FACC AG Annual Financial Report 2018/19
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Geschäftsbericht 2018/19 posiTioN Annual Financial Report reporT 2018/19 Group Management Report of FACC AG for the 2018/19 Financial Year • With a growth rate of 3.7%, the global economy was able to British economy as well as for the European economy in certain maintain the momentum of the previous year. areas. According to current forecasts, the risks of geopolitical con- flicts also remain high. • Passenger volumes remained high despite last year’s sharp rise in the price of oil. • Airbus and Boeing delivered 1,606 aircraft, with 1,640 firm orders for new aircraft booked in the same period. 2. INDUSTRY ENVIRONMENT • The order backlog for aircraft with more than 100 seats re- Airlines recently continued their positive earnings trend, which mained high at 13,447. was driven in part by strong demand as well as successful effi- ciency improvements and consolidations. The relatively low price of oil, which is a major component of airlines’ operating costs, also contributed to this positive development. 1. BUSINESS ENVIRONMENT The International Air Transport Association (IATA) reported an above-average increase of 6.5% in global passenger traffic in 2018, Despite numerous adversities, the global economy experienced a with demand increases varying by region. With growth rates of broad economic recovery in 2018. According to estimates of the 18.6% in India, 11.7% in China and 9.0% in Russia, Asia can be con- International Monetary Fund (IMF), global economic output rose sidered the largest growth driver. Confronted with increasing pas- by 3.7% after an increase of the same magnitude in 2017, while senger volumes, the airlines decided to expand their fleets, with growth in industrialized countries weakened to 2.3% (previous the global fleet growing by 6.1% in 2018. IATA calculated industry- year: 2.4%). In the emerging and developing countries, economic wide profits of USD 32.3 billion for 2018, which is the fourth year growth remained high at 4.6% (previous year: 4.7%). According to in a row in which airlines exceeded the USD 30 billion profit mark. the IMF, the world’s two largest economies, the USA and China, each recorded an increase in economic growth in 2018. The United Airbus and Boeing delivered 1,606 aircraft in 2018. During the States are currently undergoing a robust economic recovery. In same period, airlines ordered 1,640 aircraft from Airbus and Boe- 2018, the US economy grew by 2.9% (previous year: 2.2%), with ing. The order backlog for aircraft with more than 100 seats re- consumers representing the main drivers of the economic upturn. mained virtually unchanged at 13,447 aircraft. Assuming that pro- Companies also made a strong contribution to growth with in- duction rates remain constant, this order backlog corresponds to a creasing capital investments. calculated production period of nine years China, whose economy continued on a strong growth trajectory, was the largest contributor to global economic growth with a growth rate of 6.6% (previous year: 6.9%) as shown by economic data. The shift of the Chinese economy to an increasingly con- 3. GENERAL INFORMATION sumer-oriented market regime is still in full swing. 3.1 Information according to section 243 of the Austrian The eurozone economy, in contrast, experienced slightly weaker Company Code (UGB) growth in 2018: After five years of continuous recovery, growth in Europe slowed down to 1.8% compared to 2.4% in the previous The FACC Group based in Ried im Innkreis is an Austrian group of year, with growth mainly driven by consumer spending. Invest- companies which specializes in the development, production and ment activity remained strong and exports increased. These maintenance of aircraft components. growth dynamics within the eurozone, moreover, are spreading to more and more member states of the European Union. The product range includes structural components (wing-to-body fairings, fan cowls and composite components for engines, wing Despite the overall improvement of the economic climate, risks parts and wingtips) as well as components for aircraft interiors such as rising protectionism in world trade still remain a threat (overhead stowage compartments, cabin linings, service units, in- according to IMF forecasts. The issue of whether Britain and the terior solutions for business jets, cabin retrofit solutions etc.). EU will come to an agreement on the continuation of free trade also remains to be resolved. The exit of the United Kingdom from Due to different applications of the products, three operative seg- the European Union will have a significant impact on London as a ments were created. The Aerostructures segment is responsible financial center and will cause a great deal of uncertainty for the FACC AG – Annual Financial Report 2018/19 | page 1 for the development, production, distribution