VDL sees turnover drop and profits rise during the first half of 2019
VDL Groep's turnover in the first half of 2019 was, in line with expectations, slightly lower than in the same period of last year. The result was higher compared to the first two quarters of 2018. The main causes for the decline in turnover are that VDL is building fewer cars this year than last year and the decline in demand in the semiconductor industry. VDL is expecting the economic growth to continue to level out during the second half of the year. Nevertheless, the industrial family business in Eindhoven has confidence in the rest of 2019.
The combined turnover after the first six months of 2019 amounted to 2.9 billion euros. This is a decrease of about 5 percent compared to the first half of 2018 (3.1 billion euros). After the first two quarters, the operational result increased by 7 million euros compared to the same period last year, to 76 million euros. An important explanation for this is that more projects have been completed. The Buses & Coaches division managed to improve its result, despite it still running at a loss. The total order book of VDL Groep (excluding the Car Assembly division) grew by more than 22 percent in one year, from 957 million to 1,171 million euros in week 26 of this year. The number of employees has fallen by 199 since the start of the year, to 16,655 staff.
“We can look back with satisfaction at the last six months”, Willem van der Leegte, President and CEO of VDL Groep, explains. “Both turnover and results are developing in line with expectations. Based on solid foundations, such as our order book, we remain full of confidence. We are, however, also wary of changes in the short term as a result of economic and political developments.”
Turnover for this division has fallen slightly from 668 million euros last year to 649 million euros after the first half of 2019. This decrease is mainly due to the weakening demand in the semiconductor industry. Because of the breadth of our activities, we have been able to limit the decline in turnover. The Subcontracting Division's order portfolio is also showing a decline: from 460 million euros in week 26 of 2018 to 411 million euros now. This division has been profitable in the first six months.
As previously announced, the number of cars to be built by VDL Nedcar is lower than in 2018. After two quarters, turnover stands at 1.620 million euros. A year ago, that figure was 1.882 million euros. Due to emissions standards, global trade relations and disruptive developments, the car industry is going through a turbulent period. As we are an independent car manufacturer and move with market developments, this naturally has an impact.
In addition, at VDL Nedcar we are exploring new avenues for the future. In order to guarantee continued employment at VDL Nedcar, we are speaking with several interested parties that may want to have cars built by VDL. With this in mind, we have purchased properties adjacent to our site and have started procedures together with the province of Limburg that will enable us to expand our assembly plant, should customer projects give cause to do so. Naturally, the interests of neighbouring businesses and residents will be respected. VDL Nedcar, which employs around 5,600 staff, has shown a profit over the first six months of this year. Our partner BMW Group also recently won a JD Power Award for the MINI Cooper and the MINI Countryman. The award is based on the results of a driver satisfaction survey carried out by the American institute JD Power. This prize is a fantastic compliment for our employees.
The turnover of this division has increased by more than 20 percent, from 256 million euros in the first half year of 2018 to 308 million euros today. The order portfolio has increased, from 281 million euros in week 26 of 2018 to 405 million euros now. We are witnessing a very swift transition over to electric public transport solutions. This year alone, we will already deliver around 500 electric buses. The electric buses manufactured by VDL that are on the European roads have already accumulated over 35 million ‘clean’ kilometres. More than 300 electric VDL buses are now driving in the Netherlands and are helping the environment by saving over 20,000 tonnes of CO2 emissions each year. To put that into perspective: emissions from one tonne of CO2 is equal to seven flights from Amsterdam to Paris.
In financial terms, the loss of VDL Bus & Coach is successfully being reduced. The expectation is that we will make Buses profitable this year. In addition, investments in innovative and sustainable mobility solutions remain at a high level. The modular platform, initially developed for bus transport, will also be rolled out to other sustainable transport concepts.
Our companies in the Finished Products division together generated sales of 346 million euros in the first half of 2019, compared with 272 million euros in the same period in 2018. The order portfolio has increased further, from 217 million euros in week 26 of 2018 to 355 million euros in mid-2019. The Finished Products division closed the first six months with a profit.
VDL Groep is expecting the economic growth to continue to level out during the second half of the year. In Germany, for example, which is our main market, sources are alluding to a possible recession in the third quarter. What's more, due to global trade conflicts, we have seen consumer trust in China - a key indicator - fall significantly. This has consequences for the sale of luxury European products, such as cars and everything with a chip inside. The automotive industry and the semiconductor industry are the two largest markets that VDL operates in. Brexit negotiations will come to a climax in the autumn, and Italy is in the midst of a political and economic crisis. Things don’t look like they are due to calm down for a while on the international political stage. On the domestic front, the new collective labour agreement for the Metal and Electrical Engineering Industry has led to a clear increase in costs, resulting in concerns about the competitive position of the Dutch high-grade manufacturing industry in the medium term. These concerns are further fuelled by the fact that the supply of technically trained employees does not yet match the demand. Nevertheless, VDL's well-filled order book offers confidence. VDL Groep is on track to achieve the previously announced annual turnover target of approximately 5.7 billion euros in 2019. The total result for 2019 is expected to be lower than last year's result.