ANNUAL
REPORT
2018
TABLE OF
CONTENTS
STRATEGY
AND LEADERSHIP
05
07
09
10
4
Message from the Chief Executive
Officer and the Chairman
Board of Directors
Bekaert Group Executive
Our strategy
STRATEGY
AND LEADERSHIP
INDUSTRY
OFFERINGS
25 Products and applications
24 INDUSTRY
OFFERINGS
SEGMENT
PERFORMANCE
27
29
31
33
35
26 SEGMENT
PERFORMANCE
EMEA
North America
Latin America
Asia Pacific
Bridon-Bekaert Ropes Group
REPORT OF THE BOARD OF DIRECTORS
EX ARTICLE 119 OF THE BELGIAN
COMPANIES CODE
39 Key figures
41 Key figures per segment
42 Summary of financial review
47 Corporate Governance Statement
47 Board of Directors and Executive Management
53 Remuneration Report
60 Shares
64 Control and ERM
69 Sustainability
80 References
OF THE BOARD
38 REPORT
OF DIRECTORS
FINANCIAL
REVIEW
84 Consolidated financial statements
91 Notes to the consolidated financial statements
193 Parent company information
194 Auditor’s report
81 FINANCIAL
REVIEW
STRATEGY
LEADERSHIP
AND
Annual Report Bekaert 2018
MESSAGE FROM
THE CHIEF EXECUTIVE OFFICER
AND THE CHAIRMAN
Dear Reader,
From a financial performance perspective, 2018 was deeply disappointing. The
results we posted in 2018 dropped far beyond our goals and reversed our successful margin improvement trend of the past years. The share price has been under
continuous stress amid the long series of profit warnings by sector players in our
industries and reflects both the weaker Bekaert financial performance in 2018 and
rising global economic uncertainty.
Despite softening GDP growth in 2018, induced by trade tensions and other political
and economic uncertainties, we achieved 5% consolidated sales growth and our
combined sales exceeded the € 5 billion mark for the first time in history. We haven’t
been able, though, to translate this growth into incremental profit. Underlying EBIT
reached € 210 million, representing a margin on sales of 4.9%, and reported EBIT
was € 147 million at a margin of 3.4%, far below the levels of previous years.
Some of the negatives of 2018 have been resolved or related to one-time corrections
and are not expected to affect our margins in 2019. The performance of BridonBekaert Ropes Group should improve according to the profit restoration plan that
has been put in place. We are resolving the start-up issues related to various major
expansion programs and our results should no longer be affected by the losses
generated in our sawing wire activities or by those incurred in the plants that we have
closed in the course of 2018. We regret that our actions to improve our performance
included decisions that affected jobs, but they were necessary to help turn the tide
from here onwards.
Bekaert has a strong track record of success and we want to return our business
performance as quickly as possible to the positive growth path that we set out in our
strategy and that we have been achieving until recently.
Matthew Taylor
CEO
As we enter 2019, the business conditions in various sectors have begun to trend
somewhat lower as a result of tighter markets and postponed investments. Given
the market evolutions and the anticipated continued price pressure, we will implement improvement actions that will reduce our cost structure significantly, helping
to enhance our competitiveness and improve our financial performance sustainably.
We designed and implemented a new organizational structure in early March 2019.
We are making those organizational changes to upgrade our capability and to take
out complexity from the organization. This will enable faster decision making, more
agility to respond to change, and enhanced ownership to drive performance and
customer centricity.
We are confident that our accelerated transformation drive and the improvement
actions we are taking, will help us rebuild the underlying EBIT margin to above 7%
over the medium term. We will also continue to put in place cash generation actions
to reduce our net debt leverage and we intend to bring net debt on underlying
EBITDA below 2.5 by the end of 2019.
Bert De Graeve
Chairman
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Annual Report Bekaert 2018
2018 has not delivered the results you expected from us,
nor the goals we set ourselves. The Board of Directors will
propose to the Annual General Meeting of Shareholders of
8 May 2019, a gross dividend of 70 eurocent. In line with the
company’s dividend policy, the proposed temporary dividend
cut reflects the lower earnings and high debt leverage of the
company.
We want to thank our customers, partners and shareholders
for their continued trust. And we want to thank our employees
for their commitment and drive to take on the new challenges
and realize our goals.
After 17 years with Bekaert, of which five years in the Chair
of the Board, my term will expire at the close of the Annual
General Meeting of Shareholders of 8 May 2019. I would like
to take this opportunity to wish the new Chairman, the entire
Board of Directors, and Matthew Taylor and his team success
in getting the company back on the value-driving growth path
where it belongs.
Matthew Taylor
Chief Executive Officer
Bert De Graeve
Chairman of the Board of Directors
Annual Report Bekaert 2018
BOARD OF
DIRECTORS
The main tasks of the Board of Directors are to determine the company’s general policy, to approve the strategy and to supervise activities. The Board of Directors is the company’s supreme decision-making body in all matters, other than those for which
decision-making powers are reserved for the General Meeting of Shareholders by law or by the articles of association. The Board of
Directors currently has 15 members. Their professional profiles cover different areas of expertise, such as law, business, industrial
operations, banking & investment banking, marketing & sales, HR and consultancy.
Bert De Graeve
Matthew Taylor
Celia Baxter
Leon Bekaert
Gregory Dalle
Charles de Liedekerke
Christophe Jacobs van Merlen
Hubert Jacobs van Merlen
Maxime Jadot
Pamela Knapp
Martina Merz
Colin Smith
Emilie van de Walle de Ghelcke
Henri Jean Velge
Mei Ye
Composition of the Board Directors
Bert De Graeve, Chairman
Matthew Taylor, CEO
Celia Baxter (1)
Leon Bekaert
Gregory Dalle
(1)
Charles de Liedekerke
Christophe Jacobs van Merlen
Hubert Jacobs van Merlen
Maxime Jadot
Pamela Knapp (1)
Martina Merz (1)
Colin Smith (1)
Emilie van de Walle de Ghelcke
Henri Jean Velge
Mei Ye (1)
Independent Directors
Changes during 2018
On 9 May 2018, the Annual Meeting of Shareholders approved the nomination of Colin Smith for appointment as independent
Director on the Board. Mr Smith replaced Alan Begg whose term of office expired and who was not seeking re-election.
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Annual Report Bekaert 2018
The composition of the Board of Directors will change
in 2019
The Board of Directors of NV Bekaert SA has announced,
on 1 March 2019, the succession plans of its Chairman and
Directors of the Board.
»» Jürgen Tinggren has been nominated as next Chairman.
His nomination for appointment as independent Director
of the Board is subject to approval by the Annual General
Meeting of Shareholders of 8 May 2019 and will, upon
approval, take effect at the close of the Meeting.
»» Caroline Storme has been nominated as member of
the Board of Directors. Her nomination, too, is subject to
approval by the Annual General meeting of Shareholders
of 8 May 2019.
The term of office of the Chairman of the Board, Bert
De Graeve, will expire at the close of the Annual General
Meeting of Shareholders of 8 May 2019. After 5 years in the
Chair of the Board, Bert De Graeve seeks no re-election for a
new term of 4 years.
The terms of office of the Directors Leon Bekaert, Gregory
Dalle, Charles de Liedekerke, Hubert Jacobs van Merlen
and Maxime Jadot will also expire at the close of the Annual
General Meeting of Shareholders of 8 May 2019.
Gregory Dalle, Charles de Liedekerke and Hubert Jacobs van
Merlen are candidates for re-election. Maxime Jadot and Leon
Bekaert, both having served 25 years on the Board of Bekaert,
seek no re-election. Martina Merz, independent Director of the
Board, will resign on 8 May 2019, given her recent appointment as Chair of thyssenkrupp AG in addition to other mandates.
The new composition of the Board will reduce from 15 to
13 members. The responsibilities and composition of the
Committees of the Board will be determined and announced
when the abovementioned nominations become effective.
Annual Report Bekaert 2018
BEKAERT
GROUP EXECUTIVE
The Bekaert Group Executive assumes the operational
responsibility for the company’s activities and acts under the
supervision of the Board of Directors. The executive management team is chaired by Matthew Taylor, Chief Executive
Officer.
The composition of the Bekaert Group Executive has
changed in 2018
On 1 March 2018, Jun Liao became a member of the Bekaert
Group Executive and was appointed Executive Vice President
– Regional Operations North Asia.
On 15 November 2018, Bekaert announced the departure of
Beatriz García-Cos Muntañola, Executive Vice President and
Chief Financial Officer. Frank Vromant, Executive Vice-President Bekaert Americas, was appointed Chief Financial Officer
ad interim with immediate effect, in addition to his executive
responsibilities for the Regional Operations Latin America.
After 36 years with Bekaert, and a lifelong career built on
business and technology expertise, Geert Van Haver, Chief
Technology Officer retired on 31 December 2018. The responsibilities of Geert Van Haver have since then been coordinated
internally, with a direct reporting line to the Chief Executive
Officer and since 1 March conform the new organizational
structure.
At the end of 2018, the Bekaert Group Executive consisted
of 8 members:
»» Matthew Taylor, CEO
»» Rajita D’Souza, Chief HR Officer
»» Lieven Larmuseau, Executive Vice President — Rubber
Reinforcement
»» Jun Liao, Executive Vice President — North Asia
»» Curd Vandekerckhove, Executive Vice President — Global
Operations
»» Stijn Vanneste, Executive Vice President — EMEA, South
Asia and South East Asia
»» Piet Van Riet, Executive Vice President — Industrial &
Specialty Products
»» Frank Vromant, Chief Financial Officer and Executive Vice
President — Latin America
The composition of the BGE will significantly change
in 2019*
As announced on 1 March 2019, the composition of the
Bekaert Group Executive will change according to the new
organizational structure which consists of four Business
Units and four Global Functional Domains. The team, led by
Matthew Taylor, CEO, will focus on value growth and
higher-level performance.
Business Units:
»» The Business Unit Rubber Reinforcement (serving
industries that use tire cord, bead wire, hose reinforcement
wire and conveyor belt reinforcement), will be led ad interim
by Lieven Larmuseau, until the appointment of a Divisional
CEO Rubber Reinforcement.
»» The Business Unit Steel Wire Solutions (serving industrial,
agricultural, consumer and construction markets with a
broad range of steel wire products and solutions), is led by
Stijn Vanneste, Divisional CEO Steel Wire Solutions.
»» The Business Unit Specialty Businesses (including
building products, fiber technologies, combustion technology and sawing wire) is led by Jun Liao, Divisional CEO
Specialty Businesses.
»» Bridon-Bekaert Ropes Group (BBRG, including the
ropes and advanced cords businesses) is led by Brett
Simpson, CEO of BBRG.