and repair of struc- 3.2 Initial application of the International Financial Reporting tural components, while the Cabin Interiors segment focuses on Standards IFRS 15 and IFRS 9 the development, production, distribution and repair of interior so- lutions and the Engines & Nacelles segment covers the production, FACC applied IFRS 15, Revenue from Contracts with Customers, distribution and repair of fan cowls. After customer contracts have and IFRS 9, Financial Instruments, for the first time as of 1 March been concluded and the orders processed, the individual orders are 2018, which has resulted in changes in accounting and measure- then manufactured in the Group’s five plants. In addition to the ment methods. FACC applied the modified retrospective method three operative segments, the Group also comprises the central when adopting IFRS 15 and IFRS 9. Comparative information was services Finance and Controlling, Human Resources, Legal, Quality not adjusted under this method. The cumulative effect of the first- Assurance, Purchasing and IT (including Engineering Services). time application of IFRS 15 and of IFRS 9 was recorded as an ad- The central services support the operative segments in fulfilling justment of the opening balances of 1 March 2018. their duties within the framework of a matrix organization 4. DEVELOPMENT OF THE FACC GROUP 2016/17 2017/18 2018/19 in EUR million in EUR million in EUR million Revenues 705.7 747.6 781.6 One-time effects 0.0 5.7 0.0 Of which product revenues 646.1 691.0 700.1 Of which revenues from development services 59.6 56.6 81.5 EBIT (reported) 25.0 60.1 43.6 One-time effects 0.0 15.2 –11.4 EBIT (operating) 25.0 44.9 55.0 EBIT margin (operating) 3.8% 6.0% 7.0% Earnings after taxes 15.2 37.0 30.3 Earnings per share 0.33 0.81 0.66 In the 2018/19 financial year, the FACC Group generated revenues of Revenues from the offsetting of development services remained EUR 781.6 million, which represents an increase of EUR 34.0 million constant at EUR 81.5 million (previous year: EUR 56.6 million). or 4.5% compared to the previous year. Cost of goods sold increased by EUR 58.3 million from EUR 643.0 Revenues from product deliveries increased by 1.3% to EUR 700.1 mil- million to EUR 701.2 million in the 2018/19 financial year. This in- lion. The main drivers of product sales in the 2018/19 financial year crease is related to a higher operative performance as well as cost were the programs for the Airbus A320 family, Airbus A350 XWB, overruns for programs. In relation to sales, this corresponds to an Boeing 787 as well as the Bombardier and Embraer Business Jets. increase from 86% to 90%. All other programs, including all components for the equipment of Rolls-Royce and Pratt & Whitney engines, developed in line with Reported earnings before interest and taxes (EBIT) amounted to FACC management plans and contributed to the Group’s growth. EUR 43.6 million (previous year: EUR 60.1 million) in the past fi- nancial year. Growth was further fueled by the increasing rate ramp-ups for the new major programs of our customers Airbus, Boeing, Bombardier, In the 2018/19 financial year, a negative one-off effect of Embraer and COMAC. The Boeing-737 winglet program, which has EUR 11.4 million resulting from the write-down of unamortized been manufactured exclusively by FACC since 2001, is losing sig- development costs arose in connection with the announcement by nificance after 18 years of series production. Revenues from this Airbus that the delivery of the A380 aircraft would be discontinued project decreased by EUR 17.5 million to EUR 22.5 million in the in 2021. 2018/19 financial year. Call-offs from this project will be gradually further reduced and will cease completely by 2019. The orders re- After taking into account the one-time effect described above, op- ceived in recent years and new winglet programs more than com- erating EBIT (calculated as EBIT plus one-time effects)stands at pensate for the loss of sales, but will be accompanied by a tempo- EUR 55.0 million (comparable value 2017/18: EUR 44.9 million). rary slowdown in growth in the Aerostructures division until 2020/21. FACC AG – Annual Financial Report 2018/19 | page 2 4.1 Financial position and the management of currency and interest rate risks are set down in its treasury principles. It is a basic principle of the Group The main objective of FACC’s financial management is to ensure that its lines of credit are managed at the corporate level by the that the Group has access to adequate liquidity at all times, to Treasury department. avoid financial risks and to guarantee financial flexibility. In order to secure the company’s liquidity and reduce risks, FACC makes use For information on the company’s capacity to raise funds through of various internal and external funding sources with differing ma- authorized and conditional capital and on funding sources, please turities.