STEADY REVENUE AND PROFIT GROWTH COMPARED TO PREVIOUS QUARTERS CONTINUES
- Revenue for Q2 2013: EUR 87.1 million (up 18% from Q2 2012; organic growth down 3% from Q2 2012)
- Positive contribution from Kuhnke in Q2 2013; integration on schedule
- Further increase in the number of orders due to new project launches; well positioned for HY2 2013
- Macroeconomic trends remain uncertain; no clear profit forecast for 2013

Key figures 1
1 EBITA and net profit adjusted for non-recurring items:
Q2 2013: Non-recurring costs relating to the Kuhnke acquisition (EUR 1.8 million), along with a non-recurring tax gain of EUR 1.6 million Q2 2012: Release of earn-out provision for FAS Controls Inc (EUR 0.7 million) and a non-recurring tax gain of EUR 0.5 million

(x EUR 1 million)
Q2 2013Q2 2012 Difference in % Revenu 87.174.018%
EBITA 6.06.2-3% Net profit 3.22.910%(x EUR 1 million)HY1 2013 HY1 2012 Difference in % Revenue1 58.4151.35% EBITA 10.914.9-26% Net profit 5.88.2-29%

Piet Veenema, CEO of Kendrion:
"Although economic conditions remained challenging in the second quarter, our organic revenue and profit have gradually recovered from the fourth-quarter dip. Other key events in the second quarter included the acquisition and integration of Kuhnke, which is going according to plan. In line with the tentative recovery of the market in the first six months of 2013, the number of orders increased accordingly. We expect that the launch of several new projects will result in higher revenue and profit in the second half year of 2013, allowing us to continue the upward trend of the first two quarters."
Financial trends
Second-quarter revenue was up 18% from the same period in 2012 (to EUR 87.1 million), driven mainly by the acquisition of Kuhnke in mid-May. Organic revenue fell by 3% compared to the second quarter of 2012 due to a lower revenue in the Automotive division. Organic revenue increased 1% compared to the first quarter of 2013.
The adjusted operating result before amortisation (EBITA) and excluding Kuhnke, was EUR 5.1 million in the second quarter of 2013 (Q2 2012: EUR 6.2 million). On an organic basis, EBITA increased by 4% from the first quarter of 2013 (EUR 4.9 million).
The adjusted EBITA margin for the second quarter including Kuhnke was 6.9%. It was reduced slightly due to the acquisition of Kuhnke, which, following the takeover, posted revenue of EUR 15 million, with an EBITA margin of 6%. The adjusted EBITA margin of the Industrial division was 6.5% during the first six months; for Automotive, it was 7.1%.
Net financing expenses for the second quarter totalled EUR 1.4 million (+7%). The increase over the second quarter of 2012 was caused by the higher net debt following the Kuhnke acquisition.
A EUR 1.6 million increase in deferred tax assets (Q2 2012: EUR 0.5 million) resulted in a EUR 0.9 million tax gain in the second quarter.
Net profit excluding the non-recurring income and expenses related to the acquisition of Kuhnke totalled EUR 3.2 million in the second quarter, an increase of 23% compared to the first quarter and 10% up on last year.
Investments in property, plant and equipment totalled EUR 7.3 million in the first half of 2013, of which EUR 1.2 million in the Industrial Division and EUR 4.7 million in the Automotive Division. Other investments, mostly in the new ERP system (project Horizon), totalled EUR 1.4 million. This project is on schedule in terms of both time and budget. This system will also be implemented at Kuhnke in 2014. Free cash flow for the first six months was EUR -8.4 million as a result of the investments described above and the usual seasonal patterns. Positive free cash flow is expected for the full year 2013.
Total equity at the end of June 2013 was EUR 125.7 million (year-end 2012: EUR 103.1 million) and increased mainly as a result of the rights issue launched at the acquisition of Kuhnke. Net debt increased to EUR 66.1 million (year-end 2012: EUR 21.3 million) due to Kuhnke's acquisition and seasonal working capital effects. The solvency ratio at the end of June was 36.5% (year-end 2012: 44.8%). This ensures that the financial position of Kendrion will remain solid even after the Kuhnke acquisition.

