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LISI 2011 —
24
— financial report
Financial situation
As far as fasteners are concerned, demand from Airbus directly
represents over 30%of the activity. During the year, the LISI AEROSPACE
division won a major contract with Boeing: spanning 2012-2022, it
should result in a significant gain in market share for the Group. Other
segments, particularly those or regional and business aircraft, remain
sluggish, showing no real signs of recovery.
The EBIT displays a very substantial increase (+162%). The near
doubling in operating margin to 12.2% compared to 2010, reflects the
following changes:
– a strong volume effect, whose improvement is more marked in
Europe (€27m) than in the United States (+$11.5m),
– the favorable impact of new lined products (STL®, Ti Nuts, sleeved…)
and the rise in production rates. The recovery of orders in Europe
has generated nearly €10 million of business in terms of repair
bonuses, which represents a strong growth compared to 2010.
The contribution margin also increased significantly, thanks to the
proper use of installed capacity and the maintenance of trained
personnel during the slowdown period. The cost of materials and
other production costs have not changed. Therefore, much of the
improvement in the overall operating margin is due to productivity
gains and to better coverage of fixed costs.
– In addition, the proper operation of sites in terms of productivity
and quality has also contributed to this performance.
The Fasteners arm cash flow stood at €52.4m. After €21m of capital
expenditures and a €9m increase in working capital, the Free Cash
Flowof this armwas definitely positive, at €22.5m. Theworking capital
amounts to 135 days of sales, up 4 days, while inventories represent
130 days of sales.
Investmentsundertakenby LISI AEROSPACEamounted to€34.4million,
including:
– for the "Fasteners" line of business: the surface treatment line in
Torrance ($10.3m), the development of new products in Saint-Ouen-
l’Aumône, Villefranche-de-Rouergue and Canada;
– for the "Structural components" line of business: the extension of
the building (6,000 m2) in Marmande.
OUTLOOK
LISI AEROSPACE operates in an economic environment that is both
mixed and buoyant: while the uncertainties regarding the situation
in Europe are likely to urge caution, the developing countries should
continue to drive the global growth upward.
Despite a moderate increase in activity, the U.S. still displays a
significant growth potential, primarily at Boeing because of the
industrial rise of the B787, and at those distributors that have put a
final stop to their destocking programs.
Other markets such as regional aircraft and business jets are not
expected to recover in the short term.
Fornewprograms, LISIAEROSPACEFastenersexpectsnoreal resumption
of the B787 program at this stage, while the A350 represents a
significant volume to be delivered in the first half of fiscal 2012. The
rise for the current year should be mainly driven by production rate
increases. The book to bill ratio is at about 1.07 and orders increased by
over €100 million compared to 2010 for the entire division.
The continued growth of sales in 2012 seems therefore assured with
the current level of order intake and the visibility the aviation industry
seems to offer. In this perspective, LISI AEROSPACE has planned some
significant capital expenditures.
A further increase in operating margin is determined by the ability to
manage in parallel the progressive end of the constitution of the A350
assembly line, the production of the parts necessary for production
ramp-up of older aircraft (A320, A330 and A380) and the ramp up
of the Torrance plant (United States) to serve the needs of the large
Boeing contract awarded to LISI AEROSPACE and of its new B787
aircraft.
Overall, the North American arm of LISI AEROSPACE is a reservoir of
growth and significant increase in profitability as of fiscal 2012.
2.3
LISI AUTOMOTIVE
Economic environment and market assessment
Unexpected resistance of European markets, strong recovery in
the USA, continued growth in China
While measures to support the automotive industry ("cash for
clunkers") ended in 2010, sales of new vehicles in Europe fared better
than expected in early 2011 (-1.4% / 2010). The German market
developed strongly throughout the year and finished 2011 with
growth of nearly 9% compared to 2010. The French market has limited
its decline to 2.1%; markets of Southern Europe were marked by a
sharp decline (- 10.9% in Italy, - 17.7% in Spain).
German premiumbrands are gainingmarket share against the general
brands , which are more exposed to the slowdown in sales of small
vehicles. VW has the highest lead with a 7.8% increase in sales in
Europe, followed closely by BMW, up 7.7%.
The U.S. market confirmed the recovery that began in 2010, with a
surge of nearly 10% of vehicle sales. The Chinese market has remained
buoyant, despite the cessation of government incentives to buy
smaller displacement vehicles (+5%).
European production driven by exports to China and the United
States; LISI AUTOMOTIVE driven by exports to South America and
China
Despite the decline in new car sales in Europe, European production of
the main customers of LISI AUTOMOTIVE gained 5% in 2011 compared
to 2010.