The business units will have global P&L accountability for
strategy and delivery in their distinct areas and therefore have
dedicated production facilities and commercial and technology
teams within their respective organization. This will help them
develop a customer-centric approach aligned with the specific
needs and dynamics of their markets.
Global Functions:
»» Frank Vromant will continue as CFO ad interim, until the
new incumbent joins the company.
»» Rajita D’Souza remains Chief Human Resources Officer.
»» The appointment of an externally recruited Chief Strategy
Officer will be announced shortly.
»» Curd Vandekerckhove has been appointed Chief
Operations Officer.
The functions will take a role as strategic business partners,
accountable for providing specific expertise and services
across the Group, and ensuring the business has the right
capability to deliver on short and long term goals.
* More information on the BGE composition is available in the Corporate
Governance Chapter.
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Annual Report Bekaert 2018
OUR
STRATEGY
Who we are
Bekaert is a world market and technology leader in steel wire transformation and
coating technologies. We pursue to be the preferred supplier for our steel wire
products and solutions by continuously delivering superior value to our customers
worldwide. Bekaert (Euronext Brussels: BEKB) was established in 1880 and is
a global company with almost 30 000 employees worldwide, headquarters in
Belgium and € 5 billion in combined revenue.
What we do
We seek to be the best in understanding the applications for which our customers use steel wire. Knowing how our steel wire products function within our
customers’ production processes and products helps us to develop and deliver
the solutions that best meet their requirements and, through that, we create value
for our customers.
Transforming steel wire and applying unique coating technologies form our core
business. Depending on our customers’ requirements, we draw wire in different diameters and strengths, even as thin as ultrafine fibers of one micron. We
group the wires into cords, ropes and strands, weave or knit them into fabric, or
process them into an end product. The coatings we apply reduce friction, improve
corrosion resistance, or enhance adhesion with other materials.
How we work
better together sums up the unique cooperation within Bekaert and between
Bekaert and its business partners. We create value for our customers by cocreating and delivering a quality portfolio of steel wire solutions and by offering
customized services on all continents. We believe in lasting relationships with our
customers, suppliers and other stakeholders, and are committed to delivering
long-term value to all of them. We are convinced that the trust, integrity and irrepressibility that bring our employees worldwide together as one team also create
the fundamentals of successful partnerships wherever we do business.
Our strategy
Continuously driving value creation for our shareholders by cost effectively
creating superior value for customers is our strategy. Our vision and core strategies form the foundation of a transformation of our business towards higher level
performance.
Annual Report Bekaert 2018
Our Vision - Our Field of Play
Consistent with our better together aspiration, we relentlessly pursue to be
the preferred supplier for our steel wire products and solutions,
by continuously delivering superior value to our customers around the world.
Goal Statement
for the Heart
Goal Statement
for the Head
Drive value creation through a One Bekaert
Team with the passion to win, operating in a
no-harm-to-anyone working environment
Increase: Revenue
Profit
ROCE
Our Long Term
Core Strategies
Our Immediate
Must Win Battles
1.
2.
3.
4.
1.
2.
3.
4.
5.
Drive the customer into the heart of our business
Value driven growth
Technology leadership and speed
Leverage scale, reduce complexity and
reach lowest total cost
Engage and empower people
Fit for Growth
Build a winning business portfolio
Install manufacturing excellence
Build the future for Bekaert in
North America
5. Drive customer excellence
Our Values
We act with integrity - We earn trust - We are irrepressible!
Our Vision
Consistent with our better together aspiration, we relentlessly pursue being
the preferred supplier for our steel wire products and solutions by continuously
delivering superior value to our customers around the world.
With this Vision statement, Bekaert has explicitly determined its ‘field of play’:
it describes what we want to be, where we want to compete and invest, and
how we want to differentiate ourselves.
Our Long-term Core Strategies
Our five core strategies form the basis of Bekaert’s priorities and
decision-making process towards driving value and growth. These strategies
put the company’s vision into practice and reflect the direction and priorities
over the longer term:
1.
2.
3.
4.
5.
Drive the customer into the heart of our business
Value-driven growth
Technology leadership and speed
Leverage scale, reduce complexity and reach lowest total cost
Engage and empower people
To give our core strategies a much more immediate focus with dedicated
resources and close progress monitoring, we also define our Must Win Battles. Must Win Battles receive a special level of attention from the entire organization and, as a result, enable the deployment of the five core strategies
across teams worldwide.
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Annual Report Bekaert 2018
Progress on the core strategies
1) Drive the customer into the heart of our business
Bekaert has always believed in customer collaboration and co-creation as
drivers of sustainable partnerships and customer satisfaction. However, we want
to do better and become a truly customer-centric organization. This strategy is
about gaining insight into what value means to our customers and acting on it.
It is about continuously prioritizing our customers in whatever we do, at all levels
and wherever in the world.
In 2018, we continued to improve our customer service models. It is one of the
tangible impacts of the Bekaert Customer Excellence (BCE) transformation
program and helps us to obtain better customer insight and to use more
enhanced tools.
NPS
Bekaert completed a Net Promotor Score (NPS) Survey across all businesses and
on a global scale. In 2017, the first customer group covered 50% of Bekaert’s Top
80% revenue customers. In May 2018, the remaining 50% were asked to participate. It was the first time that Bekaert organized a global, full scope NPS survey.
The combined score from both phases was 49, much higher than the average
for international B2B manufacturing companies. The survey gauged the loyalty
of customer relationships by measuring the likelihood that customers would
recommend Bekaert to other companies, colleagues or business partners. ICMA
Group, an independent market research agency, handled the coordination and
analysis of the survey.
The Net Promotor Scores for international B2B manufacturing companies usually
average 20 to 30. Bekaert was very pleased with the score of 49. Furthermore,
the 28% response rate, compared to a typical benchmark of 10 to 15% for online
surveys, reflects the high level of commitment of our customers to work closely
together as business partners.
The more important results for Bekaert are those for each business activity and
region, from which we can learn to better understand and improve customer
relations and excellence. A new NPS survey is planned in 2019.
Customer week
Growing customer insight is not only relevant to our marketing & sales or business
development teams. Bekaert organizes a Customer Week every year in various
locations around the world. Through information sessions, workshops and customer visits, employees from all departments learned about who our customers
are and how we can best serve them.
In 2018 we further expanded the concept geographically. Bekaert Wire Indonesia, for instance, organized the event for the first time. Four key customers came
to display the products they manufacture with Bekaert steel wire and shared
information on what they find important in terms of quality and service. Meeting
customers in person and learning more about their processes, products and
markets, made the event a true eye-opener to our employees.
0
49
NPS
-50
-100
50
100
Annual Report Bekaert 2018
Customer-centricity during the quota and tariff turmoil
Continuously changing trade policy and ever higher trade barriers in 2018 have
pushed the limits of what we can offer in terms of the best supply solutions for
our customers in the US. As a truly global player, Bekaert worked out alternative sourcing options to serve customers in the best way possible. US tire
customers in particular, appreciated the flexibility and transparency Bekaert
offered in helping to reduce the impact on their business performance and
continuity. Our customers also engaged in our efforts to file for exclusions on
quotas and tariffs. After a process of about one year, the US Government
decided, in early February 2019, to grant quarterly exclusions for steel wire rod
types that are not available in the US and for which we are bound to import
from suppliers abroad. This doesn’t solve the supply chain issues caused by
the continuous changes in trade policy, but it offers a wider range of supply
options, made possible by the efforts of an irrepressible team with the right
customer-centric mindset.
CANADA
USA
25
%
25
RUSSIA
EUROPE
TURKEY
25
%
25
%
%
10
%
5
%
to
ECUADOR 40
%
INDIA
CHILE 29
to
38
%
%
Countries relevant to Bekaert that have installed global or bilateral trade
barriers against imports of steel wire rod or half products, impacting price
levels and/or sourcing decisions – or with protection measures creating a
rather isolated domestic supply chain (Russia).
Organizational changes driving the customer into the heart of our business
The new organizational set-up, as announced on 1 March 2019, will enable our teams to live a more customer-centric
and performance-driven culture. With global accountability for strategy and delivery in their distinct areas, the four Bekaert
Business Units will develop approaches aligned with the specific needs of their respective customers and with the dynamics
and trends within their markets. The revised structure will enable faster decision-making and technology and innovation
development, as well as enhanced agility to respond to change, which should benefit our customers.
Bekaert India received two out of the four awards presented by Parker Hannifin
India to rubber reinforcement suppliers. Bekaert won the awards ‘Outstanding
Performance in Continuous Improvement’ and ‘Outstanding Performance
in Delivery’. We also received a certificate of appreciation for ‘Excellence in
Customer Satisfaction’. In addition, Bekaert India won, for the third consecutive
year, the ‘Company of the year’ award at the TRiLA Awards (Tyre & Rubber
Industry Leadership Acknowledgement), in the category ‘Reinforcement
Products’.
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Annual Report Bekaert 2018
2) Value driven growth
In implementing this strategy, Bekaert is making a clear statement about where
we want to grow and how we can provide superior value to differentiate ourselves
from the competition.
We have not been successful in turning our organic volume growth into incremental profit in 2018. Various factors have been weighing on our profitability, whilst the
actions we undertook to offset their impact were not sufficient.
We did make progress in a number of domains and will see more benefits from
the actions we undertook in the years to come:
»» In the past two years, we have made significant investments to expand the
manufacturing capacity of our rubber reinforcement activities in EMEA and Asia
Pacific. The expansion programs generated extra costs related to the hiring and
training of personnel and to extensive approval procedures, with tire customers
inducing quality test runs for new technologies and raw material sources. The
benefits from these expansion investments in Slovakia, Romania, Russia, China
and India have therefore been restricted at the profit level. We project more
value creation from our investments in 2019.
»» A number of loss generating and weaker performing activities have cast a
shadow on the margin improvement of others. We have therefore implemented
measures, in 2018, to start turning around the profitability of those businesses
that have the potential to generate profitable growth, and have closed those
entities without margin recovery potential. These actions include measures that
will take time to deliver, but which we are convinced will improve our business
portfolio. In 2019, our results will no longer be affected by the loss generation
and one-off closure impacts related to the plants that have been closed in Italy
and Costa Rica.
»» Our actions to further increase the market penetration of more advanced
products, which lower the total cost in the value chain and are more value
creating for our customers and for our business, gained traction during the
course of the second half of the year. This particularly applies to the ever
stronger and lighter tire cord constructions that allow tire makers to produce
tires with a lower weight, thinner plies, and lower rolling resistance. Ultra-tensile
steel cord is less expensive than the conventional steel cord it replaces when
the total cost of ownership is taken into consideration because it drastically
reduces the steel cord weight and the amount of rubber required for the thinner
plies.
