Revenue growth in Q3 2017 of 6% to EUR 116.7 million (Q3 2016: EUR 110.1 million)
- Normalised EBITA increases by 25% to EUR 9.9 million in Q3 2017 (Q3 2016: EUR 7.9 million)
- Normalised EBITA margin of 8.5% in Q3 2017, up from 7.2% in Q3 2016
- Normalised EBITA margin for the first nine months of 2017 of 8.8%, up from 7.2% in the first nine months of 2016
- Continuing simplification measures resulted in one-off costs of EUR 1.7 million in the third quarter, with corresponding annualised savings of EUR 1.4 million. Expectation full year one-off costs and savings increased to EUR 4.5 million and EUR 4.0 million respectively

Key figures
(x EUR 1 million unless otherwise stated)Q3 20171Q3 20162Difference in %Revenue116.7110.16%EBITDA14.812.915%EBITA9.97.925%Net profit5.94.920%ROS8.5%7.2%(x EUR 1 million unless otherwise stated)YTD 20171YTD 20162Difference in %Revenue352.3335.55%EBITDA46.239.417%EBITA31.024.228%Net profit19.615.031%ROS8.8%7.2%1 Normalised for YTD 2017 non-recurring restructuring costs of EUR 3.7 million (after tax EUR 2.7 million): Q1 2017: EUR 1.2 million (after tax EUR 0.9 million); Q2 2017: EUR 0.8 million (after tax EUR 0.6 million); Q3 2017: EUR 1.7 million (after tax EUR 1.2 million)2 Normalised for YTD 2016 non-recurring restructuring costs of EUR 4.0 million (after tax EUR 3.2 million): Q1 2016: EUR 2.7 million (after tax EUR 2.1 million); Q2 2016: EUR 0.7 million (after tax EUR 0.7 million); Q3 2016: EUR 0.6 million (after tax EUR 0.4 million)

Joep van Beurden, Kendrion CEO:
"Kendrion continued its good performance of the first half year into the third quarter of 2017. We grew our revenue by a solid 6% and EBITA by 25% compared to Q3 2016, as favourable market conditions combined with the more direct and streamlined way in which we run our operations. During the quarter, we signed a letter of intent with a large customer to start producing permanent magnet brakes for industrial robots in our new facility in Suzhou, China. We expect to finalise the first phase of that investment in Q1 2019. We are on track to open our new facility in Suzhou in December 2017.
We expect that the implementation of our strategy of "Simplify, Focus, Grow" will continue to bring us benefits. We are ahead of schedule in terms of the anticipated savings for this year and we expect to implement additional simplification measures across our business units over the next six months.
The global economic outlook remains positive with favourable order patterns across our business but especially in the Industrial business units. We look at the future with confidence, based on our strong business fundamentals, broad R&D capabilities, close customer relationships and growing project pipeline. We reiterate our expectation to grow annual revenue by an average of 5% and deliver an EBITA margin of 10% as from the end of 2018."

Progress in strategy
Kendrion's strategy for 2016-2018, as announced in May 2016, comprises three pillars: "Simplify, Focus, Grow". The primary objective is to deliver sustainable profitable growth for the business in the medium to long term.
We have made good progress since May 2016 on implementing the strategy and the related simplification measures. Following the integration of our operations in China, we are now ready to further expand our production capacity and will open a new facility in Suzhou. The official opening of the new facility will take place in December 2017 and production is expected to commence in Q1 2018.
The cost reductions and restructuring measures implemented in Q3 resulted in one-off costs of EUR 1.7 million, bringing the total for the first nine months to EUR 3.7 million, with corresponding savings on an annualised basis of EUR 3.2 million, ahead of schedule in terms of the previously announced anticipated savings of EUR 3.0 million for the year. Kendrion expects to implement additional simplification measures across its business units over the next six months. For the full year 2017, one-off costs of around EUR 4.5 million are now anticipated, with corresponding savings of EUR 4.0 million on an annualised basis.
Financial review
Revenue
Third quarter of 2017
The favourable market conditions of the first half of 2017 continued in the third quarter. Revenue growth amounted to 6.0% (6.9% at constant exchange rates), which breaks down into 11.3% for Industrial (12.0% at constant exchange rates) and 2.9% for Automotive (3.8% at constant exchange rates).
The Industrial activities recorded strong revenue growth with higher activity levels across all business units driven by the favourable market conditions. In China, a letter of intent was signed for the investment in a permanent magnet brakes production line with a large customer. These brakes are used in industrial robots and other applications. In Automotive, Passenger Cars continued to benefit from the ramp-up of the production of the active damping valves for ThyssenKrupp Bilstein, while Commercial Vehicles was impacted by the closure of its facility in Brazil and the discontinuation of operations in India, reducing the overall year-on-year growth level of our Automotive activities by just over 2%. Market circumstances for both passenger cars in Europe and the truck market remained favourable.

