Preliminary results for second quarter of 2009 - Active cost and risk management

EBIT was impacted by extraordinary accruals related to restructuring foreign subsidiaries totaling EUR -13 million and by declining sales revenues associated with the difficult market situation totaling EUR -4 million.

Earnings after taxes were impacted when tax loss carryforwards were forfeited because Grenzebach Maschinenbau GmbH's share of KUKA increased to over 25 percent. This had a negative impact of EUR -10 million.

The results for the second quarter 2009 were therefore weaker than expected due to extraordinary charges.

KUKA's preliminary numbers for the second quarter 2009 indicate orders received came in at EUR 253 million and sales revenues at EUR 211 million. Thus orders received were approximately EUR 40 million higher and sales revenues approximately EUR 16 million lower than the comparable figures in the first quarter 2009.

The orders received trend had already been foreshadowed by the German Engineering Federation's (VDMA's) recently published report. Orders received by mechanical engineering companies dropped 46 percent year-over-year between January and May 2009, while in the robotics and automation sector, they plunged an even greater 55 percent.

Active cost management

KUKA AG's Executive Board reacted early to the impending weakened business environment and had already initiated a multilevel program to cut the group's personnel and material costs in the fourth quarter of 2008. During the second quarter of 2009 just ended, the cost cutting measures focused on adjusting capacity by short time work, postponing pending wage increases and vacation bonuses and obtaining salary concessions from executive board members and managers. As of the end of the first half year of 2009, the cost cutting program is on track.

KUKA reorganizes business in France and closes loss making locations

Following the cost reduction programs already implemented, the business in France is to be reorganized. Proposals include closing KUKA Systems in Tours and Montigny Le Bretonneux near Paris, which would affect 144 employees. A severance agreement is to be put into place in coordination with the works councils and union representatives.

The local resources had already been adjusted to suit the declining demand in previous years. Ongoing losses associated with these activities and lack of a positive medium-term outlook for the automotive business made reorganization necessary (see also press release dated July 20, 2009: KUKA reorganizes business in France).

Write-downs associated with bankrupt US automakers avoided

In addition to adjusting operating capacities, the primary goal during the first half year was to secure the company's liquidity. Here the focus was on the insolvent carmakers in the United States. By working closely with the persons responsible in North America, KUKA was able to reduce the outstanding receivables associated with Chrysler and General Motors, which totaled EUR 82 million as of September 30, 2009 and EUR 44 million on March 31, 2009, to only EUR 10 million as of the end of June 2009. 

In addition, the new Chrysler Group that emerged from the bankruptcy proceedings took over the existing production contracts with KUKA Toledo Production Operations (KTPO) without making any changes. As a result, the car body assembly facility for the Jeep Wrangler, which had been idle since the beginning of May, was able to restart operations on June 29. As a result, there was no need for any write-downs on this plant, which is owned by KUKA.

2009 Outlook

For the year 2009 overall, KUKA expects a breakeven operating result (EBIT) and a breakeven free cash flow before extraordinary restructuring costs. However, taking into consideration the extraordinary restructuring costs, KUKA expects that the operating result (EBIT) and free cash flow will be well into negative territory.

Extraordinary restructuring measures related to operations in Germany are currently not anticipated in the second half of 2009.