»» To enable value-driven growth, we have defined several target markets with
a long-term value growth potential. We have the intention to expand our
presence in these target sectors, both in existing and into new markets, and
are considering partnerships that will leverage complementary technologies,
combined product solutions, and extended sales channels. The goal is simple:
we want to take a leading position in the winning markets of tomorrow.
Value-driven growth:
our strategy to shape a
long-term perspective
Annual Report Bekaert 2018
Examples of partnership forms
»» In developing a new generation hybrid rope for special hoisting solutions, Bridon-Bekaert Ropes Group teamed up
with leading producers of high modulus fibers. After successful field trials in mines all over the world, a high-strength,
low-weight hybrid rope was launched at IMARC Australia in October 2018.
»» IdealAlambrec, Bekaert’s subsidiary in Ecuador, has established a 50/50 joint venture with AGF Group of Canada,
specialized in reinforcing steel, post-tensioning, and scaffolding & access, to combine and grow the cut and bend and
installation rebar business for construction works.
»» Bekaert has worked together with two leading finite element software companies to integrate the post-crack behavior
of Dramix® steel fiber concrete in their software packages. Designers using the latest SCIA and ADAPT engineering
and building software packages, can now integrate Dramix® steel fiber in their structural designs, giving Dramix® steel
fibers more exposure as a reference solution in concrete design.
»» We team up with customers and suppliers around the globe to develop, implement, upgrade and protect both current
and future technologies. Listening closely to our customers and understanding how our products function within their
production lines and products is key to developing value-creating solutions. Co-creation is therefore one of the most
impactful partnership forms explored by Bekaert and its customers.
»» Our customers in several key markets have clear ambitions in terms of
improving their sustainability performance and are setting high demands
across the value chain, which involves suppliers being transparent and
ambitious with regards to their own sustainability performance. Bekaert
too, has set clear ambitions and targets in relation to the progress we
want to achieve in this domain and has made further steps in improving its
own performance, as well as in engaging more suppliers in its endeavors,
hereby expanding the scope thereof within our total value chain. In 2018,
Bekaert received, for the second year in a row, a gold label from EcoVadis,
scoring high (99th percentile) in our industry. Our GRI-based monitoring and
reporting also enabled us to score above industry average in CDPs Supply
Chain listing. Steadily improving our sustainability performance is one key
element in helping us to attain preferred supplier status with our customers.
Bekaert receives Michelin Supplier Award 2018
In November 2018, Michelin honored Bekaert with a Supplier Award, praising
our commitment to building a partnership with the Michelin Group that drives
greater shared benefits for the future.
This award is the result of years of cooperation, continuous improvements
in many areas like quality, on-time delivery, project development, innovation,
strategic alignment, and the allocation of dedicated resources. It demonstrates
our successful approach of bringing value to Michelin and helping them
achieve success.
Bekaert showcases steel wire product offering at Wire Düsseldorf Germany
The Bekaert sales team met with customers and prospects from all over
the world during Wire Düsseldorf 2018. Our booth showcased product
designs for various sector applications, with special emphasis on the value
creating properties of product innovations such as high-tensile strength
products for the construction, energy, offshore and automotive industries.
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Annual Report Bekaert 2018
»» In 2018, in our endeavor to create more value-driven growth, Bekaert developed
a new Enterprise Performance Management (EPM) model. EPM is a set of
processes and tools that will enable us to create more fact-based transparency
with regards to the drivers of value creation and the root causes of performance
gaps. In practice, EPM will help us be more ambitious in our target setting, and
provide the tools to better understand the impact of planned and implemented
improvement scenarios. EPM has been implemented in the planning process
for 2019 and the longer-term strategic planning process of the Group.
3) Technology leadership and speed
Our third core strategy is about accelerating Bekaert’s technology leadership and
speed in alignment with our strategy to drive value-creating growth. Co-creation
is one of the leading principles: we help our customers differentiate themselves
in their markets.
R&D in 2018
1000
cyclic corrosion tests
65 million
€
R&D budget
24
research partnerships
1 700
patents and patent applications
Acknowledgement
We wish to thank the Flemish government’s Flanders Innovation & Entrepreneurship (VLAIO) agency, as well as the Belgian federal government. Their subsidies
and incentives for R&D projects involving highly educated scientific staff and
researchers in Flanders are essential for maintaining a foothold for R&D activities
in Belgium.
Innovation in practice: continuously redeploying our core
competencies
In order to sustain and strengthen our technological leadership, we continue to
explore new possibilities in steel wire transformation and coating technologies.
Through the combination of these competencies, we influence the properties of
steel such as strength, ductility, fatigue, shape, adhesion, and corrosion resistance.
54 000
fatigue tests
Annual Report Bekaert 2018
Even with almost 140 years of expertise, there is still much to be discovered
in our search for the optimal bulk and surface properties of steel wire. By
maximizing the synergies between the competencies of our technologists and
those of our research and business partners, we can make a real difference
and draw infinite possibilities.
Mordica Memorial Award
Senior Technology Manager Walther Van Raemdonck has won the 2019 Mordica Memorial
Award organized by the Wire Association International (WAI), which is seen as the wire and cable
industry’s most prestigious award. The Mordica Memorial Award is presented to an individual to
honor their contributions to the wire industry’s base through research, development, innovation,
or other technical pursuits. The Wire Association International, Inc. is a worldwide technical society
for wire and cable industry professionals that collects and shares technical, manufacturing and
general business information.
Intellectual Property
The Intellectual Property department of Bekaert takes care of patents,
designs, trademarks, domain names and trade secrets for the whole Bekaert
Group, including the Bridon-Bekaert Ropes Group and the joint ventures in
Brazil, through its teams in Belgium and China. It also advises on IP clauses
in various agreements such as joint development agreements and licenses.
Reliable IP protection policies have made Bekaert a trusted partner of
customers and suppliers around the world.
In 2018, we filed 31 first patent applications. At the end of 2018, the Bekaert
Group had a portfolio of more than 1 700 patents and patent applications.
Co-creation and open innovation
Bekaert actively seeks opportunities for cooperation with strategic customers,
suppliers and academic research institutes and universities. The academic
partnerships particularly focus on physical metallurgy, metallic coatings and
modeling. Two partnerships were added in 2018: University of Eindhoven (The
Netherlands) and University of Prague (Czech Republic).
University of Eindhoven (Netherlands)
University of Cambridge (UK)
University College Dublin (Ireland)
Bekaert University Technology Centre (Ireland)
University of Antwerp (Belgium)
University of Leuven (Belgium)
University of Ghent (Belgium)
University of Brussels (Belgium)
OCAS (Gent, Belgium)
Flanders Make (Lommel & Leuven, Belgium)
Von Karman Institute (Sint-Genesius-Rode, Belgium)
CRM Group (Liège, Belgium)
Fraunhofer Gesellschaft (München, Duitsland)
Imperial College London (UK)
University of Prague (Czech Republic)
University of Lille (France)
Colorado School of Mines (Golden, CO, US)
CEIT (Centro de Estudios Investigaciones Técnicas,
Navarra, Spain)
Cenim, the National Center for
Metallurgical Research (Madrid, Spain)
Tsinghua University (China)
University of Trnava (Slovakia)
University of Zagreb (Croatia)
Qingdao University of Science
and Technology (China)
Nanjing University (China)
17
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Annual Report Bekaert 2018
Innovation & Venturing
Bekaert’s Innovation & Venturing department discovers and transforms ideas
into opportunities that bring value to our customers. The team supports the
technology department and business platforms in their search for new products
and solutions. In 2018, polymer & composite reinforcement and digital business
models joined the existing focus areas of superconductivity and additive manufacturing. True to its name, the Innovation & Venturing department uses different
operating modes to explore these areas, such as investing in venture capital,
organizing innovation campaigns within the company, or participating in trials.
While we have very close ongoing collaboration programs with our key customers, and display technology leadership in various domains, we haven’t been
as successful as we wanted to be in speeding up the go-to-market process.
We are convinced that the new organizational structure, implemented in March
2019, will enable shorter development cycles and drive faster results from new
developments.
Technology is a strategic differentiator for Bekaert and plays an important role in
both our short- and long-term value proposition.
»» In order to drive our near-term technology leadership and speed, Bekaert
intends to integrate the business-relevant technological development and
testing activities within the respective Business Units. This set-up would bring
new technologies into the market faster because the Business Units will work
with dedicated teams and will be able to set clear priorities for technology
development based on the deep knowledge of their customer segments.
»» Ensuring Bekaert drives evolution in its technology leadership for years to come,
a central research and innovation center of expertise would remain accountable
for activities that span the enterprise. This team’s main role is to safeguard
consistency in driving Bekaert’s cross-unit core technology competencies, as
well as to drive innovation in relevant solutions that we do not currently have in
our business unit portfolios.
Equipped for Excellence
Bekaert’s in-house engineering department plays a key role in the optimization
and standardization of our production processes and machinery. In addition to
designing, manufacturing and integrating available engineering solutions, this
department installs and services the critical equipment in our production plants
worldwide. It co-operates with other Bekaert departments, such as technology
and manufacturing excellence, and with external partners.
Newly designed equipment always combines innovative solutions for performance
improvements in various areas, including product quality, production excellence
and flexibility, and cost efficiency. Other key elements in new machine design are
safety, ergonomics and energy efficiency.
The Bekaert engineering teams are located in Belgium, China, India, Slovakia,
USA and Brazil. The Belgian and Chinese teams focus on the conceptual design
of new equipment. The teams in China, India, Slovakia, USA and Brazil provide
on-site services to the Bekaert plants worldwide.
Digital business models
Bekaert looks at start-up companies
that offer unique solutions for
challenges faced by our customers.
In 2018, Bridon-Bekaert Ropes
Group invested in VisionTek
Engineering Srl., specialized in rope
performance monitoring based on
3D measurements of ropes. By
collecting and analyzing the data of
installed ropes, customers will receive
on-site and online recommendations
related to the preventive maintenance
of the rope. The aim is that they will
no longer need to replace the ropes
according to pre-set times, but based
on a complete rope integrity and asset
management model.
Annual Report Bekaert 2018
Bekaert Engineering Field of Play
Equipment
Supplier
Spare
Parts
Advanced
Service
Turn Key
Solutions
Engineering
Solutions
Bekaert’s engineering team is constantly looking for internal and external
opportunities for total cost reduction. It also looks for disruptive innovative
engineering solutions for new products and processes. Furthermore, Bekaert
Engineering ensures assembly, installation and maintenance services, and
coordinates global spare parts management.
4) Leverage scale, reduce complexity and reach lowest total cost
This core strategy is designed to leverage our scale to greater effect, by reducing complexity and focusing on our opportunities and strengths with more
standardization at best-in-class levels. We also want to ensure that in the
process of providing the best value-creating solutions to our customers, we
organize ourselves in a very cost-effective way and provide a total cost reduction through effective process and product innovations.
