||€ 1 136 million
|€ 1 086 million
|Capital expenditures (PP&E):
||€ 50 million
||€ 1 269 million
Economic environment in 2015
China's economy grew at its slowest pace in two decades in 2015. Structural changes in the economy, subdued global demand, increased trade barriers against Chinese imports and domestic challenges such as the vast overcapacity in several sectors, and the high debt burdens drove GDP growth down below 7%.
Demand from tire markets was very low at the beginning of 2015 but demand from passenger tire markets recovered at the end of the first quarter. Structural domestic overcapacity and commoditization of truck tire reinforcement solutions were the reasons for continued price erosion in China.
Demand from solar markets in China grew steadily throughout 2015. Demand for new-generation sawing wire solutions such as structured wire, gained ground in the market.
Economic growth in India moved up firmly to more than 7%. Domestic industrial demand picked up as a result of government reforms implemented to strengthen the economy. Bekaert’s tire cord activities in India recorded solid growth by gaining market share in a rebounding market environment.
South East Asia continued its solid growth trend in most countries, although the region’s largest economy in Indonesia, grew at the slowest pace in years (below 5%). The manufacturing industry remains, however, one of the strongest contributors to the GDP of the country. Our activities in Indonesia included an invested in additional production capacity to capture the growth.
Bekaert is present in Asia Pacific with manufacturing and development centers in China, India, Indonesia, Malaysia, Japan and Australia.
Our activity performance
Bekaert achieved 12% sales growth in Asia Pacific. This was the result of favorable exchange rate movements and the net effect of acquisitions and divestments, partly offset by lower volumes from the years weak start and by lower raw material prices which we passed on to our customers. The impact of price erosion in Chinese tire markets was neutralized by a better product mix.
Our 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.
Our portfolio improvement came from increasing 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.
Furthermore, our business portfolio also improved as a result of divesting some businesses with low or negative margins. We divested the carding solutions business (with entities in China and India) and exited from the stainless steel wire market (with an entity in 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.
Our 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.
We also invested significantly across the region, recording a total of € 50 million investments in PP&E in 2015, with tire cord expansion investments in India and Indonesia.
Growing our global presence in Ropes
Bekaert announced, at the beginning of 2015, the acquisition of the wire rope business of Arrium Ltd in Newcastle, Australia. The integration of the Australian ropes activities have enhanced Bekaert's growth strategy in steel wire ropes in general and will enable the Group to take a leading global market position in mining ropes in particular. The acquired business adds about € 40 million to Bekaert's consolidated sales on an annual basis and was integrated as of 1 March 2015.
At the end of 2015 Bekaert and Ontario Teachers’ Pension Plan announced the intended merger of the global ropes and advanced cords businesses of Bekaert and Bridon. The transaction is subject to customary closing conditions including regulatory approvals. In Asia Bekaert will enter, upon closing, the advanced cords businesses of Bekaert in Shenyang (China). The commercialization of the ropes activities integrated in Bekaert’s wire plants in Qingdao (China) and Shah Alam (Malaysia) will also be managed by the new group. Ontario Teachers’ Pension Plan will then contribute its entire ownership interest in Bridon to the Bridon Bekaert Ropes Group, which includes the manufacturing facilities in Hangzhou (China) and Jakarta (Indonesia).