Pankl Racing Systems AG - 2007/08 Q1-3: Exceptional Items Affect Q3 Earnings

Revenues development of Pankl Group Kapfenberg, 19 August 2008. In the first 9 months of the current fiscal year, revenues of Pankl Group increased by 3.4% from EUR 78.0m to EUR 80.7m. The Racing/High Performance Segment accounted for 80%, the Aerospace Segment for 20% of revenues. Delays in the production start-up of the new Slovak facility, supply difficulties of presuppliers and delays in the completion of aerospace contracts as well as a continuing difficult market environment for motor racing engine components impacted negatively on Q3 revenues.

Exceptional items affected earnings Non-recurring expenses amounting to about EUR 700k reduced Q3 operating earnings. 2007/08Q1-3 EBIT amounted to EUR 7.4m versus EUR 8.0m in the same period last year and were the second best operating earnings recorded in Pankl’s corporate history despite significant exceptional expenses. In the reporting period, the EBIT margin amounted to 9.2% versus 10.2% in the same period last year. The exceptional expenses referred mainly to start-up expenses resulting from the transfer of the Slovak Pankl subsidiary Pankl Slovakia to its new production facility in Topolcany. Furthermore Q3 earnings were affected by non-recurring expenses from the transfer of the connecting rods serial production for high performance vehicles from Bruck upon Mur (Austria) to Topolcany (Slovakia). Operating earnings before these exceptional items increased by EUR 0.1m to EUR 8.1m.

Racing/High Performance: EBIT-Margin remains at high levels despite exceptional expenses In 2007/08Q1-3, Racing/High Performance Segment revenues amounted to EUR 64.3m versus EUR 65.2m in the same period last year. Ongoing strong demand for drivetrain components did not entirely make up for engine components declines. Due to Pankl Slovakia‘s non- recurring expenses amounting to about EUR 700k, EBIT declined from EUR 7.8m in 2006/07Q1- 3 to EUR 6.1m. The EBIT margin remained at a high level and amounted to 9.6%.

Aerospace: Revenues increased by 28% in the first nine months The Aerospace Segment continued to perform well, both in terms of revenues and earnings. Revenues increased by 28% from EUR 12.8m to EUR 16.4m, EBIT improved from EUR 140k or 1.1% of revenues to EUR 1.262m or 7.7% of revenues. Supply delays of some presuppliers and delayed completion of 2 customer contracts impacted negatively on Q3 revenues and earnings.

Outlook We expect a continuation of the Q3 developments until the end of the fiscal year: In Q4, the Racing/High Performance Segment will continue to experience strong demand for drivetrain components and weak demand for engine components. In the Aerospace Segment we expect demand to bottom out versus the strong growth in the first 2 quarters of the fiscal year.

In total, we expect revenues growth of 5% for the fiscal year 2007/08. Due to the Q3 exceptional items and the moderate revenues development in 2007/08H2, we expect EBIT to remain on a high level but below the records of the fiscal year 2006/07

Editor's note: Image rights belong to the respective publisher.