The Bekaert Manufacturing System (BMS) helps us to make progress on this
strategy. BMS is a program designed to ensure manufacturing excellence
in all our processes and locations worldwide. BMS brings together the collective effort of all Bekaert plants to drive the lowest total cost offering to our
customers.
BMS was launched at the end of 2014 and has now been implemented in
nearly all plants worldwide. Enabled by the BMS methodology and tools, our
plants have identified and implemented projects to increase safety, quality and
efficiency, and to reduce cost.
Bekaert’s joint ventures with ArcelorMittal in Brazil and the plants belonging
to the Bridon-Bekaert Ropes Group are included in the BMS implementation
roadmap to enable similar benefits in their operations.
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20
Annual Report Bekaert 2018
Bekintex team members recognize value of BMS way of working
One of the final locations to implement BMS was Bekintex (Wetteren, Belgium), the facility that converts thin steel fibers into yarns
and fabric. All employees were invited to a kick-off event during
which the basics and benefits of the BMS methodology were
explained. Operators and supervisors already noticed the value of
the new way of working: “It’s easier to follow up the quality and productivity thanks to the new information tools because we all get the
correct information at the same time. Teams also work better together
because each member is more involved.”
BMS as a catalyst for continuous performance improvement
The project progress and objectives defined within BMS have now also been
integrated into the yearly planning cycle of the plants, so that the continued focus
and improvement remain ensured.
In 2017, to keep the transformation impact of past BMS implementations sustainable, Bekaert established the Bekaert Manufacturing Academy. This program enables us to keep building our capabilities and to improve and share our
standards and best practices, so that we keep evolving our way of working. In
2018, the Academy’s focus was on increasing plant productivity, standardization
and adoption of 5S and on the preparation of an international group of Bekaert
trainers responsible for bringing best practices to the shop floor.
Tina Tang leads international BMS workshops
Throughout 2018, operations managers from all over the world – including
the US, Brazil, Slovakia, India and China – travelled to Belgium to attend
workshops on BMS. Tina Tang, global program leader of the Bekaert
Manufacturing Academy, led several of these workshops.
As a Chinese national regularly commuting to Belgium and other locations,
Tina is an example of Bekaert’s international career path potential. After
starting as a process engineer in Belgium, she moved on to other technical
and quality-related functions around the world, before becoming HR
Learning & Development Manager and Global Bekaert Manufacturing
System Leader based out of China. Tina’s international career has also been
noticed by the magazine Engineeringnet, which included Tina’s and other
expats’ stories in an article dedicated to Bekaert’s international leadership
strategy.
In 2018, BMS launched a new set of tools that particularly focus on quality,
called ABC (Always Committed, Best Quality, Customer Delight). In addition to
our continued focus on quality processes, such as effective quality controls and
programs to reduce rejects and scrap, ABC targets quality improvements that
will directly and visibly benefit our customers. The explicit focus on the customer brings manufacturing excellence (BMS) and customer excellence (BCE)
together on the shop floor. With ABC we want to achieve a breakthrough in quality performance, durable problem solving and elimination, and a true customercentric mindset throughout our operations worldwide.
In 2018, as the next step in our BMS journey, we developed a digital framework
to improve shop floor excellence. Based on this framework and a pilot project,
plants will be equipped from 2019 onwards with new digital tools to improve our
safety, quality, cost and delivery performance.
ABC
Always committed
Best quality
Customer delight
Annual Report Bekaert 2018
5) Engage and empower people
The engagement and empowerment of people have been key success factors
all along our transformation journey. We empower our teams with responsibility, authority and accountability, and count on the engagement of every
Bekaert employee to drive a higher-level of performance.
Along with the development and implementation of Bekaert’s new Enterprise
Performance Management (EPM) model, Bekaert has developed a People
Performance Management (PPM) program. PPM replaces the company’s
Personal Development Review of the past and is our new way of looking at
people performance and how we can better achieve our goals in the future.
As such, PPM is part of a larger effort to become a much more performance-driven organization.
Enablers for the new people performance management practice are: a clear
alignment of team and individual goals with business priorities; frequent performance steering and coaching; fair recognition in line with the achieved
performance; and better supporting tools that allow employees to keep track
of their performance and ‘feedforward’ actions throughout the year. The program, the tools and the training materials were developed and announced in
2018, in preparation of the launch at the start of 2019.
After the extended organization-wide employee survey of 2017, Bekaert conducted a follow-up survey to gauge the current employee engagement levels.
The 2018 results show that sustainable engagement has further improved at
Bekaert. Our employees particularly appreciated the efforts made to implement the actions defined after the initial survey. In 2019, too, there will be a
company-wide employee survey.
Team Venezuale: the most engaged worldwide
Teams around the world stepped up their efforts to engage employees
following 2017’s employee survey. Among the many initiatives, Bekaert in
Venezuela introduced a recognition program and award event for the team
to reward value-adding projects developed and implemented at Vicson.
The results not only spoke to the head, but also to the heart. Despite
the dire political situation and economic and humanitarian crisis in
Venezuela, the pride and engagement of our Vicson team was clearly
visible in the 2018 pulse survey results. The exceptionally high engagement score (98%) shows that employees feel respected and listened
to. Moreover, they highlight the sense of personal accomplishment
they gain from working at Bekaert. In fact, all questions in the survey
received top scores, marking our team in Venezuela as most engaged
of all Bekaert locations worldwide!
PPM
People Performance
Management
21
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Annual Report Bekaert 2018
Prodalam and Inchalam win Chilean industry awards
The Training Management Group (OTIC) of Chile’s Association of Metallurgic and Metalworking Industries (ASIMET) has awarded two of Bekaert’s
Chilean entities: Prodalam with the ‘Commitment to Employees award’
and Inchalam with the ‘Commitment to Training’ award.
Prodalam was given the award for the training initiatives that took place
during 2018. They include the creation of training curriculums for each job
family and the alliance with one of the most recognized providers of online
training in the country. This ensured that all 648 employees distributed
along the 4 300 kilometres of Chile have the same opportunity of receiving
high quality education to improve their performance and grow within the
local organization and within Bekaert.
Inchalam received the award for its commitment to continuous development through training skills and competencies, completing a total of
22 929 hours of effective training during 2018. This made Inchalam a great
reference in relation to people management practices in the region.
In addition to the Commitment with Employees and Training awards,
Inchalam won the Best Innovation Management trophy, rewarding the
company for its continuous search for excellence through innovation management and the participation of its members in initiatives of transformation in innovation.
As a Corporate Socially Responsible company, engagement is the keyword when it
comes to Sustainability. A summary of our 2018-2019 sustainability report is included
in the Report of the Board of Directors. Our sustainability efforts and activities
are focused in such a way that balanced consideration is given to the interests
of all respective stakeholders, including employees, customers, shareholders,
partners, local governments and communities. To underscore our engagement
and commitment to drive progress in this field, we have defined an ambition and a
set of clear short- and long-term targets for each of the key pillars of sustainability.
better together, the movie
At Bekaert, we believe in working together to achieve better performance. Our
teams show the way! All actors in the better together video are Bekaert colleagues. This video, which was produced in 2018, involves team members of
eight nationalities from our manufacturing locations in Chile, Slovakia, China and
Belgium.
Annual Report Bekaert 2018
23
INDUSTRY
OFFERINGS
Annual Report Bekaert 2018
Bekaert has a strong presence in diverse sectors. This makes us less sensitive to sector-specific trends and it also
benefits our customers, because solutions we develop for customers in one sector often form the basis of innovations
in others.
Bekaert serves customers across a multitude of sectors with a unique portfolio of drawn steel wire products, coated
to optimally suit the application needs. Bekaert steel wire is used in cars and trucks, in elevators and mines, in tunnels
and bridges, at home and in the office, and in machines and offshore. If it drives, ascends, hoists, filters, reinforces,
fences or fastens, there is a good chance Bekaert is inside.
6%
45
AUTOMOTIVE
21
CONSTRUCTION
%
6%
7%
%
45%
8%
7%
21%
More information on bekaert.com
8%
AGRICULTURE
7%
ENERGY & UTILITIES
7%
CONSUMER GOODS
6%
BASIC MATERIALS
6%
EQUIPMENT
25
SEGMENT
PERFORMANCE
Annual Report Bekaert 2018
EMEA
Economic Environment in 2018
After enjoying a period of strong economic growth, economic activity in
Europe slowed in the second half of 2018. Lingering concerns about the
impact of Brexit and the slow nature of the process, disruptions to car production due to changes in emission test norms, social unrest in various countries
and global trade policy uncertainty were the main causes of this. For the whole
of 2018, this resulted in GDP growth of 1.8% in the Euro Area, significantly
lower than last year’s 2.4%. Growth in Central and Eastern Europe remained
strong, but nonetheless decreased compared to 2017.
EMEA 2018
Combined sales by industry
9%
5%
23%
10%
Following four years of sales growth, the car industry faced a downturn in
2018, mainly due to the introduction of a new testing procedure, WLTP, and
postponed or cancelled investments amid Brexit uncertainty. In contrast, the
construction markets posted healthy growth throughout the year, both in the
residential and non-residential markets in Western Europe and due to civil
infrastructure projects in Central Europe.
Bekaert has a presence in both the Western European and Central & Eastern
European markets. In Europe, we offer a quality portfolio of steel wire products
for sectors that are in search of innovative, high-end products and solutions.
Our Activity performance
Bekaert’s activities in EMEA achieved almost 5% sales growth in 2018, driven
by the aggregate effect of passed-on wire rod price increases and price mix
(+6.8%), a small organic volume decline (-0.9%) and the divestment effect of
the Solaronics business (-0.9%). Demand from the automotive and construction markets was strong throughout the year, while demand for industrial,
specialty, and stainless products softened in the second half of the year.
Underlying EBIT was € 114 million at a margin of 8.5%. The margin performance was lower due to higher than anticipated start-up costs in plants with
major expansion programs in Central Europe, and increased price pressure in
several markets, particularly those where we compete with integrated players.
Reported EBIT dropped to 5.5% as a result of the one-off impact of the closure of the Figline plant in Italy (€ -40 million), thereby reflecting the operational
losses incurred since the announcement of the closure, the impairment losses
of the site’s assets and the expenses accrued for the closure.
Capital expenditure (PP&E) amounted to € 67 million and included, amongst
other things, capacity expansions in Romania, Slovakia and Russia.
53%
Automotive
Energy & Utilities
Construction
Consumer goods
Other
Combined sales
€ 1 322 million
Capital expenditures (PP&E)
€ 67 million
Total assets
€ 973 million
Employees
7 895
27
28
Annual Report Bekaert 2018
Getting prepared for Brexit
One of the first and tangible effects of an eventual Brexit will be the logistical
and administrative impact at the borders.