First nine months of 2017
Compared to the first nine months of 2016, revenue was 5.0% higher (5.2% at constant exchange rates). In the first nine months of 2017, our Industrial activities posted 6.7% growth (7.2% at constant exchange rates) while the Automotive activities grew by 4.0% (4.1% at constant exchange rates).
Results
Third quarter of 2017
The normalised operating result before amortisation (EBITA) increased by 25% to EUR 9.9 million (Q3 2016: EUR 7.9 million). The profitability in Automotive slightly reduced due to lower on stock production than Q3 last year. This was more than compensated by the higher result of the Industrial activities. The more streamlined and direct way in which we run our operations combined with solid top-line growth resulted in further improvement of the normalised EBITA margin of 8.5% (Q3 2016: 7.2%).
First nine months of 2017
Normalised EBITA in the first nine months of 2017 increased to EUR 31.0 million (first nine months of 2016: EUR 24.2 million), again mostly driven by higher activity levels and the simplification measures taken throughout the year. The normalised EBITA margin improved from 7.2% in the first nine months of 2016 to 8.8% in year-to-date 2017.
Net finance costs in the first nine months of 2017 amounted to EUR 2.2 million (first nine months of 2016: EUR 2.0 million). This slight increase was fully due to a negative currency impact.
Income tax expense for the first nine months of 2017 was EUR 5.7 million (first nine months of 2016: EUR 3.6 million). The normalised effective tax rate in the first nine months of 2017 was 25.3% (2016: 22.5%). The higher tax rate was due to the withholding tax on a dividend payment from China in the third quarter and a changed country mix compared to last year.
Normalised net profit for the first nine months of 2017 was EUR 19.6 million (first nine months of 2016: EUR 15.0 million). Normalised net earnings per share increased to EUR 1.46 (first nine months of 2016: EUR 1.13).

Financial position
The net debt position at the end of the third quarter was EUR 59.9 million, a decrease of EUR 2.3 million compared to the previous quarter end. Free cash flow amounted to EUR 3.4 million in the third quarter. Our share buyback programme, which commenced in August, resulted in a cash outflow of EUR 1.3 million. The programme is expected to be finalised by year-end.
Free cash flow in the first nine months was EUR 2.6 million (first nine months of 2016: EUR 1.8 million).
Investments amounted to EUR 16.6 million in the first nine months (first nine months of 2016: EUR 14.4 million), with depreciation totalling EUR 15.2 million. Investments for the full year 2017 are also expected to exceed depreciation, largely due to new automotive projects and capacity expansions in Industrial Drive Systems.
Kendrion's financial position remains strong, with a solvency ratio of 50.8% and an improvement in net debt cover to 1.0 at the end of September 2017.

Number of employees
The number of employees (FTEs) at the end of the third quarter 2017 amounted to a total of 2,661, including 142 temporary employees (Q3 2016: 2,639 employees, including 98 temporary employees). The increase is mainly due to the higher activity levels compared to the same period last year.

Outlook
The overall outlook for the global economy remains positive. Kendrion's most important market, Germany, is expected to continue to do well, reflected by a strengthening German machine building index.
For Q4 and into 2018, we expect a continuation of the favourable order patterns for both the Automotive and the Industrial activities, while noting that, as every year, uncertainties concerning the production volume of the Automotive activities in the month of December remain. Kendrion expects its revenue to increase in 2017, driven mostly by growth in the business units Passenger Cars and Industrial Drive Systems.
Going forward, we remain confident about our business fundamentals and our main objective to deliver sustainable profitable growth for the business in the medium to long term. We reiterate our medium- to long-term outlook of expected average organic growth of 5% per year and a 10% EBITA margin as from the end of 2018.

tijd 09.25
Kendrion EUR 38,225 +73ct vol. 21.980