“Despite a challenging macroeconomic situation, the Group achieved a good commercial performance”
Suresh Abye
Group Finance Director
“Despite a challenging macroeconomic situation, the Group achieved a good commercial performance”
Suresh Abye
in an increasingly complex and volatile market environment
After peaking in the second half of 2017, the underlying growth dynamics of global industrial investment - the driving force of the Group’s commercial activity - slowed in 2018. This was in a macroeconomic environment marked by the heightening of geopolitical tensions - notably reflected in the US sanctions policy, business rivalries between major powers - through the implementation of new customs duties, and nervous financial markets - which limit some companies’ financing capacities.
However, Fives managed to pass the milestone of €2 billion in order intake for the second consecutive year. This performance is notably due to Group progress in the high-growth logistics sector, but also, more generally, reflecting a balanced portfolio serving diversified end markets with uncorrelated cycles, a sign of resilience in an increasingly volatile environment. As a result, Fives ended the year with an order book of €1,543 million, close to all-time highs, which gives an excellent outlook for 2019.
However, the Group’s earnings for the 2018 financial year were disappointing. Despite increased sales, at €1,951 million, EBITDA only reached €94 million. These results are the consequences of cost overruns recorded in the execution of contracts in the aluminium, automotive and energy sectors. Major initiatives were rolled out during the year to reinforce internal processes and secure margins for current and future contracts.
Despite this, 2018 saw Fives strengthen its balance sheet and its long-term financing capacities; the Group welcomed two new shareholders and obtained a loan of €80 million from the EIB to fund its research and development activities. Finally, tight monitoring of working capital requirement allowed to maintain a high cash position at year-end (€147 million) despite the decline in earnings.
Sales:
€
1
,
951
million
Closing cash
position:
€
147
millions
Order intake
€
2
,
00
3
million
order book
at year-end:
€
1
,
543
million
On May 29, 2018, Fives welcomed two new shareholders: La Caisse de Dépôt et Placement du Québec (CDPQ) and the Public Sector Pension Investment Board (PSP), two of Canada’s largest pension fund managers.
They now sit alongside management and Ardian, which has held capital in Fives since 2012 and is remaining a minority co-investor.
These new shareholders are long-term partners, with an extensive knowledge of the industry, whose image and financial footing strengthen the Group’s positioning, giving it the ability to ramp up its development in high added-value markets.
Fives obtained a €80 million loan from the European Investment Bank (EIB) to finance its research and development program for projects linked to improving industrial processes.
This loan will contribute to Group investments in digital, robotic and automated technologies, as well as 3D metal printing technologies within AddUp, the joint venture created in partnership with Michelin.
The EIB’s interest in these programs demonstrates the credibility and promised value of the Group’s development in economic, technological and environmental terms.
The increased volumes of shipped goods and the associated handling and throughput management constraints encourage postal operators, express courier companies, major e-commerce firms and distribution companies to automate their sorting centers and storage platforms.
Fives’ portfolio of technologies sets it apart as a benchmark supplier, notably thanks to its “cross-belt” sorting solution and its “OPR” palletizing systems. In 2018, the Group recorded €520 million in logistics orders, a 24% increase compared to 2017, and nearly 2.5 times more than in 2016.
In 2018, the Group faced difficulties in the execution of some contracts in the aluminium, automobile and energy sectors, which affected its EBITDA margin by nearly 1.5 point.
In this context, action plans were implemented in three areas: reinforcing pre-project risk evaluation and costing processes, adapting project management to stricter client requirements, shorter time frames and an increasingly unstable environment, and finally improving formalization of know-how and experience, as well as succession plans for key managerial and technical positions.
Despite substantial restructuring since 2015, the steel market is still characterized by structural overcapacities. Despite this, the Group has managed to stand out through its technologies and worldwide presence and for the second consecutive year.
In Asia, Fives has been awarded several contracts for high added-value steel, notably for the automotive industry, whether high-resistance light steel (sheet metal) or silicon steel (electric engines). In the USA, where the introduction of customs duties has revitalized a market with strict quality standards, several orders have been placed, notably to provide galvanization lines including the Group’s proprietary technologies. Finally, in Europe where investment is focused on making productivity gains, Fives has developed an automatic line pilot for one of its clients, which takes a smart and optimal approach to all “process” operations to save a significant amount of production costs.
