Strong Bekaert Sales Driven by High Raw Material Prices

In the first nine months of 2008 Bekaert achieved consolidated sales of 2.047 billion euros and combined sales of 3.119 billion euros, an increase of 28.8 per cent and 24.0 per cent respectively. Bekaert reports that organic growth accounted for a growth in consolidated sales of 24.7 per cent, largely driven by the passed on raw material price rises, and the net movement in acquisitions and divestments in Vicson (Venezuela) and in Proalco (Colombia) accounted for 7.9 per cent. Exchange rate fluctuations tempered the growth by 3.8 per cent.

Bekaert’s revenue growth throughout the first three quarters of 2008 reflects raw material linked price increases, an improved product mix and organic volume growth. Strategic positions were further strengthened in the emerging markets with expansion programs in Asia and the continued consolidation of activities in Latin America.

The company says that its wire products posted ‘vigorous’ sales growth across nearly all activity platforms. Wire Europe continued the growth rate begun in previous quarters, performing especially well in its Central European production platforms. Wire North America’s nominal sales grew by 33 per cent as a result of increased price levels and higher volumes. On a currency-adjusted basis, sales rose 19 per cent. Wire Latin America’s solid growth was the result of higher selling prices, reflecting the immediate pass-through of price increases of raw material. Bekaert’s expansion program in Karawang, Indonesia, contributed to sales increases at Wire Asia.

The continued growth at Bekaert’s steel cord China operations was the product of increased demand matched by local production capacity, combined with a broad and dedicated product portfolio, says Bekaert. Weakening volumes in Western Europe and North America were compensated by higher price levels, reflecting rising steel cord raw material costs.

Compared with the same period in 2007, revenues from advanced materials were down by 3.6 per cent. For the most part this was due to lower sales of stainless products as a result of declining demand and decreased nickel-based raw material prices.

Bekaert reports that its balance sheet remains strong. Its working capital and debt ratios remain in line with the 2008 half year results report. The company’s net debt position is approximately 50 per cent covered by debt financing not maturing within the next twelve months, and the company’s growth in China is financed locally. Healthy cash generation combined with committed credit lines are adequate to fund Bekaert’s needs.

On 8 October 2008, Bekaert announced the company’s further consolidation plans in Latin America, with the intention of merging the interests of Bekaert and its Ecuadorian partners in a regional holding from the beginning of 2009 onwards. The resulting majority shareholding by Bekaert (80 per cent of shares) will further increase the group’s consolidated sales by 140 million euros.

Bekaert expects fourth quarter consolidated sales to be comparable to the last quarter of 2007. The present economic downturn, the effect of decreasing raw material prices for certain steel qualities, and the fact that the fourth quarter’s consolidated growth rate will no longer be favoured by the acquisition of Vicson and Proalco (included as from the fourth quarter of 2007), will have an impact on the last quarter’s top line growth rate.