AG EXPECTS A POSITIVE RESULT IN 2017
Apr 28, 2017
This successor project to the Mercedes-Benz SLS AMG GT3 continues the cooperation with Mercedes-AMG GmbH in customer racing. In the Motorsport segment (DTM and Formula 3 engines), HWA AG also achieved a slight increase in revenue in 2016. In addition, the Company generated revenue from new customers. Overall, the revenue level represented a record figure for HWA AG and exceeded Management’s expectations. Total output for 2016 amounted to EUR 100.4 million.
Profitability in the 2016 financial year developed unsatisfactorily. On December 12, 2016, HWA AG had already announced via an ad hoc disclosure that its target EBIT margin of between four and six percent would no longer be achieved. In 2016, HWA AG generated adjusted EBIT of EUR 2.0 million, corresponding to an adjusted EBIT margin of approximately 2%. The weaker operating performance was primarily attributable to the Vehicles/Vehicle Components segment. Planned projects could not be completed as scheduled and were postponed into 2017. In addition, an excessively high level of in-house manufacturing negatively impacted profitability.
As a result of the unsatisfactory earnings performance and a cost structure that was no longer competitive, the Management Board initiated a program aimed at optimizing and restructuring certain business areas. The reorganization concept included a significant reduction of internal capacities and positions, which had already been legally implemented and was scheduled for completion by September 2017. Provisions totaling EUR 1.8 million were recognized in 2016 for this purpose. Including this one-off negative effect, reported EBIT for 2016 amounted to EUR 0.2 million, compared to EUR 5.1 million in the previous year. Due to this one-time charge, the Company reported a net loss of EUR 0.3 million for 2016, compared to a net profit of EUR 3.4 million in 2015.
In line with HWA AG’s dividend policy of distributing approximately 50% of annual profits to shareholders, the Management Board and Supervisory Board decided not to propose a dividend for the 2016 financial year and to suspend dividend payments, given the negative result for the year.
The highest priority for HWA AG in 2017 is a return to profitability. The focus is therefore on improving margins and implementing the optimization and restructuring program announced on January 31, 2017. The core of this strategy is a stronger focus on the Company’s key competencies, which the Management Board has defined as development services, race car operations, testing and assembly, as well as aftersales and customer motorsport services. Through the planned reduction of internal capacities, the Company has already established the personnel framework required to reduce vertical integration and increase outsourcing activities.
In the Motorsport segment (DTM), revenue is expected to decline significantly in 2017 as planned. This reduction is mainly attributable to cost-saving measures introduced by manufacturers participating in the series. All three manufacturers are pursuing lower DTM costs through regulatory changes and the introduction of standardized components, which will significantly impact HWA AG’s revenue in 2017. However, the decline in revenue is not expected to have a corresponding effect on earnings, as the Company has proactively adapted to this development. In the Vehicles/Vehicle Components segment, revenue is expected to remain stable at a high level following strong growth over the previous two years. The positive development of this business area is expected to continue.
For 2017, the Management Board expects total output to decline to between EUR 80 million and EUR 85 million. With regard to EBIT margin, Management has adopted a cautious approach and expects a margin of at least 2.5%. The objective is to achieve a positive result in 2017 and resume dividend payments.
HWA AG intends to publish its 2016 annual financial statements in May 2017.
Contact:
Investor Relations / Press
HWA AG
Volker Glaser
Benzstraße 8
71563 Affalterbach
Germany
Phone: +49 (0) 7144 8717-279
Fax: +49 (0) 7144 8718-111
E-mail: ir@hwaag.com
Company Profile of HWA AG
Outstanding performance and an uncompromising will to win – this is the philosophy of HWA AG. For almost five decades, the team has been active in international motorsport and is regarded as one of the most successful organizations in the industry. As a highly sought-after development partner, HWA AG combines its expertise to achieve further success on racetracks around the world.
HWA AG has existed in its current form since 1998. Hans Werner Aufrecht founded AMG, the performance specialist for the Mercedes-Benz brand, in 1967. At the end of 1998, Aufrecht sold the original AMG Motorenbau- und Entwicklungsgesellschaft mbH to Daimler AG. As part of this transaction, the motorsport activities, today’s Mercedes-AMG DTM Team, and parts of the Vehicles/Vehicle Components division were separated and transferred to HWA AG. At the end of 2006, the company was converted from a limited liability company into a stock corporation, and HWA AG was listed on the stock exchange in April 2007.
Today, HWA AG is responsible for Mercedes-Benz’s DTM activities within the Motorsport segment. Acting as a full-service provider on behalf of Mercedes-Benz Motorsport, HWA AG manages all aspects of the program, including the development and construction of Mercedes-Benz DTM race cars as well as operation of the racing team. The Vehicles/Vehicle Components segment focuses on the development and production of vehicles and components for premium automotive manufacturers. For example, the GT3 racing version of the Mercedes-Benz SLS AMG was developed and produced by HWA AG in close cooperation with Mercedes-AMG. Its successor project, the Mercedes-AMG GT3, has been delivered to customer teams worldwide since December 2015. HWA AG also possesses extensive expertise in the development, production and support of Formula 3 racing engines.