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Wincor Nixdorf 1QFY sales as expected: Not great

Trying times in critical markets set the stage for a predictably subdued quarterly performance by the European ATM giant.

January 27, 2015

When expectations are low, there is no great satisfaction in meeting them. Unless you count the cold comfort of having been proved right. Case in point: Wincor Nixdorf, which last week reported earnings for the first quarter of its fiscal year — Sept. 30, 2014, through Dec. 31, 2014.

As the company noted in its Group Interim Management Report for the first three months of the fiscal year:

There was no significant growth impetus for the global economy in the company's first quarter of 2014/2015, which corresponds to the final quarter of the calendar year 2014. This was in line with projections made by the International Monetary Fund, which had become increasingly tentative over the course of the year. In its most recent World Economic Outlook, published in the fall of 2014, the IMF again revised downward its growth forecast for 2014 as a whole. Against the backdrop of more prominent risks, it warned of the possibility of a new global economic crisis.

So it was more or less as expected that the company completed its first quarter of fiscal 2014–2015 with net sales comparable to the same period a year ago, but with EBITA down 12 percent year over year.  

Softer sales reflect harder times

Net sales for the quarter totaled 640 million euros/previous year: 638 million euros ($717 million/previous year: $715 million). Operating profit came to 37 million euros/42 million euros ($41 million/$47 million).

As a result, the EBITA margin fell by 0.8 percentage points to 5.8 percent (6.6 percent). Profit for the first three months of fiscal 2014/2015 stood at 25 million euros/28 million euros ($28 million/$31 million).

Wincor reported that results for the first fiscal quarter of the year were in line with expectations, and reaffirmed its outlook for the year: a moderate increase in net sales, accompanied by growth in EBITA to a percentage just slightly above that of net sales.

According to the company's interim report, the first three months of the fiscal year have confirmed the company's original assessment — namely that wider market conditions will remain "volatile and challenging."

The management report described market complications in greater detail:

First, they relate to the Russia-Ukraine conflict, with increasingly detrimental effects on the performance of the Russian economy and the ruble.

Second, the situation in the Middle East continues to be plagued by uncertainty. This is compounded by the fact that the eurozone economy has moved steadily towards deflation, as feared by the IMF in its report published in the fall of 2014.

Wincor Nixdorf CEO and president Eckard Heidloff said that, against this backdrop, the company will press ahead with realignment plans.

"Sustained growth in our software business and expansion in the emerging markets are two major aspects of the strategic changes we are currently pursuing, and this is also reflected in our first quarter performance," he said.

In fact, the storyline of Q1 might be described as, "On the one hand ... but then on the other hand," with growth at least partially offsetting contraction across almost all metrics — from regions, to business segments, to hard lines-soft lines comparisons.

Sales rise in Asia, but fall in Europe

Emerging markets were, indeed, a positive. The Asia, Pacific and Africa region saw net sales increase by 3 percent to 119 million euros/115 million euros  ($133 million/$129 million) during the first three months of the fiscal year. The share of total net sales attributable to Asia/Pacific/Africa remained unchanged year over year at 18 percent.

Net sales generated in the Americas grew by even more — 8 percent for the reporting period, expressed in U.S. dollars. Translated into euros, this amounted to growth of 19 percent to 82 million euros/69 million euros ($92 million/$77 million). As a result of this year-on-year increase, the proportion of net sales generated in the Americas rose to 13 percent (11 percent in same period of fiscal year 2013/2014).

Conversely, net sales in Germany for the first quarter of the fiscal year fell by 8 percent to 139 million euros/151 million euros ($156 million/$169 million), accounting for 22 percent (24 percent) of total net sales for the reporting period.

Net sales in Europe, excluding Germany, totaled 300 million euros/303 million euros ($336 million/$340 million) — a decline of 1 percent.

Europe continued to account for 47 percent of the group’s total net sales unchanged from the previous year and still the largest contributor to consolidated revenue, the company reported.

Sales rise in banking, but fall in retail

Net sales attributable to the banking segment rose by 5 percent to 421 million euros/400 million euros ($472 million/$448 million) in the first quarter. EBITA for the segment was 25 million euros/30 million euros ($28 million/$34 million) in the first three months of the fiscal year, which corresponds to a decline of 17 percent or 5 million euros ($6 million).

Net sales in the retail segment fell 8 percent in the first three months of the fiscal year, to 219 million euros/238 million euros ($245 million/$267 million). At 12 million euros ($14 million), EBITA was unchanged year over year.

Hardware business contracts, but software and services business grows

In the first quarter of the fiscal year, net sales attributable to the hardware business totaled 282 million euros/305 million euros ($316 million/$342 million), a year-over-year decline of 8 percent.

By contrast, net sales from software and services rose by 8 percent to 358 million euros/333 million euros ($401 million/$373 million).

The share of total net sales attributable to the hardware business stood at 44 percent (48 percent), while software and services accounted for 56 percent (52 percent) of total net sales.

photo courtesy rick harris | flickr