Demand from European markets was strong throughout 2015 across most sectors. Automotive demand, in particular, boosted volume growth for tire cord and other steel wire applications in the region.
Bekaert’s activities in EMEA delivered excellent results driven by strong volume growth and a favorable product mix. The successful integration of the steel cord plants acquired from Pirelli in Italy, Romania and Turkey accounted for 14% growth and strengthened EMEA’s solid, double digit profit base. The company’s building products platform achieved firm growth and most other industrial steel wire activities performed at the strong level of 2014. Bekaert achieved 22% REBIT increase for the region and lifted profit margins to a record high of 11.3%.
Non-recurring items amounted to € +6 million and mainly related to the gain on the disposal of the European activities of the divested Carding Solutions business, partially offset by restructuring costs.
Capital expenditure (PP&E) amounted to € 48 million and included capacity expansions and equipment upgrades, particularly in Slovakia and Belgium.
Bekaert anticipates continued solid demand and performance in most European markets, but has limited visibility on evolutions in the oil and gas sector where demand has started to slow down over the past months.
Bekaert’s activities in North America recorded a top line growth of 7%. Currency effects drove up sales by 16% while volumes declined by 9% due to the volume loss from the plant closure in Surrey, Canada (end of first quarter 2014) and the fire damage in Rome, Georgia (US) (November 2014). Moreover, weaknesses in agricultural and industrial steel wire markets continued to weigh on the segment’s performance. The impact of lower wire rod prices, passed on to our customers, was offset by a better product-mix. Profit margins have not yet reached the desired levels due to a low volume base and competitive price pressure from imports.
The non-recurring items (€ +14 million) mainly reflect the final insurance settlement proceeds from the Rome fire.
Capital expenditure (PP&E) amounted to € 55 million and related mainly to the reconstruction of the Rome plant and investments in the ropes and tire cord activities.
Bekaert projects a better performance in 2016 as we start to see improvements from actions put in place to raise our competitiveness in target markets.
Bekaert’s consolidated sales in Latin America increased by +21% thanks to the significant impact from acquisitions (+15%) and favorable currency effects (+7%). An improved price-mix (+4%) fully offset the impact of passed-on lower raw material prices (-4%). Acquisitive growth included: the addition of the former Pirelli tire cord plant in Sumaré, Brazil (from the start of 2015 onwards); the consolidation of the Bekaert Cimaf ropes plant in Brazil; and the wire business acquisition from ArcelorMittal in Costa Rica (both at the end of April 2014).
The impact of acquisitions, an improved price-mix and the effects of cost savings drove up profitability and cash generation in the region. REBIT and EBITDA increased by more than 75% in comparison with 2014. The EBITDA margin accelerated during the year, reaching 10% on sales in the second half of 2015.
Bekaert invested € 24 million in property, plant and equipment across the region.
Bekaert’s combined sales growth was limited due to the significant devaluation of the Brazilian real. The actual performance of our joint ventures in Brazil outperformed the weak economic conditions in the country.
Bekaert perceives increased instability in the whole region with a weakening business climate in Brazil, Peru and Ecuador. In Venezuela, we have been forced to shut down operations in February 2016 due to raw material shortage. Based on prudence principles, Bekaert impaired its Venezuelan assets already in 2010 and has applied inflation accounting and valuation at the corresponding economic exchange rate since 2013 onwards. Notwithstanding the economic evolutions in Latin America, Bekaert expects to maintain the benefits from its strong market positions, sustained cost savings and improved business portfolio.
Bekaert achieved 12% sales growth in Asia Pacific. This was the result of favorable exchange rate movements (+14%) and the net effect of acquisitions and divestments (+6%), partly offset by lower volumes (-3%) from the weak start of the year and by lower raw material prices (-5%). The impact of price erosion was neutralized by a better product mix.
Bekaert’s activities in Asia Pacific delivered strong margin growth thanks to cost control and a significantly improved business portfolio, which was the result of: firm tire cord sales growth in India and Indonesia; a growing share of high value-adding products in our sales portfolio; divestments and acquisitions; and the first effects of a turnaround in our steel wire businesses in South East Asia.
Bekaert improved its portfolio by growing the share of high-value adding tire cord and sawing wire products in China. We regained market share in the Chinese tire cord market and kept pace with growing demand in the solar sector. Sawing wire accounted for more than 10% of Bekaert’s sales in Asia Pacific in 2015.
Divestments included the Asian activities of the carding solutions business (China, India) and the exit from stainless steel wire activities (India). At year-end 2015, Bekaert also deconsolidated the loss-generating entities in Xinyu (China) to reflect the change in control and the ongoing negotiations to exit the business. The positive REBIT impact from the deconsolidation will be visible in Bekaert’s 2016 financial statements.
Bekaert acquired over the course of 2015 the former Pirelli steel cord plant in China, the former Arrium ropes plant in Australia, and the remaining shares held by business partners in the Dramix® plant in Shanghai, the Jiangyin-based steel wire plant in China, the Dramix® sales and distribution activity in Australia/New Zealand, and the Malaysian steel wire and rope activities.
These actions and achievements drove profit levels significantly up in Asia Pacific. EBITDA increased by 25% to€ 200 million in 2015, with an EBITDA margin of almost 20% on sales in the second half of the year.
The non-recurring items (€ -11 million) mainly related to restructuring costs and asset impairments, partially offset by gains on disposals in carding solutions and the deconsolidation of the Xinyu activities.
Bekaert invested significantly across the region and recorded a total of € 50 million investments in PP&E in 2015, among which tire cord expansion investments in India and Indonesia.
Bekaert anticipates continued highly competitive market conditions in the region. We project our ongoing efforts to enhance the product portfolio and manufacturing cost base in the region, to add revenue and profitability in 2016.