In 2018, we investigated the potential impact of a No Deal Brexit on our business and customer service relations. The scope of inbound and outbound
transport flows between the EU and UK is relatively limited for us (less than
4% of consolidated sales). Nevertheless, we have worked closely together with
customers and suppliers to determine and take various proactive measures
for contingencies, including consignment stocks, the timely application for
customs licenses and the certificate of Authorized Economic Operator, and
the consideration of alternative transport routes in case of long delays at the
currently most used border crossing points.
Drying business becomes part of Argynnis Group AB
Bekaert reached an agreement with Argynnis Group AB of Sweden regarding
the sale of all shares in Solaronics SA. The transaction covers the production
facility in Armentières (France) and an international sales & services network.
An in-depth analysis showed that the further growth potential of the drying
business of Bekaert Combustion Technologies would be best secured by
entrusting its future potential to an organization that combines the competences of two complementary industry players.
People management in Slovakia
Slovakia has witnessed significant economic growth over recent years, driven by
intensive investments by automotive companies in the west and central region of
the country. As a result, the unemployment rate in the Trnava/Nitra region (where
both Bekaert plants are located) has dropped below 2%.
Bekaert, too, invested in capacity expansions and in recruiting and training new
colleagues. The HR team focused intensively on finding the right people in an
extremely tight labor market, while not losing sight of retaining and further engaging our current workforce. Thanks to these efforts, Bekaert performed better than
many other companies in the region who struggled with people turnover rates of
more than 25%.
It has been very difficult, though, to fully benefit from our hiring and training
efforts, as the people turnover rates are still particularly high during the first year
of employment. In the summer of 2018, the HR team decided to take a new
approach to find more stable solutions.
Alongside local recruitment, Bekaert now works with specialized agencies to
hire from abroad. Over the last months, we have hired and trained more than 100
Serbian and more than 20 Ukrainian employees to complement our Slovak work
force and we are actively taking care of creating a cultural blend that benefits the
spirit in the plants. So far, the integration efforts have been successful and the
people retention rate has become more stable than before.
Our recruitment and engagement actions continue as they are critical in leveraging the benefits of our investments and training activities so we can achieve our
goals and continued growth ambitions.
Annual Report Bekaert 2018
NORTH AMERICA
Economic Environment in 2018
The US economy grew about +3% in 2018, reflecting the positive impact of
tax reforms and continued strong demand. The unemployment rate fell to its
lowest level since 1969. New protectionist policies that have raised tariffs and
disrupted the established manufacturing supply chains started to progressively impact consumer prices and investment decisions during the course
of the year.
While the US car market showed little more than flat growth in 2018, domestic
tire production rebounded firmly. The replacement market for car tires, for
instance, increased by more than 3%. The massive damage to the power
infrastructure due to the many wildfires, hurricanes, and floods in the US in
2018, led to more activity and demand in energy related markets. Demand
from the agricultural markets, on the other hand, has been weak for the second consecutive year.
North America 2018
Combined sales by industry
10%
18%
8%
13%
51%
Our Activity performance
In 2018, Bekaert’s activities in North America achieved +12% sales growth.
The organic sales growth accounted for +16.4% and stemmed from improved
volumes (+5.7%) and passed-on higher wire rod prices and other price-mix
effects (+10.6%). The adverse currency impact for the year tempered to -4.4%
due to the appreciation of the US$ in the last quarter of 2018.
Automotive demand remained strong throughout the year. The industrial steel
wire and agricultural fencing markets were affected by increased price pressure and by the usual seasonal effects in the second half of the year.
Bekaert’s rubber reinforcement activities in the US recorded solid growth.
The margins were, however, affected by supply chain issues caused by the
continuous changes in trade policy, including quota restrictions and tariffs.
The rubber reinforcement activities in the US use imported wire rod because
the qualities needed to produce the related products are not available in the
country. After reaching the volume quota limit on imports from Brazil at the
end of July, the cost of imported wire rod increased by 50% as from August
onwards. This cost increase reflected the aggregate impact of import duties
and anti-dumping tariffs as well as wire rod price evolutions and additional
logistics costs related to the imports from other continents. Efforts were made
to pass on the steep wire rod price increases to our customers and to create
a more balanced offering of domestically produced and imported tire cord
from our manufacturing plants abroad.
In other steel wire markets, the average price of domestic wire rod increased
about 30% compared with last year. Passing on the full price impact to our
customers was not possible as we compete with import flows and integrated
players (downstream integrated steel mills) there. The margins were, moreover,
affected by continued weak demand in agricultural markets.
Automotive
Agriculture
Construction
Energy & Utilities
Other
Combined sales
€ 618 million
Capital expenditures (PP&E)
€ 18 million
Total assets
€ 367 million
Employees
1 411
29
30
Annual Report Bekaert 2018
Both the underlying and reported EBIT amounted to € 25 million at a margin of
4%. Capital expenditure (PP&E) was € 18 million in North America.
Bekaert Shelbyville adds glued Dramix® fibers to the mix
In response to US policy encouraging federal agencies to buy American-made products, Bekaert has started producing glued Dramix® steel
fibers for concrete reinforcement in Shelbyville (Kentucky, US).
Customer quality improvement program kicks off in the US
The ABC Quality module of the Bekaert Manufacturing System (BMS)
program focuses on quality efforts and the role everybody can play in
ensuring and providing the highest level of quality and service to our customers. ABC (Always Committed, Best Quality, Customer Delight) wants
to achieve a breakthrough in quality performance, durable problem solving and elimination, and a true customer-centric mindset throughout our
operations worldwide.
The kick-off of ABC in the US took place in the Van Buren plant in Arkansas and was soon followed by an intensive session with the enthusiastic
team of the Orrville plant in Ohio. ABC requires the engagement and
commitment of all plant team members and is being deployed worldwide
with the help of experienced change agents, effective tools, and highly
interactive training sessions.
Annual Report Bekaert 2018
31
LATIN AMERICA
Economic Environment in 2018
Latin America’s bumpy economic recovery has continued to deliver limited
growth in 2018, overall. Weaker global trade, an intensive election cycle across
the continent, tighter global financial conditions, the continued impact of widespread corruption cases on infrastructure spending, and volatile commodity
prices caused the recovery to flounder. Argentina’s economy deteriorated
significantly in August amid a renewed currency crisis and deepening recession. In Brazil, the economic sentiment continued its upward trend, but the
recovery is still fragile.
In Latin America, Bekaert manufactures an extensive product portfolio to
serve construction, mining, agriculture and a wide range of industrial and
consumer markets across the region. Bekaert has wholly owned and
majority owned subsidiaries in Ecuador, Colombia, Costa Rica, Venezuela, Peru,
and Chile, and runs joint ventures in Brazil in a 45/55 partnership with
ArcelorMittal.
Latin America 2018
Combined sales by industry
17%
34%
16%
11%
Bekaert’s activities in Latin America go back to 1950. Today, they represent
almost 30% of combined sales.
22%
Automotive
Agriculture
Construction
Consumer goods
Our Activity performance
Other
In Latin America, consolidated sales were up +2.7% from last year.
Passed-on higher wire rod prices and other price-mix enhancements contributed
+14.3% to the organic revenue growth. An overall weak economic environment in
the region drove demand for our products down, resulting in an organic volume
loss of -1.8% for the year. Consolidated sales were adversely impacted by the
disposal effect (-6.1%) of the Sumaré integration within the JV partnership with
ArcelorMittal since 1 July 2017, and by adverse currency movements (-3.7%).
Excluding currency effects, royalties from Brazilian joint ventures, and one-time
elements, the underlying EBIT of our operations in Latin America slightly improved
compared with last year. Including all elements, underlying EBIT decreased. This
is mainly due to the lower positive net effect of one-time items in 2018 compared
with 2017. Last year’s records included the effect of the cancellation of the obligations under an onerous supply contract (€ +10 million) and the disposal effect
of Sumaré (€ +12 million). The one-time element in 2018 regarded a change in
a long-term benefit plan in Ecuador (€ +3.7 million). Royalties from the Brazilian
joint ventures were higher in 2018, compared with last year (€ +5.4 million), while
currency effects on underlying EBIT were € -1.9 million negative, year-on-year.
Including all elements, underlying EBIT decreased to € 43 million, reflecting a
margin of 6.2%. Reported EBIT was significantly lower than last year: in 2017
the gain on the sale of 55.5% of the shares in the Sumaré plant in Brazil was
included whereas in 2018 we incurred one-off expenses related to the closure of
the Dramix® plant in Costa Rica.
Combined sales
€ 1 474 million
Consolidated sales
€ 692 million
Capital expenditures
Total assets
Employees
(*)
(*)
€ 18 million
€ 477 million
6 595
(*) Consolidated entries
32
Annual Report Bekaert 2018
Bekaert invested almost € 18 million in property, plant and equipment across the
region, particularly in Chile.
Bekaert’s combined sales increase in Latin America (+5.7%) was from strong
organic growth (+15.7%), largely offset by the translation impact of currency movements (-9.9%) which was mainly driven by the depreciation of the Brazilian Real
compared with last year (-19.4% compared with the average rate of 2017).
Poised to seize opportunities in Perus
The largest corruption investigation in Latin America’s history — revolving partly
around bribes paid by the Brazilian construction giant Odebrecht to secure government contracts — has, over the past few years, spread across the region.
After Brazil, no other country has felt the stinging impact of the scandal more
than Peru. All major construction projects in the country have been put on hold
for years because several decision makers in the highest ranks of the country’s
political class have been implicated.
Prodac, Bekaert’s steel wire plant in Peru, has been working hard to offset the
negative impact of decreased volumes in construction markets. It is doing so,
not only by rightsizing its operations to the new reality, but also by developing
and implementing concrete lines of actions to grow positions in existing and
target markets. With the help of BCE (Bekaert Customer Excellence) knowledge
and tools, Prodac’s satellites Prodimin (mining markets) and Prodicom (wholesale activity) have each set out a distinct market approach to grow their business potential. A number of public infrastructure projects have been reactivated
recently in the country, and Prodac is seizing the opportunities that those create.
These include, among others, the construction works related to the preparations
for the Pan American Games in Lima in 2019, the construction of the new international airport in Lima, and the Pisco port expansion.
Metro project in Ecuador
In July 2019, the first metro line in Quito will be put into operation. Construction of the metro line began in January 2016 and was long delayed
due to archaeological remains found in the neighborhood of the historic
center, a UNESCO World Heritage Site. The line extends over a distance
of 22 kilometers and will connect Quitumbe (south Quito) with El Labrador
(north Quito).
Ideal Alambrec, Bekaert’s entity in Ecuador, supplied Dramix® steel fibers
for concrete reinforcement in cooperation with Bekaert-Maccaferri Underground Solutions, and provided technical sales support to the contractors.
