Summary of financial review

Sales and financial review


Compared with the exceptional year of 2010, Bekaert's consolidated sales¹  increased by 2.4%. This was the result of continued strong growth in the first half of 2011 and a decline in top line sales in the second half, mainly due to the dramatic demand and price evolution in the sawing wire business.
Solid volumes in nearly all activity platforms except for sawing wire, drove an organic consolidated sales growth of 5.1%. The net impact of acquisitions and divestments (-1.1%) and fluctuations in exchange rates (-1.6%) had an adverse effect on the sales growth. The combined sales² increase was 4.9% from organic growth. Both the net movement in acquisitions and divestments (-0.8%) and currency movements (-1.2%) were slightly negative.

Financial review


The Board of Directors will propose that the General Meeting of Shareholders on 9 May 2012 approve the distribution of a gross dividend of € 0.5 per share in addition to the interim dividend of € 0.67 which became payable as of 17 October 2011. The total gross dividend would thus amount to € 1.170, compared with € 1.667 last year. The dividend of € 0.5 will, upon approval by the General Meeting of Shareholders, become payable as of 16 May 2012.

Financial results

Bekaert achieved an operating result before non-recurring items (REBIT) of € 281 million. This equates to a REBIT margin on sales of 8.4%. Non-recurring expenses amounted to € 12.4 million and mainly related to restructuring costs in China and provisions for environmental liabilities in Belgium. Including non-recurring items, EBIT was € 268 million, representing an EBIT margin on sales of 8.0%. EBITDA reached € 476 million, representing an EBITDA margin on sales of 14.2%.

Selling and administrative expenses increased mainly as a result of bad debt provisions. Research and development expenses grew by 14% in support of Bekaert's innovation strategy.

Interest income and expenses amounted to € 66 million (versus
€ 50 million) due to a higher average net debt. Other financial income and expenses amounted to € 47 million (versus € 18 million), mainly due to the capital gain on the divested Specialty Films activities and exchange rate gains on dividends from China.

Taxation on profit amounted to € 68 million at an effective tax rate comparable to last year (27%).
The share in the result of joint ventures and associated companies amounted to € 25 million, which is below the € 36 million of 2010. The results in Brazil and Chile were negatively impacted by price adjustments reflecting our defense against Asian imports.


The result for the period thus reached € 207 million. After non-controlling interests (€ 15 million), the result for the period attributable to the Group was € 193 million, compared with € 368 million in 2010. Earnings per share amounted to € 3.27 (down from € 6.21 in 2010).

Balance sheet

As at 31 December 2011, shareholders’ equity represented 42.4% of total assets. Net debt increased to € 860 million, mainly due to a higher working capital level and continued investments. Average working capital on sales increased to 28%, from 21% as at year-end 2010. The gearing ratio (net debt to equity) was 48.7%, in line with the company’s long-term target of 50%.

¹ All comparisons are made relative to the financial year 2010.
² Combined sales are sales of consolidated companies plus 100% of sales of joint ventures and associates after intercompany elimination


Cash flow statement

Cash from operating activities amounted to € 106 million, (2010:
€ 342 million). Operating working capital increased by € 200 million, mainly due to more difficult business conditions in China. Cash flow attributable to investing activities amounted to € 185 million, of which € 267 million related to capital expenditure in, amongst others, Asia Pacific, Slovakia, Russia and Belgium. This was partly offset by € 101 million proceeds from divestments (Specialty Films activities mainly).

Investment update

Capital expenditures reached € 278 million of which € 267 million in property, plant and equipment, mainly in Asia-Pacific and EMEA.
Bekaert further accelerated the investments in research and development, totaling € 90 million in 2011. These R&D expenses mainly applied to the activities of the international technology centers in Deerlijk (Belgium) and Jiangyin (China). As a result of the global measures to adapt the business footprint in sawing wire, Bekaert intends to adjust as from 2012 its resources and development priorities in the technology center in Deerlijk and in the Engineering plant in Ingelmunster. More details about the global realignment program announced
on 2 February 2012 can be found in the respective press release .