Acquisition and integration of Kuhnke
Kendrion reached agreement on 6 May 2013 with the shareholders and management of Kuhnke AG ("Kuhnke") on the acquisition of Kuhnke. Kuhnke had revenue of some EUR 110 million in 2012 and approximately 1,100 employees. Kuhnke has branches in Malente (Germany, approximately 500 employees), Sibiu (Romania, approximately 560 employees) and sales offices in various locations including Kristianstadt (Sweden). Kuhnke operates in the automotive industry, with revenues of approximately EUR 70 million in 2012, and the automation industry, with revenues of approximately EUR 40 million in 2012 (generated in the machine manufacturing and medical sectors).
The integration of Kuhnke was a key focus for the company in the second quarter. We are pleased that Kuhnke's and Kendrion's existing operations complement each other perfectly. Kuhnke performed in line with expectations following the acquisition. Kuhnke's activities have been brought into the new business units Industrial Control Systems and Automotive Control Systems. Support functions will be either integrated into these business units or phased out over the next few months. The number of support staff at Kuhnke will be reduced by approximately 40, half of which as a result of outsourcing. Talks with the Works Council and unions are underway.
Operational changes
Division Industrial
Following the Kuhnke takeover, this division consists of three business units: Industrial Magnetic Systems, Industrial Drive Systems and Industrial Control Systems.
Industrial Magnetic Systems improved its revenue and profit significantly from the first half year 2012, due in part to the higher revenues in textile machinery, along with revenue growth in the United States driven by new projects.
Industrial Control Systems started strongly at Kendrion, with satisfactory operating result and good opportunities for future revenue and profit growth.
Industrial Drive Systems experienced a challenging second quarter, mainly due to lower revenue in German machine manufacturing. The previously expected revival in this industry has thus far failed to materialise. The company also invested in activities with a view to further revenue growth in the coming years, including new products and the launch of manufacturing operations in China.
Division Automotive
Following the Kuhnke acquisition and the transfer of Kendrion's existing operations for the truck market to a new business unit, this division currently consists of four business units: Passenger Car Systems, Automotive Control Systems, Commercial Vehicle Systems and Heavy Duty Systems.
Passenger Car Systems was clearly affected by the downturn in the automotive market during the first six months, with revenue down 7% from the same period in 2012. Revenue in this business unit is expected to pick up again in the coming months, especially also as a result of the new projects scheduled to be launched in the United States.
After a hesitant start – caused by start-up costs relating to a major new project for this business unit – the newly incorporated Automotive Control Systems is now likely to complete this project on schedule.
Despite a sluggish European bus market, Commercial Vehicle Systems experienced a stronger second quarter, growing its revenue mainly in the Far East.

Heavy Duty Systems was faced with a weak truck market in both the United States and India in the second quarter. The outlook for the second half of the year is more positive, largely due to the economic recovery in the United States.
Number of employees The number of FTEs rose to 2,800, an increase of more than 1.100 from the end of Q1 2013, due to the Kuhnke acquisition. This includes approximately 160 temporary employees.
Outlook
While we continue to be faced with a tough economy, we have noted some positive trends, including the US economic recovery. General trends in Germany have been somewhat positive, but China has been faced with a dip in various sub-markets. On a global level, trends in the automotive market, in particular, are difficult to predict. Based on the growing number of orders, due in part to new project launches in the United States in particular, Kendrion expects to continue the upward trend in the second half of the year. A clear revenue and profit forecast for the full year 2013 however will not be provided.
Mr Henk ten Hove appointed member of Supervisory Board
Kendrion is pleased to announce that during the Extraordinary General Meeting of Shareholders held on 19 August 2013, Mr Henk ten Hove was appointed a member of the Supervisory Board of Kendrion N.V. for a period of four years. He will succeed Mr Jan van Kesteren as Chairman of the Supervisory Board in December 2013, as Mr Van Kesteren will be resigning on 31 December.
Mr Ten Hove has also been appointed a member of the Kendrion Remuneration Committee.
Mr Ten Hove is the former CEO of Wavin N.V.