Annual Report Bekaert 2018
ASIA PACIFIC
Economic Environment in 2018
China’s economy grew at the slowest rate since 1990, coming in at 6.6%.
Trade tensions with the US weighed on export opportunities and industrial
output growth. The tire market in China grew about 2% in 2018 but tailed off
towards the end of the year.
India confirmed its strong growth potential with an estimated GDP growth of
7.3%, compared to 6.7% in 2017, nearly closing the gap on the UK to become
the world’s fifth-biggest economy.
Asia Pacific 2018
Combined sales by industry
7%
4% 4% 5%
Indonesia’s economy, the largest in Southeast Asia, continued to grow at a
stable rate by reaching an estimated 5%. Investments in Indonesia, however,
slowed down somewhat during the course of the year.
Bekaert is present in Asia with manufacturing sites and development centers
in China, India, Indonesia, Malaysia and Japan. Bekaert will start a greenfield
investment in Quang Ngai Province in the central coastal area of Vietnam. The
construction works will start during the course of the second quarter of 2019.
The plant will produce rubber reinforcement products and serve customers
worldwide.
80%
Automotive
Energy & Utilities
Construction
Equipment
Our Activity performance
Bekaert delivered +7.7% organic sales growth in Asia Pacific, driven by good
volume growth (+5.7%) and the positive aggregate effect of passed-on wire
rod price increases and price-mix (+2%). The robust growth of rubber reinforcement activities across the region was partly offset by weaker volumes in
other sectors, among which the sawing wire activities in China and the steel
wire activities in Malaysia. Adverse currency effects (-3.1%) drove top line
growth down to +4.6%.
Underlying EBIT decreased to € 86 million at a margin of 7.2%. The margin
decrease was the result of loss-making sawing wire activities (€ -9 million
compared with € +21 million last year), the weak performance of our activities in Malaysia, and high start-up costs related to the expansion program in
India. The rubber reinforcement business progressively improved the margin
performance in the second half of the year, particularly in China and in India.
This trend is visible in the segment’s underlying EBIT for the second half.
Reported EBIT dropped to € 54 million due to the impairment of tangible and
intangible assets related to sawing wire in China and the restructuring costs
in Ipoh (Malaysia), which were partly offset by gains from the sale of land and
buildings following the closures of the plants in Huizhou (China) and Shah
Alam (Malaysia).
In anticipation of continued growth perspectives, Bekaert invested € 85 million
in PP&E in the region in 2018, including expansion investments in China, India
and Indonesia.
Other
Combined sales
€ 1 197 million
Capital expenditures (PP&E)
€ 85 million
Total assets
€ 1 175 million
Employees
10 912
33
34
Annual Report Bekaert 2018
The 2018 edition of the Global Tire Tech Forum organized by the China
Tire Industry Association (CRIA) was held in Hefei City, Anhui Province.
More than 260 international and Chinese representatives from all players
in the tire supply chain participated in the event.
Bekaert was invited to give a key note speech on super tensile/ultra tensile steel cord developments supporting the reduction of tire weight and
rolling resistance. The event was a perfect opportunity to meet up with
industry peers and customers interested in value creating solutions for
the tire industry.
Bert De Graeve meets Chinese Premier Li Keqiang in Brussels
In October 2018, Bert De Graeve, Chairman of Bekaert, and a select group of
business and political leaders met Chinese Premier Li Keqiang during the Asia-Europe meeting in Brussels (Belgium).
Gearing up for growth in India
India has become the world’s fourth largest automobile market and continues to
grow at a fast pace: the Indian tire industry expanded by 6% compared with 2017,
mainly driven by increased radialization (up 10% in commercial vehicle markets).
As the only domestic steel cord producer in the country, Bekaert anticipated the
current and future growth and therefore invested significantly in the course of
2017-2018.
We invested in both half-product capacity (previously sourced from Bekaert
China) and end-product capacity to accommodate the increasing demand
from tire customers in the country. Having a fully integrated production process
enhances business continuity in times of trade uncertainties between countries.
It also puts us in a position to offer speed and flexibility in supporting the evolving
needs of the customers.
Our team in India had to deal with new challenges such as consistent quality and
supply reliability of local wire rod because the Indian steel mills were not used to
producing the grades or volumes needed. It took some time to ensure stability in
the supply process. The team is currently working very closely with the suppliers
to co-create a supply excellence model that will benefit the entire supply chain.
We are growing in other sectors as well, with more Dramix® capacity to serve local
and export construction markets, and newly added products to the portfolio to
serve the agricultural markets in India.
Steel Cord
3+9+15x0.22+1
Dramix® 3D
Fibre
Fixed Knot
Fence
Clutch Spring
Wire
Thin
Fibres
35
Annual Report Bekaert 2018
BRIDON-BEKAERT
ROPES GROUP
Economic Environment in 2018
2018 saw continued challenging market dynamics in BBRG’s core ropes
sectors. While the oil price showed signs of recovery in 2018, the main oil
extraction companies remained in balance sheet repair mode, which impacted
both the volume and margin opportunity. Mining markets showed an upward
trajectory, though still limited, with a small number of greenfield and brownfield
developments. Industrial markets saw low single-digit growth in an increasingly challenging competitive environment.
The advanced cords business, serving various sectors including the automotive, construction, and equipment markets, continued to benefit from solid
demand and market positions.
Bridon-Bekaert Ropes Group 2018
Bridon-Bekaert
Group 2018
Combined
sales byRopes
industry
Combined sales by industry
14%
19%
9%
27%
32%
Our Activity performance
Bridon-Bekaert Ropes Group (BBRG) achieved 5.5% organic sales growth,
part of which was compensated by the impact of adverse currency movements (-3.7%) on the topline. Organic growth accelerated in the second half
of 2018 (+8.4%) compared with the limited growth in the first half of the year
(+2.7%) and was mainly driven by a positive price-mix evolution.
Underlying EBIT was € -6.9 million for the year due to significant one-time
adjustments without cash impact (including pension plan adjustments and
obsolete stock write-offs) totaling € -13.7 million. Excluding these adjustments,
underlying EBIT would have reached € 6.8 million (€ +1.8 million in the first half
of 2018 and € +5 million in the second half).
Reported EBIT was € -20 million and included the impacts of one-off elements
related to the restructuring in Brazil (€ -7 million) and other measures to turn
around the business (€ -6 million).
In 2018, BBRG invested € 19 million in PP&E, about half of which in support
of growing the advanced cords facilities in Belgium and China, and the other
half in the ropes manufacturing sites worldwide.
Brett Simpson, Chief Executive Officer of Bridon-Bekaert Ropes Group, joined
the company in September 2018 to take over the helm and lead the business
forward. Brett Simpson, Australian, has significant business experience and
expertise in leading and improving international businesses.
In October 2018 Bekaert completed the refinancing of the outstanding debt
incurred by Bridon-Bekaert Ropes Group (BBRG) and the transaction related
to the acquisition of the 33% equity share previously held by Ontario Teachers’
in BBRG. Taking full control of BBRG will allow the business to accelerate the
turnaround efforts and achieve its full potential.
Equipment
Energy & Utilities
Construction
Basic Materials
Other
Combined sales
€ 463 million
Capital expenditures (PP&E)
€ 19 million
Total assets
€ 561 million
Employees
2 593
36
Annual Report Bekaert 2018
Bridon-Bekaert and Applied Fiber bring terminated synthetic rope solutions to market
Bridon-Bekaert Ropes Group (BBRG) and Applied Fiber have agreed in 2018 to combine their expertise to develop and
bring to market advanced solutions that improve efficiency and safety in heavy industrial operations. Applied Fiber is a
global leader for terminated synthetic fiber tension systems. By providing terminated fiber rope solutions for high impact
and performance-driven applications, BBRG complements its existing steel, synthetic and hybrid rope solutions.
BBRG launches A-Cords at World Elevator Expo in Shanghai (China)
BBRG successfully introduced its premium brand A-Cords during the World Elevator Expo in Shanghai (China). To show
the effectiveness of its products, all showcases were suspended with Flexisteel® cords. The exhibit illustrated BBRG range
of expertise, going from traditional elevator ropes, over high tensile steel wire Flexisteel® for roomless elevators, to fine
cords for belts. A virtual 360° tour brought the customers into the heart of our manufacturing and technology facilities.
Annual Report Bekaert 2018
In line with the organizational changes implemented on 1 March 2019, Bekaert’s segment reporting will be changed in
2019. The new segmentation will drive transparency into the business dynamics of each reporting unit and replace the
previous geographic segmentation, to which Bridon-Bekaert Ropes Group had been added as a separate reporting
segment. The Group’s business units (BU) are characterized by BU-specific product and market profiles, industry trends,
cost drivers, and technology needs tailored to specific industry requirements.
The new reporting segments will be:
- Rubber Reinforcement
This Business Unit serves industries that use tire cord, bead wire, hose reinforcement wire and conveyor belt reinforcement.
- Steel Wire Solutions
This Business Unit serves industrial, agricultural, consumer and construction markets with a broad range of steel wire
products and solutions.
- Specialty Businesses
This Business Unit includes building products, fiber technologies, combustion technology and sawing wire.
- Bridon-Bekaert Ropes Group (BBRG)
BBRG includes the ropes and advanced cords businesses.
