Wincor Nixdorf posts 'significant' fall in operating profit

Source: Wincor Nixdorf

Wincor Nixdorf AG completed the first nine months of fiscal 2014/2015 with a slight dip in net sales, as anticipated, and a significant decline in operating profit as a result of the restructuring program initiated by the company.

Net sales generated by the Wincor Nixdorf Group fell by 2% to €1,768 million (previous year: €1,803 million). Operating profit (EBITA) after restructuring expenses amounted to €40 million (€92 million), down 57% on the figure posted for the same period a year ago. Thus, the EBITA margin fell by 2.8 percentage points to 2.3% (5.1%). Profit for the first nine months of the fiscal year stood at €25 million (€61 million), which represents a decline of 59%. Excluding restructuring expenses, EBITA fell by 18% compared to the first nine months of the previous year, taking the total to €75 million (€92 million). As regards the current fiscal year 2014/2015, Wincor Nixdorf anticipates that net sales will be 3-5% lower than the level recorded in the previous fiscal year. EBITA without restructuring expenses is expected to reach €100 million, from which planned restructuring expenses totaling €80 million will have to be deducted. This translates into an EBITA figure of €20 million for the current fiscal year as a whole.

The restructuring program will be accompanied by strict cost reduction measures as well as considerable adjustments to capacity levels in the company functions associated with the Hardware business. As a result of restructuring expenses of €27 million in the third quarter, the operating profit of €20 million generated by the company became a €7 million loss.

"On the whole, the restructuring program initiated by Wincor Nixdorf has gotten off to a solid start. It is being implemented with emphasis, is already producing the first tangible results and can ensure Wincor Nixdorf to autonomously follow a future-proof strategy," said CEO & President Eckard Heidloff. In this context, Heidloff also responded to recent media reports. "The issue of industry consolidation has been a matter of debate for many years. I do not wish to inflame the discussion by adding statements on it from our point of view."

The restructuring program being pursued by Wincor Nixdorf has two key objectives. First, the aim is to better exploit business opportunities for Software and IT Services presented by the ongoing trend towards digitalization in retail banking and retailing. Secondly, the company is looking to structure its Hardware business in a more cost-effective manner despite the substantial level of innovation still seen in this area. In this context, the depth of the value chain is to be redimensioned such that adequate margins can be achieved even against the backdrop of slower growth and more pronounced market and price volatility.

One of the key objectives within the seven-point restructuring program is centered on the "Considerable acceleration of growth in Software and associated Professional Services." To this end, measures aimed at restructuring global sales were initiated in the period under review. The measures include staff downsizing in some of the company’s sales functions so that additional sales professionals specializing in software can be recruited accordingly. Furthermore, Wincor Nixdorf is continuing to expand its Eastern European nearshoring sites for Professional Services by means of fast-track recruitment of software developers. Staff upsizing at the Eastern European locations is being implemented mainly by migrating jobs currently based at Western European sites. Compared to the current figure, Wincor Nixdorf plans to double the total headcount of software specialists assigned to sales and software developers.
Another element of the program is the "Fundamental realignment of the Hardware strategy." With this in mind, plans have been drawn up to expand sourcing of components and modules from countries with more favorable cost structures. At a later stage, such sourcing is meant to help reduce the company’s own vertical range of manufacturing in the Hardware business. In this context, measures have already been initiated for the purpose of streamlining capacity levels in production.

Net sales up for Banking, decline in Retail
The Banking segment saw net sales increase by 1% in the first nine months of fiscal 2014/2015, taking the total to €1,149 million (€1,137 million). Third-quarter revenue was up 2%. EBITA within the Banking segment fell by 59% to €26 million (€63 million) in the first nine months of the fiscal year. Net sales generated in the Retail segment fell by 7% in the first nine months of the fiscal year to €619 million in total (previous year: €666 million). EBITA for the Retail segment amounted to €14 million in the reporting period (€29 million), down 52% on the same period a year ago.

Growth in Asia/Pacific/Africa – Downturn in Germany and Europe
In Germany, net sales for the first nine months of the fiscal year were 6% lower year on year at €404 million (€432 million). Germany contributed 23% (24 %) to total net sales at Group level.
Net sales generated in Europe (excluding Germany) over the first nine months of the fiscal year were down 3% at €817 million (€843 million). This region contributed the largest part of total net sales for the Group at 46% (47%).
In Asia/Pacific/Africa, the Group managed to lift net sales by 9% to €346 million in the first nine months of the current fiscal year (€317 million). Thus, the share contributed by the Asia/Pacific/Africa region to total net sales increased to 20% (17%). In local currencies, the Americas recorded a 15% decline in net sales during the first nine months of the fiscal year. Translated into euros, this corresponded to a downturn of 5% to €201 million (€211 million). As a result, the proportion of Group net sales generated in the Americas was 11% (12%).

Higher share of Software/Services business
In the first nine months of the fiscal year, net sales attributable to the Hardware business fell by 12% to €726 million (€822 million). In the Software/Services business, net sales were up 6% at €1,042 million (€981 million). The share of total net sales generated by the Hardware business fell to 41% (46%) in the period under review. Correspondingly, the proportion of total net sales derived from Software/Services rose to 59% (54%). 

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