Ad hoc announcement: Wincor Nixdorf specifies business outlook: significant reduction in operating profit – extensive restructuring program initiated
On completing the first two quarters of fiscal 2011/2012, Wincor Nixdorf AG has further specified its prospects for the financial year as a whole. While the company anticipates that net sales will develop at a level comparable to that achieved in the previous year (€2,328 million in FY 2010/2011) operating profit (EBITA) is expected to contract significantly to around €100 million (prev. year: €162 million). This takes into account costs of approx. €40 million attributable to a restructuring program already initiated by the company.
The earnings outlook has been revised downwards primarily as a result of the continued and substantial decline in net sales generated within the Banking segment, which has been accompanied by significant pressure on margins in the Hardware business. The contraction in business was attributable, firstly, to subdued investment spending still evident throughout the western European banking market in particular, as a direct result of the sovereign debt crisis. Secondly, net sales were adversely affected by the fact that Banking business in the emerging countries failed to develop to the extent originally anticipated and that the solutions portfolio tailored specifically to this business has yet to be taken forward to the appropriate level. Primarily as a result of these developments in the Banking business, net sales attributable to Hardware declined by 13% at Group level compared to the same period a year ago. By contrast, net sales from the Software/Services business rose by 5%.
In view of this performance, the company has initiated a process of strategic realignment with regard to its activities, launching an extensive restructuring program that is currently being implemented. Among other measures, the staff in western Europe in particular is to be downsized by more than five hundred; Germany will account for around half of this figure. The aim of restructuring is to extend and substantially strengthen global competitiveness, as well as targeting business activities at the emerging markets faster and in a more pronounced manner. To this end, Wincor Nixdorf will significantly tighten the management, support and administrative functions of its international business organization. For instance, the resources of several countries are to be brought together as part of new, larger units, while at the same time the structures of managerial responsibility for the global Banking and Retail segments are to be sharpened substantially.
In parallel, the company will relocate to the Asia/Pacific region key capacities required for future growth in the emerging markets. As part of this process, development activities in this region are to be further expanded, while those located in Europe are to be scaled back. In taking this route, the company will be looking to develop hardware for the emerging markets in particular, as well as establishing an appropriately targeted portfolio of products and services as soon as possible. Additionally, in future a larger proportion of products within the existing portfolio is to be manufactured in China, while at the same time production capacities in Germany and Singapore are to be adjusted accordingly.
The downsizing measures are to be implemented in two stages, with one half of the staff reduction taking place in the current 2011/2012 fiscal year and the other half in the coming 2012/2013 fiscal year. As regards the total headcount of those employed within the Group, there are likely to be contrary effects due to the recruitment of personnel in areas of significant growth, such as Software/Services, but also in growth regions.
At the beginning of the current fiscal year, Wincor Nixdorf had already announced that it could not rule out entirely a significant contraction in operating profit compared to the previous fiscal year. In view of the uncertainties within the European banking market in particular, the company had given a skeptical assessment of the market conditions for business development and – depending on net sales performance – had also outlined the possibility of a significant decline in earnings. The company considers the latest progression of business over the course of the first two quarters as confirmation of this assessment.
In the first half of fiscal 2011/2012, net sales of the Wincor Nixdorf Group declined by 4% to €1,156 million (6 months 2010/2011 [referred to hereafter as "prev. year"]: €1,208 million). In the same period, operating profit stood at €45 million and was thus down 49% on the previous year's figure for this period (prev. year: €88 million). The EBITA margin fell by 3.4 percentage points to 3.9% (prev. year: 7.3%). Profit for the first six months of the fiscal year declined to €27 million, thus contracting by 53% year on year (prev. year: €58 million). All figures mentioned with regard to the first half of the fiscal year are based on preliminary figures – the detailed financial results for the first half of the fiscal year are to be published on April 26, 2012.
Preliminary figures (PDF)
Click here for the Half-Year Interim Report for Fiscal Year 2011/2012.