Interim Report as of September 30, 2010

• Orders received climb by 28.0 percent to EUR 862.2 million in 9M/10; Robotics division sets another record in Q3/10 with EUR 137.7 million
• Sales revenues up by 15.0 percent to EUR 754.0 million in 9M/10 (Q3/10: 25.8 percent)
• EBIT margin rises to 1.8 percent in 9M/10, and 3.0 percent in Q3/10
• Guidance 2010 confirmed

KUKA Group first nine months 2010 business performance

The general global economic recovery led to strong demand for capital goods in the current financial year, especially from Asia and the Americas and particularly from the BRIC countries. As expected, KUKA Group year-over-year financial results recovered accordingly. Orders received improved considerably as the economy picked up. They climbed to EUR 862.2 million in the first nine months of 2010, which represents an increase of 28.0 percent compared to the EUR 673.8 million reported in 9M/09. This resulted in further increases compared to the 17.3 percent growth achieved in the first six months of 2010.

The Robotics division's performance was particularly satisfying, which benefited from strong demand led by the automotive industry. Orders received in this division during the first nine months totaled EUR 384.1 million, which compares to EUR 227.1 million in 2009; an increase of 69.1 percent. With these numbers Robotics once again reached pre-crisis levels while simultaneously setting an all-time high for the first nine months of a year. Orders received in the Systems division also continued to grow: Systems was able to win orders worth EUR 524.6 million in 9M/10. This is an increase of 11.9 percent over last year's EUR 468.8 million in 9M/09.

The positive development in orders received was even stronger in the third quarter of 2010 than the previous quarters. The figure achieved at the Group level was EUR 314.5 million, which represents 52.0 percent growth compared to the EUR 206.9 million in Q3/09. After the record quarter Q2/10, the Robotics division reported a strong third quarter that ended with another all-time high: EUR 137.7 million in Q3/10. Compared to the weak prior year's quarter (Q3/09: EUR 70.5 million), the division was able to nearly double its orders in the quarter just ended (+95.3 percent), while automotive sector orders even tripled (+206.1 percent). General industry (+53.8 percent) and service (+49.4 percent) also experienced a considerable increase in orders received. The Systems division's orders received rose from EUR 146.3 million in Q3/09 to EUR 195.6 million in Q3/10; an increase of 33.7 percent. As expected, the upturn has taken some time to begin to reach this division. In view of a more balanced regional sales mix, the large orders from Thailand and Brazil stand out.

In line with significantly rising orders received, KUKA Group sales revenues also continued to increase, rising 15.0 percent in the first nine months from EUR 655.4 million last year to EUR 754.0 million in the current year. The Robotics division, more quickly impacted by changes in the economic cycle, once again made greater gains. Sales revenues in this division rose from EUR 244.0 million in 2009 to EUR 317.6 million in 2010; an increase of 30.2 percent. The Systems division posted a 9.6 percent increase in sales revenues in the first nine months, which came in at EUR 476.0 million compared to the previous year's EUR 434.4 million.

The development of sales revenues in the third quarter of 2010 was similar. Sales revenues generated at the Group level grew by 25.8 percent to EUR 273.9 million from EUR 217.7 million in Q3/09. Sales revenues in the Robotics division in the current year total EUR 118.6 million, up more than fifty percent (58.1 percent) from EUR 75.0 million in Q3/09. In the same period, the Systems division posted sales revenues in the amount of EUR 172.1 million, a year-over-year plus of 13.5 percent compared to the EUR 151.6 million in Q3/09.

At 1.14, KUKA Group's book to bill ratio was unchanged compared to the first half of 2010 and was once again well above 1.

The increase in orders received correspondingly resulted in a higher order backlog. KUKA Group's order backlog climbed 7.2 percent from EUR 630.9 million at the end of June to EUR 676.3 million at the end of September, which represents an increase of 19.7 percent over the prior year's result at the end of September 2009. Within a period of one year, the order backlog in the Robotics division doubled, whereby longer supplier lead times due to increased orders are also responsible for the currently high order backlog. The Systems division's workload also increased, posting at EUR 527.6 million on September 30 of this year compared to EUR 489.5 million September 30, 2009. This ensures good capacity utilization for KUKA Group in both divisions well into 2011.

Thanks to the expanding sales volume and the effectively implemented measures to optimize the cost structure, KUKA Group's earnings before interest and taxes (EBIT) improved during the first nine months of the year and reached EUR 13.3 million. This includes special expenditures totaling EUR 4.4 million, primarily related to the holding company. In the same period the previous year, losses of EUR -28.0 million were reported as a result of the generally difficult business situation and because of special charges. Both divisions were able to generate positive results this financial year. The Robotics division achieved an EBIT of EUR 13.4 million in the first nine months of 2010 versus EUR -6.5 million in 9M/09, which represents an EBIT margin of 4.2 percent. The Systems division posted an EBIT of EUR 12.5 million in the same period compared to EUR -15.1 million in 9M/09, resulting in an EBIT margin of 2.6 percent.

KUKA Group earnings before interest and taxes in the third quarter of 2010 were EUR 8.3 million versus EUR -5.1 million in Q3/09. The Robotics division generated an EBIT of EUR 7.2 million in the same period compared to the EUR -4.5 million posted in Q3/09; an EBIT margin of 6.1 percent. The Systems division's earnings contribution was EUR 4.9 million versus EUR 0.3 million in Q3/09, which resulted in an EBIT margin of 2.8 percent.

KUKA Group's operating profit is no longer the same as EBIT as a result of changes to the accounting rules (IAS 23R effect), as financing costs for long-term contracts must now be reported under manufacturing costs. These costs totaling EUR 3.3 million for the first nine months of 2010 are included in operating profit and not in EBIT. Operating profit in the first nine months of the current financial year is thus EUR 10.0 million, which compares to EUR -28.2 million in 9M/09.

The ongoing cost reduction program aims to generate EUR 65 to 70 million in recurring savings. Of this amount, savings of EUR 57.6 have already been achieved for fiscal 2009 and the first nine months of 2010 compared to the 2008 financial year. After nine months, 80 percent of the target has been reached and is therefore at the top end of the scheduled time frame.

The measures initiated in conjunction with the cost-cutting program comprise a significant reduction of structural and personnel costs by improving processes and organizational structures throughout the Group long term. This is apparent in the substantially lower overhead costs. For example, the entire process from order acceptance to customer payment has been reorganized and the interface between product management and product development redesigned. In addition, the purchasing functions have been restructured and the purchasing processes revised. Significant advances have also been made thanks to design-to-cost measures in the divisions. 

Outlook

The 2010 financial year is one of transformation for KUKA. Continued cost structure optimization and further development of the corporate strategy will be the basis for generating sustainable profitable growth.

Based on the business growth in the first nine months of 2010, the Group is expecting to surpass the threshold of EUR 1 billion in sales in 2010 overall, provided general conditions remain stable. As a result, EBIT is expected to come in at between EUR 20 and 30 million, although currently it is estimated that restructuring expenses of about EUR 10 million will have to be deducted from this result.

Dr. Till Reuter, CEO of KUKA AG, underscores, “KUKA's future growth will come not only from emerging countries but also from new products such as the new generation of industrial robots and new customer segments. We have also set the organizational course and strengthened our focus to push forward with this growth strategy in the last months.”

KUKA Group, Key figures