37
REPORT
THE BOARD
OF
Annual Report Bekaert 2018
KEY
FIGURES
Consolidated sales
in millions of €
5 000
4 000
3 000
4 808
298
29 313
5 074
226
29 406
+5.5%
-24.2%
+0.3%
2 000
1 000
0
Consolidated financial statements
in millions of €
2017
2018
Delta
4 098
318
301
-93
-69
27
183
185
-2
497
192
-
4 305
147
210
-111
-58
25
3
40
-37
426
197
42
5.1%
-53.8%
-30.2%
18.6%
-15.6%
-7.4%
-98.5%
-78.5%
-14.3%
2.9%
-
4 305
Delta
4 098
2018
3 715
Sales
Capital expenditure (PP&E)
Employees as at 31 December
2017
3 671
in millions of €
3 216
Combined key figures
2014
2015
2016
2017
2018
Income statement
Sales
EBIT
EBIT-underlying
Interests and other financial results
Income taxes
Group share joint ventures
Result for the period
attributable to equity holders of Bekaert
attributable to non-controlling interests
EBITDA-underlying
Depreciation PP&E
Amortization and impairment
EBIT on sales
in %
10
6.3
6
Balance sheet
Equity
Non-current assets
Capital expenditure (PP&E)
Balance sheet total
Net debt
Capital employed
Working capital
Employees as at 31 December
1 583
2 124
273
4 445
1 151
2 664
888
25 784
1 516
2 050
198
4 449
1 153
2 598
875
25 915
12.4%
12.1%
7.8%
7.3%
4.0
11.2%
11.5%
35.6%
72.7%
2.3
9.0%
9.9%
3.4%
4.9%
1.8
8.0%
0.2%
34.1%
76.0%
3.0
-4.2%
-3.5%
-27.3%
0.1%
0.2%
-2.5%
-1.5%
0.5%
5.3
7.8
7.3
7.0
4.9
6.0
5.1
4
3.4
2
0
2014
Ratios
EBITDA on sales
Underlying EBITDA on sales
EBIT on sales
Underlying EBIT on sales
EBIT interest coverage
ROCE underlying
ROE
Financial autonomy
Gearing (net debt on equity)
Net debt on EBITDA
8.2
8
2015
2016
2017
Reported
2018
Underlying
Gross dividend(1)
in €
1.50
Joint ventures and associates
769
84
66
28
18
3 491
25
154
8.3%
26.3%
-7.3%
8.7%
-8.3%
-1.1%
-7.4%
-7.1%
1.00
0.50
0
(1)
0.70
710
66
71
26
20
3 529
27
165
1.10
Delta
1.10
2018
0.90
Sales
Operating result
Net result
Capital expenditure (PP&E)
Depreciation
Employees as at 31 December
Group's share net result
Group's share equity
2017
0.85
in millions of €
2014
2015
2016
2017
2018
The dividend is subject to approval
by the General Meeting of
Shareholders 2019
39
40
Annual Report Bekaert 2018
Key figures per share
NV Bekaert SA
Consolidated sales by segment
2017
2018
Delta
Number of shares as at 31 December
60 373 841 60 408 441
Market capitalization as at 31 December (in millions of €)
2 200
1 272
+0.1%
-42.2%
Per share
in €
2017
2018
Delta
EPS
3.26
1.10
0.77
0.70
0.70
0.49
-78.4%
-36.4%
-36.4%
2017
2018
Delta
36.45
42.05
21.06
28.21
-42.2%
-32.9%
Gross dividend*
Net dividend**
Valorization
in €
Price as at 31 December
Price (average)
* Subject to approval by the General Meeting of Shareholders 2019
** Subject to the applicable tax legislation
11%
31%
14%
16%
28%
EMEA
Asia Pacific
Latin America
North America
BBRG
Annual Report Bekaert 2018
SALES
KEY FIGURES
PER SEGMENT
in millions of €
1 200
North America
12%
1 335
150
Latijns-Amerika omzet
2014
2015
2016
2017
2018
0
in miljoen
€
1600
782
721
400
692
Asia Pacific sales
673
29%
800
638
6.2%
8.7%
12.9%
682
8.2%
11.1%
14.8%
1 200
688
2018
712
2017
2014
2015
2016
2017
2018
0
in millions
of €
Geconsolideerd
BBRG
400
BBRG omzet
500
Underlying
2017
2018
EBIT on sales
EBITDA on sales
ROCE
3.3%
9.0%
3.1%
-1.5%
4.8%
-1.5%
9%
2014
2015
2016
2017 2018
in miljoen
€
0
1 197
24%
800
Consolidated companies
Joint ventures and associates
375
250
125
0
463
7.2%
15.3%
8.7%
1 144
9.3%
17.1%
10.9%
ondernemingen
454
2018
1 052
2017
Joint ventures en geassocieerde
49
48
1200
Asia Pacific
€ 1 197 million
Combined sales
Bridon-Bekaert Ropes Group
€ 463 million
Combined sales
300
618
4.0%
6.2%
10.8%
552
6.0%
8.5%
14.9%
450
320
EBIT on sales
EBITDA on sales
ROCE
2018
512
2018
Asia Pacific
Underlying
2017
1 019
Latin America
€ 1 474 million
Combined sales
2016
528
2017
Latin America
EBIT on sales
EBITDA on sales
ROCE
2015
600
North America
€ 618 million
Combined sales
Underlying
2014
0
in miljoen
€
239
EBIT on sales
EBITDA on sales
ROCE
Noord-Amerika sales
555
Underlying
400
1 273
26%
800
1 148
8.5%
13.7%
16.8%
1 174
11.1%
15.9%
20.8%
791
EMEA
€ 1 322 million
Combined sales
2018
631
EBIT on sales
EBITDA on sales
ROCE
2017
966
Underlying
1 064
EMEA
2015
2016
2017
2018
Consolidated companies
Joint ventures and associates
41
42
Annual Report Bekaert 2018
SUMMARY OF
FINANCIAL REVIEW
Notes
Besides IFRS accounts, Bekaert also presents the key underlying business performance parameters of profitability and
cash generation, to provide a more consistent and comparable view on the Group’s financial performance. These underlying business performance indicators adjust the IFRS figures
for the one-off accounting impacts of restructuring costs,
provisions for environmental sanitization programs, asset
impairments, M&A related fees, and other such non-recurring
items that would distort the analysis of the Group’s underlying
Business performance. ‘REBIT’ and ‘REBITDA’ - reflecting the
‘recurring’ or ‘underlying’ business performance - are now
named(1) EBIT-Underlying and EBITDA-Underlying respectively.
EBIT and EBITDA according to IFRS are referred-to as such
or as EBIT-reported and EBITDA-reported when specification
adds clarity.
Underlying EBIT bridge
Bekaert’s underlying EBIT was € 210 million, reflecting a
margin of 4.9%. The main factors preventing us from turning
improved volumes (contributing € +33 million to underlying
EBIT) into incremental profitability were the adverse effect of
the sawing wire business decline (decrease of € -30 million
versus last year), significant one-time BBRG (€ -14 million)
clarifying most of the earnings decline of the segment (down
€ -22 million from last year), and an aggregate € -36 million
reflecting the pass-through effectiveness of increased wire
rod prices, inventory valuation effects, and price erosion. The
incremental cost savings from transformation programs could
not offset the overall cost increases from high start-up costs in
plants with expansion programs and inflation. The net effect of
divestments (€ -15 million) and adverse currency effects (€ -6
million) added to the underlying EBIT decrease year-on-year.
Sales and financial review
Sales
Bekaert achieved consolidated sales of € 4.3 billion in 2018,
an increase of +5.1% compared with last year. The organic
volume growth (+2.2%) and the aggregate effect of passed-on
higher wire rod prices and price-mix (+6.6%) accounted for an
organic sales growth of +8.9%. This was partially offset by the
effect of divestments (-1.3%) and adverse currency movements
1 Definitions of financial parameters are described in the Financial Review of
this Annual Report.
(-2.5%). Combined sales totaled € 5.1 billion for the year, up
+5.5% from 2017 as a result of strong organic sales growth
(+10.3%), adverse currency movements (-4.5%) and a limited
effect of divestments (-0.2%).
Dividend
The Board of Directors will propose to the Annual General
Meeting of Shareholders of 8 May 2019, a gross dividend of
70 eurocent. In line with the company’s dividend policy, the
proposed temporary dividend cut is reflecting the lower earnings and high debt leverage of the company. The dividend
will, upon approval by the General Meeting of Shareholders,
become payable as of 13 May 2019.
Financial results
Bekaert achieved an operating result (EBIT-Underlying) of €
210 million (versus € 301 million in 2017). This equates to a
margin on sales of 4.9% (versus 7.3% in 2017). The one-offs
amounted to € -63 million (€ +17 million in 2017) and included
impairment and lay-off costs related to various restructuring
programs and plant closures as well as to other asset impairments and write-offs. Including these one-offs, EBIT was € 147
million, representing an EBIT margin on sales of 3.4% (versus
€ 318 million or 7.8%). Underlying EBITDA was € 426 million
(9.9% margin) compared with € 497 million (12.1%) and EBITDA
reached € 387 million, or an EBITDA margin on sales of 9.0%
(versus 12.4%).
Overhead expenses (underlying) decreased by € -13 million to
9.1% as a percentage of sales (versus 9.9% in 2017). Selling
expenses were stable. The administrative expenses decreased
by € -13 million (underlying) due to a lower variable remuneration and favorable currency effects. The reported administrative expenses included € -18 million one-off elements related to
the closure of the plant in Figline (Italy), other lay-off expenses
and various corrective actions in BBRG. The research and
development expenses amounted to € 65 million, about stable from last year. Underlying other operating revenues and
expenses (€ +16 million versus € +1 million last year) mainly
reflected an increase of royalty payments received from the
Brazilian joint ventures and the positive impact from pension
plan adjustments in Latin America. Reported other operating
revenues and expenses (€ +33 million) included the gain on
the sale of land and buildings related to the plants closed in
Huizhou (China) and Shah Alam (Malaysia).
Annual Report Bekaert 2018
Interest income and expenses amounted to € -85 million,
slightly lower than last year (€ -87 million). The lower interest
expenses from the debt refinancing of BBRG were largely offset by increased interests from a higher average gross debt.
Other financial income and expenses amounted to € -26 million (versus € -6 million last year) due to the amortized cost
impact of the BBRG debt refinancing (including bank charges
and fees on the repayment of the previous loans) and fees
related to the buy-out of OTPP. Income taxes decreased from
€ -69 million to € -58 million due to lower profitability in various
tax paying entities. As the combination of loss making entities only provided an immaterial tax offset to the tax expense
incurred by the combination of profit making entities, the overall effective tax rate was 161%.
The share in the result of joint ventures and associated companies was € +25 million (versus € +27 million last year) due to
the significantly weaker Brazilian real (-19.4% compared with
the average rate of 2017).
The result for the period thus totaled € 3 million, compared
with € 183 million in 2017. The result attributable to non-controlling interests was € -37 million (versus € -2 million) and
mainly reflected the net loss representation of BBRG as
non-controlling interest until the end of October of 2018. After
non-controlling interests, the result for the period attributable
to equity holders of Bekaert was € +40 million, compared
with € +185 million last year. Earnings per share amounted to
€ 0.70, down from € +3.26 in 2017.
Balance sheet
As at 31 December 2018, shareholders’ equity represented
34.1% of total assets, down from 35.6% in 2017. The gearing
ratio (net debt to equity) was 76.0% (versus 72.7%).
Net debt was € 1 153 million, down from € 1 339 million as at
30 June 2018 and unchanged from € 1 151 million as at yearend 2017. Net debt on underlying EBITDA was 2.7, compared
with 2.3 on 31 December 2017.
Cash flow statement
Cash from operating activities amounted to € 244 million,
unchanged from € 244 million in 2017, as the lower cash generation was offset by a reduction in cash-outs to fund working
capital.
Cash flow attributable to investing activities amounted to €
-102 million (versus € -209 million): € -185 million related to
substantially lower capital expenditure (intangibles and PP&E)
while the net impact of acquisitions and divestments dropped
from € 38 million to € 3 million. Proceeds from disposal of
property from closed plants in China and Malaysia amounted
to € 55 million.
