Progress-Werk Oberkirch AG

That's why PWO!

Investment Case

PWO has made tremendous progress over the past good 10 years, transforming itself from a German supplier with a small Canadian presence to a renowned international group with a global reach. The unavoidable start-up losses are now history, upfront investments for new production sites have been completed and the significant effort to develop the sites into high-tech production plants is now behind us.

Our customers gladly rely on PWO worldwide. As a result, in each of the past five years we have acquired new business volumes of almost EUR 500 millions on average. This indicates substantial revenue growth going forward. PWO’s strong performance capabilities will again lead to a significant improvement in the Company’s financial ratios.

We also offer our investors a steady dividend associated with attractive yields. Profitable growth plus returns – this is how we intend to persuade investors to invest in PWO shares.

Forecasts

FORECASTS FOR THE 2018 FISCAL YEAR

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We believe that the Group’s positive performance will continue in 2018. The expected increase in revenue of around 8 percent to EUR 500 million will also be supported by the invoicing of tools not yet been billed by the end of the 2017 fiscal year.

Based on the currency exchange rates hedged at the end of 2017, we expect EBIT before currency effects to increase to a range of EUR 25 – 26 million. This range would be equal to roughly a 20 percent increase over the EBIT including currency effects of EUR 20.5 million reported for the past fiscal year, which is the reference amount used for our planning. We expect exchange rates to have a neutral impact on EBIT in the coming period due to the high hedging ratio for hedging transactions already in place.  

Free cash flow is expected to be clearly positive in 2018. The equity and dynamic leverage ratios should improve, also supported by the invoicing of tools from the past fiscal year. After falling well short of the original investment budget in 2017, we now expect our investment volume to reach the upper end of our long-term range and amount to EUR 42 million in 2018. As a rule, our investment budgets are always set for a period of three years. We currently require roughly EUR 110 million over that time period to support our long-term growth. 

There are no major awards of larger series production contracts by our customers expected in 2018. We will, therefore, focus on preparing for new start-ups in upcoming years , as well as acquiring the volumes necessary to achieve our growth targets. As a result, we expect new business in the 2018 fiscal year in the range of EUR 250 - 300 million. Apart from this amount, we are already very well positioned to win new contracts to be tendered in the years thereafter. 

MEDIUM-TERM FORECAST UNTIL 2020

We intend to increase our revenue to over EUR 530 million by the year 2020. This target is based on today’s material prices. We have already acquired the orders needed to achieve this growth target thanks to the strong level of new business we have enjoyed over the past several years.

EBIT before currency effects is expected to grow significantly faster as we grow our margins in China and Mexico to an attractive level by 2020. We will also be able to use the accumulated tax loss carryforwards at those locations in the future, which should result in even stronger growth in the Group’s net income for the period. The existing loss carryforwards currently amount to around EUR 28 million.

The Group’s improved profitability and its investment rate of around seven percent per annum are expected to lead to a visible increase in free cash flow, which has already reached a positive level. This is how we intend to strengthen the Group’s balance sheet.