CEO Letter to our Shareholders
Dear Shareholder,
Financial year 2007/2008 was a record year for Demag Cranes. The sustained strong growth in order intake brought with it marked gains in revenue and EBIT at Group level. Business was so good, in fact, that we twice had to raise our earnings forecast during the year. Profitability grew as well, and we slightly exceeded target return on revenue, which further increased to 11 percent in the third quarter. The Demag Cranes Group balance sheet is also looking very healthy: At the end of the financial year, we had substantially reduced our liabilities again and we are now almost debt free.
Our shareholders are to benefit accordingly once again this year from their company’s success. At the Annual General Meeting, the Management Board and Supervisory Board will propose a dividend of EUR 1.40 per share for financial year 2007/2008.
At segment level, the excellent performance of the Industrial Cranes segment in particular stood out in the financial year. Revenue grew much faster than in the previous year. We almost doubled adjusted EBIT, our most important performance indicator, not least thanks to our efficiency enhancement programmes. In the Port Technology segment, we implemented all the packages of measures announced, thus reducing manufacturing costs. We not only achieved, but even topped all of our communicated targets such as doubling profitability and the target profit corridor. Our Services segment proved yet again to be a key source of income for the Group. With revenue growth in double figures, we also improved our profitability again, surpassing our target margin of 20 percent by some way.
Quality goes before quantity, which means that the Demag Cranes Group will continue to pursue a strategy that targets sustained profitable growth.
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Harald J. Joos, CEO |
Harald J. Joos, CEO and Member of the Thomas H. Hagen, Member of the Board Rainer Beaujean, CFO |
And we will not lose sight of this goal in future. Business expansion is not an end in itself for us, but rather must satisfy clearly defined earnings targets. In general, increasing our presence on the international markets will be a major growth driver, with emerging markets playing a central role, especially the BRIC countries (Brazil, Russia, India and China) and the Middle East. Our technology and innovation leadership has been a major contributing factor to the success of this strategy in the last few years. We have shown the way ahead by successfully developing and launching new innovative products, ranges and series, including our Generation 5 Mobile Harbour Cranes and the new rope and chain hoist ranges in the Industrial Cranes segment. Setting the trend as a pacemaker in port automation, Demag Cranes set out to fill the market gap, becoming a supplier of complete integrated system solutions early on.
In order to further increase management efficiency in the Demag Cranes Group and to raise awareness within the Company of how important the focus on the customer is for us, we have adopted a new management structure by replicating the segment structure on the management team. There is a new Group Management team comprising the Management Board and three segment heads that are responsible globally for the operations of the three segments Industrial Cranes, Port Technology and Services. This moves us away from an entity-focused management approach and means that we manage our operations in the same way we report to the capital market. This will speed up our decisionmaking processes and make financial controlling by the Holding company more direct.
I would particularly like to take this opportunity to thank all our employees for their commitment. We are well aware that the Group’s future depends to a considerable extent on the motivation and skills of our employees. We want to invest in this foundation by continuing to intensify our human resources development and making Demag Cranes an attractive employer - worldwide.
Even though we consider the Demag Cranes Group to have an excellent strategic position, we cannot shut our eyes to the financial crisis and its potential consequences for the real economy and our business. We have taken a more conservative approach in our forecasts for financial year 2008/2009 in view of the extreme uncertainties facing the markets. For details, please see the Forecast Report beginning on page 91.
Thanks to the Group’s strong financial position, we may be able to seize opportunities that present themselves as competitors run into problems and to take a significantly more active part in the process of industry consolidation than in previous years. We are well prepared.
Yours sincerely,
Harald J. Joos