Cash flows from financing activities totaled € -157 million (versus € +30 million in 2017). The major cash-ins from gross
financial debt in 2018 as well as the repayments are mainly
related to the debt restructuring of BBRG and the refinancing
of a € 100 million bond.
Investment update and other information
Net debt was € 1 153 million at year-end 2018, unchanged
from € 1 151 million last year but significantly down from €
1 339 million as at 30 June 2018. Net debt on underlying
EBITDA was 2.7, compared with 2.3 last year and 3.1 as at 30
June 2018. The company implemented a series of actions in
the second half of 2018 to bring net debt down by € -186 million. The working capital decreased by € -156 million (versus
30 June 2018), mainly driven by successful cash collection
actions, the impact of off-balance sheet factoring (€ 73 million
of accounts receivable), and more standardized supplier payment terms. The average working capital on sales decreased
to 20.4%.
In October 2018, Bekaert completed the refinancing of the
outstanding debt incurred by Bridon-Bekaert Ropes Group
(BBRG). This included: (1) the temporary refinancing through
a financial covenant-free bridge loan with a group of banks
for a maximum maturity of two years, preceding a permanent
long-term funding decision; (2) the repayment of € 294 million
to the BBRG lenders’ syndicate; (3) the release of all related
security interests; (4) the elimination of the related ring-fenced
debt structure; and (5) significantly lower interest charges
on the refinanced BBRG debt. The debt of BBRG had been
consolidated in Bekaert’s consolidated statements since the
establishment of Bridon-Bekaert Ropes Group. As a result of
this refinancing, all debt of the Bekaert Group is covenant-free.
Bekaert is investing in all continents to expand and upgrade
the production capacity to the levels needed. Investments
in property, plant and equipment amounted to € 198 million
in 2018 and included major tire cord expansion programs in
EMEA and Asia Pacific. Bekaert will start a greenfield investment in Quang Ngai Province in the central coastal area of
Vietnam. The construction works will start in the course of the
2nd quarter of 2019. The plant will produce rubber reinforcement products and serve customers worldwide.
In addition to the 3 636 280 treasury shares held as of 31
December 2017, Bekaert purchased 352 000 own shares
in the course of 2018. A total of 51 200 stock options were
exercised in 2018 under Stock Option Plan 2010-2014 and
Stock Option Plan 2. 51 200 treasury shares were used for
that purpose. 35 048 treasury shares were transferred in the
context of the Personal Shareholding Requirement Plan. As a
result, Bekaert held an aggregate 3 902 032 treasury shares
as of 31 December 2018.
Segment reports
EMEA
Bekaert’s activities in EMEA achieved +4.8% sales growth in
2018, driven by the aggregate effect of passed-on wire rod
price increases and price mix (+6.8%), a small organic volume
decline (-0.9%) and the divestment effect of the Solaronics
business (-0.9%). Demand from automotive and construction
markets was strong throughout the year, while demand for
industrial, specialty, and stainless products softened in the
second half of the year.
43
44
Annual Report Bekaert 2018
The underlying EBIT was € 114 million at a margin of 8.5%.
The margin performance was lower due to higher than anticipated start-up costs in plants with major expansion programs
in Central Europe, and increased price pressure in various
markets, particularly those where we compete with integrated
players.
were adversely impacted by the disposal effect (-6.1%) of the
Sumaré integration within the JV partnership with ArcelorMittal since 1 July 2017, and by adverse currency movements
(-3.7%).
North America
Excluding the effects of currency, royalties from Brazilian joint
ventures, and one-time elements, the underlying EBIT of our
operations in Latin America slightly improved, compared with
last year. Including all elements, underlying EBIT decreased,
mainly because of a lower positive net effect of one-time items
in 2018 compared with 2017. Last year’s records included the
effect of the cancellation of the obligations under an onerous supply contract (€ +10 million) and the disposal effect of
Sumaré (€ +12 million). The one-time element in 2018 regarded
a change in a long-term benefit plan in Ecuador (€ +3.7 million). Royalties from the Brazilian joint ventures were higher in
2018, compared with last year (€ +5.4 million), while currency
effects on underlying EBIT were € -1.9 million negative, yearon-year.
Bekaert’s activities in North America achieved +12% sales
growth. The organic sales growth accounted for +16.4% and
stemmed from improved volumes (+5.7%) and passed-on
higher wire rod prices and other price-mix effects (+10.6%).
The adverse currency impact for the year tempered to -4.4%
due to the appreciation of the US$ in the last quarter.
Including all elements, underlying EBIT decreased to € 43
million, reflecting a margin of 6.2%. Reported EBIT was significantly lower than last year: in 2017 the gain on the sale of
55.5% of the shares of the Sumaré plant in Brazil was included
whereas in 2018 we have incurred one-off expenses related to
the closure of the Dramix® plant in Costa Rica.
Automotive demand remained strong throughout the year.
Industrial steel wire and agricultural fencing markets were
affected by increased price pressure and by the usual seasonality effects of the second half of the year.
Bekaert invested almost € 18 million in property, plant and
equipment across the region, particularly in Chile.
Reported EBIT dropped to 5.5% as a result of the one-off
impact of the closure of the Figline plant in Italy (€-40 million)
reflecting the operational losses incurred since the announcement of the closure, the impairment losses of the site’s assets
and the expenses accrued for the closure.
Capital expenditure (PP&E) amounted to € 67 million and
included, amongst others, capacity expansions in Romania,
Slovakia and Russia.
Bekaert’s rubber reinforcement activities in the US recorded
solid growth. The margins were, however, affected by supply
chain issues caused by the continuous changes in trade policy, including quota restrictions and tariffs.
In other steel wire markets, the average price of domestic wire
rod increased about 30% compared with last year. Passing
on the full price impact to our customers was not possible
as we compete with import flows and integrated players
(downstream integrated steel mills) there. The margins were,
moreover, affected by continued weak demand in agricultural
markets.
Both the underlying and reported EBIT amounted to € 25 million at a margin of 4%.
Bekaert’s combined sales increase in Latin America (+5.7%)
was from strong organic growth (+15.7%), largely offset by the
translation impact of currency movements (-9.9%) which was
mainly driven by the depreciation of the Brazilian real compared with last year (-19.4% compared with the average rate
of 2017).
Asia Pacific
Bekaert delivered +7.7% organic sales growth in Asia Pacific,
driven by good volume growth (+5.7%) and a positive aggregate effect of passed-on wire rod price increases and pricemix (+2%). The robust growth of rubber reinforcement activities
across the region was partly offset by weaker volumes in other
sectors, among which the sawing wire activities in China and
the steel wire activities in Malaysia. Adverse currency effects
(-3.1%) drove top line growth down to +4.6%.
Capital expenditure (PP&E) was € 18 million in North America..
Latin America
In Latin America, consolidated sales were up +2.7% from last
year.
Passed-on higher wire rod prices and other price-mix
enhancements contributed +14.3% to the organic revenue growth. An overall weak economic environment in the
region drove demand for our products down, resulting in an
organic volume loss of -1.8% for the year. Consolidated sales
Underlying EBIT decreased to € 86 million at a margin of 7.2%.
The margin decrease was a result of loss-making sawing wire
activities (€ -9 million compared with € +21 million last year),
the weak performance of our activities in Malaysia, and high
start-up costs related to the expansion program in India. The
rubber reinforcement business progressively improved the
margin performance in the second half of the year, particularly in China and in India. This trend is visible in the segment’s
underlying EBIT of the second half.
Reported EBIT dropped to € 54 million due to the impairment of tangible and intangible assets related to sawing wire
Annual Report Bekaert 2018
in China and the restructuring costs in Ipoh (Malaysia), partly
offset by the gain on the sale of land and buildings following
the closing of the plants in Huizhou (China) and Shah Alam
(Malaysia).
In anticipation of continued growth perspectives, Bekaert
invested € 85 million in PP&E in the region in 2018, including
expansion investments in China, India and Indonesia.
Bridon-Bekaert Ropes Group
Bridon-Bekaert Ropes Group (BBRG) achieved 5.5% organic
sales growth, part of which was compensated by the
adverse currency movements (-3.7%) impacting the topline.
The organic growth accelerated in the second half of 2018
(+8.4%) compared with limited growth in the first half of the
year (+2.7%) and was mainly driven by a positive price-mix
evolution.
Underlying EBIT was € -6.9 million for the year due to significant one-time adjustments without cash impact (including
pension plan adjustments and obsolete stock write-offs) totaling € -13.7 million. Excluding these adjustments, underlying
EBIT would have reached € 6.8 million (€ +1.8 million in the first
half of 2018 and € +5 million in the second half).
Reported EBIT was € -20 million and included the impacts
of one-off elements related to the restructuring in Brazil (€ -7
million) and other measures to turn around the business (€ -6
million).
BBRG invested € 19 million in PP&E in 2018, about half of
which in support of growing the advanced cords facilities in
Belgium and China, and the other half in the ropes manufacturing sites worldwide.
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Annual Report Bekaert 2018
ALTERNATIVE PERFORMANCE MEASURES:
definitions and reasons for use
Capital employed (CE)
Working capital + net intangible assets + net goodwill +
net property, plant and equipment. The weighted average
CE is weighted by the number of periods that an entity has
contributed to the consolidated result.
Capital employed consists of the main balance sheet items
that operating management can actively and effectively
control to optimize its financial performance, and serves as
the denominator of ROCE.
Capital ratio
(financial autonomy)
Equity relative to total assets.
This ratio provides a measure of the extent to which the Group
is equity-financed.
Combined figures
Sum of consolidated companies + 100% of joint ventures
and associates after elimination of intercompany transactions
(if any). Examples: sales, capital expenditure, number of
employees.
In addition to Consolidated figures, which only comprise
controlled companies, combined figures provide useful
insights of the actual size and performance of the Group
including its joint ventures and associates.
EBIT
Operating result (earnings before interest and taxation).
EBIT consists of the main income statement items that
operating management can actively and effectively control to
optimize its profitability, and a.o. serves as the numerator of
ROCE and EBIT interest coverage.
EBIT – underlying
EBIT before operating income and expenses that are related
to restructuring programs, impairment losses, business
combinations, business disposals, environmental provisions
or other events and transactions that have a material one-off
effect that is not inherent to the business.
EBIT – underlying is presented to enhance the reader’s
understanding of the operating profitability before one-off
items, as it provides a better basis for comparison and
extrapolation.
EBITDA
Operating result (EBIT) + depreciation, amortization and
impairment of assets + negative goodwill.
EBITDA provides a measure of operating profitability before
non-cash effects of past investment decisions.
EBITDA – underlying
EBITDA before operating income and ...
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