In the past months, Bekaert announced several initiatives enabling further growth:
Bekaert announced on 15 November 2011 that it would issue, through NV Bekaert SA, a dual tranche bond: one tranche with a tenor of 5 years and one tranche with a tenor of 8 years, for an expected total minimum amount of € 200 million in the form of a public offering in Belgium and the Grand Duchy of Luxembourg. As a result of major success of this issue, the subscription period was terminated on 17 November 2011. The aggregate nominal amount of bonds was fixed at € 400 million. With this bond issue, Bekaert aims to achieve an optimal global balance between short-term and long-term debt, as well as between bank financing and financing through the capital markets.

On 15 December 2011, Bekaert and Xinyu Iron & Steel Co., Ltd (Xinsteel), a Xinyu-based (Jiangxi, China) iron and steel company, announced the successful closing of their partnership transaction by which Bekaert acquires 50% of the spring wire and Aluclad activities of Xinsteel in Xinyu, Jiangxi Province, China. These activities represent an annual turnover of approximately CNY 500 million. The joint venture is accounted for in Bekaert’s financial records using the equity accounting method, as of 1 December 2011.

On 22 December 2011, Bekaert and its Chilean partners signed an agreement to restructure the shareholding of their joint venture operations in Chile, Peru and Canada. As a consequence, Bekaert becomes the principal shareholder (52%) in the partnership, and will consolidate the results of all respective entities as of 2012 in the Group’s financial statements.


On 27 January 2012, Bekaert and Element Partners, a Pennsylvania, US-based equity fund, signed an agreement regarding the sale of Bekaert’s Industrial Coatings activities to Element Partners. The transaction covers the production facilities in Deinze (Belgium) and Jiangyin (China), the maintenance activity at Spring Green (US), and the respective sales organization. The deal involves all 130 employees currently working in the Industrial Coatings platform. The contemplated divestment of the Industrial Coatings activities is a confirmation of Bekaert's strategic focus on realizing sustainable profitable growth in activities related to the
company's core technological competences: advanced metal transformation and coatings.

No purchases or cancellations of shares took place in 2011. The total number of shares booked as treasury shares as at 31 December 2011 amounts to 939 700.

Sales by segment


Bekaert's activity platforms performed well in most EMEA markets, with automotive sales recording solid growth in comparison to 2010. Sales declined in the last quarter of 2011 due to substantially lower demand in solar energy markets and strong price pressure in overall highly competitive markets. The usual seasonality effects of the last quarter further impacted the segment’s performance toward year-end.

While the price evolution of steel-based raw materials added to the segment’s revenues and profit in the first half of the year, it created an adverse effect in the second half.

The usual start-up costs associated with manufacturing expansions in Slovakia and Russia and the very weak capacity utilization and high costs incurred at the Belgian sawing wire and stainless steel wire activities, added to the profit drop for the segment in the second half of the year.


Solid demand in most sectors, except the depressed construction market and overall weaker business in agriculture, led to increased sales in North America. Normal seasonality as well as extended year-end holiday closures at customers’ sites is reflected in the lower activity levels during the last quarter.

The 2011 organic sales growth versus 2010 was to a large extent offset by the impact of disposed activities (-6% related to Specialty Films, Diamond-like carbon coatings and Composites) and unfavorable exchange rates (-5%). Profitability levels were heavily impacted in the second half of the year due to lower capacity utilization, yearend shut-downs for maintenance activities and declining steel-based raw materials prices.


The Bekaert subsidiaries in Latin America continued to deliver robust sales growth throughout the year. Sales volumes were strong, particularly in Venezuela and Peru. Bekaert also succeeded in translating cost increases into its selling prices, while currency movements had an adverse effect of -4.5%.

Combined revenues were up 8% in Latin America. Strong local currencies forced our joint ventures to adjust prices downward to successfully avert competitive imports. This affected the price levels and margins of the Brazilian activities mainly. In order to recover profitability, a cost structure improvement project was installed including a thorough restructuring in all Brazilian plants.

Asia Pacific

The quarterly sales trend in Asia-Pacific has been negative throughout 2011, despite strong growth in India and Indonesia.

The segment’s overall volume increase over 2010 was more than offset by a negative product mix and an overall growth slowdown in China. Showing zero growth, the Chinese truck tire market is one example of China’s rapidly maturing industrial base with limited growth perspectives in a highly competitive environment.
In addition, the drastic change of the sawing wire business in the second half of 2011 drove sales and profits in China considerably down from last year. Initiatives taken in December 2011 to rightsize Bekaert’s sawing wire manufacturing footprint there are reflected in non-recurring items.

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