Letter to Shareholders

Management-Board Günther Wühr, Dr Thomas Kneip, Bernhard Pawlik about fiscal year 2019

Dear Shareholders,

CENTROTEC continued the positive development of previous years in the2019 financial year. Further progress with internationalisation and a solid development in the German home market contributed to an increase in revenue and earnings, and the basis for maintaining this development was strengthened through extensive investment measures. Modernised locations, expanded production capacities, improved development, service and sales structures as well as a rounded product range that is focused very precisely on the target markets reflect the successful efforts to encourage this positive development to continue.

Global economic conditions that were again fundamentally positive in the period under review prepared the way for the CENTROTEC Group to increase revenue by 5.9% to EUR 651.0 million (previous year EUR 614.7 million), with a rise in the operating result (EBIT) of 8.8% to EUR 33.1 million (previous year EUR 30.4 million). The full-year forecast made in this publication at the start of 2019 was comprehensively achieved for both key figures. Furthermore, there was a markedly overproportional rise in earnings per share (EPS) compared with revenue and the operating result to EUR 1.48 (previous year EUR 0.74). This improvement was partly attributable to the much healthier result from investments compared with the previous year. As already in the previous year, a share buyback programme with a volume of EUR 20.5 million was conducted in the period under review. This capital outflow which amounts to more than EUR 45 million for the past two years has driven up the company’s net debt to EUR 66.9 million (previous year EUR 21.0 million). The figure also for the first time includes lease liabilities amounting to approx. EUR 15 million that are accounted for according to IFRS 16 for the first time from this year. Meanwhile above-average investment is in the pipeline for the current financial year for the completion of the production plant in China as well as the comprehensive expansion of the production location in Brilon. In light of this further rise in investing activities and in response to the unprecedented uncertainty in the market and the entire economy due to the coronavirus, the Supervisory Board and Management Board of CENTROTEC have resolved to propose to the Annual General Meeting that the payment of a dividend for the 2019 financial year be dispensed with completely.

After many years of steadily positive overall economic development, the situation currently appears appreciably more critical. The dramatic escalation of the coronavirus pandemic’s impact on the global economy in recent weeks could do sustained damage to any positive development trends in 2020. CENTROTEC, too, could be directly affected by potential production stoppages due to an increased number of cases at its plants or interruptions in the supply chain.

At the start of the year CENTROTEC had forecast revenue growth to EUR 670 to 690 million for the 2020 financial year, with an operating result (EBIT) of EUR 34 to 36 million. Since that forecast was made, the rampant sense of uncertainty in Europe due to the coronavirus has also prompted many customers of CENTROTEC to build up stock levels in order to maintain their ability to supply. This is also reflected in a very healthy development in the first few months of the year. However a widespread collapse in sales markets or problems in procurement markets could bring significant disruption as early as the second quarter. Individual markets such as Italy and France have already taken a sharp downturn since the start of March. In light of this, the above forecast is now subject to considerable uncertainty. However as matters stand it is not possible to put a meaningful figure on the financial impact of the crisis.

Despite the difficult economic environment, CENTROTEC will report a high volume of investment in the period in question as it seeks to maintain its long-term course of growth. There are two major individual investment projects in the pipeline: the plant currently under construction in China and the planned expansion of the Brilon production location.

Over the long term, the basic economic environment indicates distinctly bright prospects for the CENTROTEC Group and its companies. The resolve that the German government has demonstrated e.g. through the climate package to actively address climate change as well as the global, cross-industry megatrends towards operating convenience and efficiency mean that CENTROTEC, with its expertise in the areas of heating, climate control and ventilation, is well-placed to operate successfully in the national and international markets for building efficiency thanks to its ideally coordinated system solutions.

With best wishes,

Dr Thomas Kneip
[Management Board member]

Bernhard Pawlik
[Management Board member]

Günther Wühr
[Management Board member]


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