Bekaert’s underlying EBIT reached € 272 million in 2020, reflecting a margin of 7.2% and an increase of € 30 million or +13% compared with last year, despite a -13% sales decline. The agile response to the impact of Covid-19, the structural cost improvement actions, and significant business mix improvements more than offset the volume and cost impact of the health crisis.
Where the underlying EBIT bridge showed a negative year-on-year transition in the first half (€ -34 million), it turned highly positive in the second half (an increase of € +64 million or +56% compared with H2 2019, reaching € 181 million in underlying EBIT and reflecting a margin of 9.0%). The strong benefits from business mix improvements, the continued mitigation actions, and positive, non-cash inventory valuation effects from increased raw materials prices at year-end, contributed to the strong profitability improvement in the second half of 2020.
Bekaert achieved consolidated sales of € 3.8 billion in 2020, well below last year (-12.7%) due to the heavy impact of the Covid-19 pandemic in the first half of 2020. The organic sales decline (-9.7%) was driven by lower volumes (-8.3%) and passed-on wire rod price and other price-mix effects for the full year (-1.4%). The currency movements were -3.0% negative.
Combined sales totaled € 4.4 billion for the year, down -13.5% from 2019. The solid organic sales growth of Bekaert’s joint ventures in Brazil (+6.8%) was more than offset by the strong devaluation (-33.4%) of the Brazilian real, resulting in a top-line decline of -18.0%.
The Board of Directors will propose to the Annual General Meeting of Shareholders of 12 May 2021, a gross dividend of € 1.00, in line with the company’s pay-out policy. The dividend will, upon approval by the General Meeting of Shareholders, become payable as of 18 May 2021.
Bekaert achieved an operating result (EBIT-underlying) of € 272 million (versus € 242 million last year). This resulted in a margin on sales of 7.2% (5.6% in 2019).
The one-off items amounted to € -16 million (€ -87 million in 2019) and mainly included expenses and impairments related to footprint adjustments and other restructuring programs, largely offset by the gain on sale of land and building in Belgium and the related reversal of environmental provisions. Including the one-off items, EBIT was € 257 million, representing an EBIT margin on sales of 6.8% (versus € 155 million or 3.6% in 2019). Underlying EBITDA was € 479 million (12.7% margin) compared with € 468 million (10.8%) and EBITDA reached € 473 million, or a margin on sales of 12.5% (versus 9.3%).
Overhead expenses (underlying) decreased by € -29 million to 8.9% on sales (versus 8.4% in 2019). Selling and administrative expenses decreased by € -16 million due to a lower cost base from structural cost saving programs and the Covid-19 mitigation actions. Research and development expenses amounted to € 50 million, compared with € 62 million in 2019, a result of better focus and the savings impact from the 2019 restructuring. Underlying other operating revenues and expenses decreased from € 17 million last year to € 8 million in 2020 due to a reduction in royalties received and impairment losses in 2020 versus provision reversals in 2019. Reported other operating revenues and expenses (€ +51 million) were significantly higher than last year (€ +15 million) due to the gain on sale of real estate in Belgium.
Interest income and expenses amounted to € -56 million, down from € -66 million in 2019 and a result of lower interests on financial derivatives. Other financial income and expenses amounted to € -30 million (€ -18 million in 2019) mainly due to adverse realized and unrealized currency translation effects.
Income taxes increased from € -51 million to € -57 million. The overall effective tax rate dropped from 73% to 33% thanks to the rebound in profitability with less impact from loss generating entities, and the reversal of provisions on settled tax cases.
The share in the result of joint ventures and associated companies was € +34 million (versus € +29 million last year), reflecting the strong performance of the joint ventures in Brazil.
The result for the period thus totaled € +148 million, compared with € +48 million in 2019. The result attributable to non-controlling interests was € +13 million (versus € +7 million last year) due to the profit increase in entities with minority shareholders, particularly in Latin America. After non-controlling interests, the result for the period attributable to equity holders of Bekaert was € +135 million versus € +41 million last year. Earnings per share amounted to € +2.38, significantly up from € +0.73 in 2019.
As at 31 December 2020, equity represented 35.8% of total assets, slightly up from 35.6% at year-end 2019. The gearing ratio (net debt to equity) was 39.4%, significantly down from 63.8% at year-end 2019 due to strong deleveraging.
Net debt of € 604 million, down from € 977 million at the close of 2019, resulting in net debt on underlying EBITDA of 1.26, significantly down from 2.09 last year.
Cash flows from operating activities amounted to € +505 million, lower than the € +524 million in 2019, mainly as a result of a lower decrease in working capital (contributing € +124 million to cash from operating activities in 2020 versus € +169 million in 2019), partly offset by a higher EBITDA, lower cash-outs on income taxes and lower usage of provisions and employee benefit obligations.
Cash flows attributable to investing activities amounted to € -31 million (versus € -91 million in 2019) due to the proceeds from disposal of fixed assets, mainly the sale of land and buildings in Belgium. The cash-out from capital expenditure was about stable compared to last year.
Cash flows from financing activities totaled € -83 million, compared with € -269 million last year. 2019 included the proceeds from a new retail bond (€ +200 milion) and Schuldschein issue (€ +320 million), more than offset by the repayment of non-current interest-bearing debt instruments (€ -675 million), whereas 2020 included the proceeds of a new retail bond (€ +200 million) which was offset by the repayment of non-current interest-bearing debt instruments (for a total of € -248 million). In addition, 2020 included a lower amount of gross dividend payments (€ -26 million) versus the previous year (€ -53 million).
Investments in property, plant and equipment amounted to € 100 million in 2020, about stable compared to last year (€ 98 million).
Alongside the ongoing improvement programs towards higher level performance, Bekaert has determined a number of actions to address structural changes in the market environment. In addressing these, the Group is enhancing the effectiveness of its operating model and process efficiencies across the business, while continually evaluating the set-up and usage of its footprint in view of driving sustainable value creation.
As part of the global approach and measures:
On 28 September 2020, Bekaert and Almasa reached an agreement on the merger of Proalco SAS (subsidiary of Bekaert) with the steel wire activities of Almasa SA, both located in Colombia. The partnership intends to create value by combining expertise and resources in offering existing and new steel wire products and solutions to the market. The transaction, subject to customary closing conditions including regulatory approvals, is expected to close in the course of the first half of 2021.
On 31 December 2019, the Company held 3 873 075 treasury shares. Of these 3 873 075 treasury shares, 10 036 shares were transferred to non-executive Directors of Bekaert as remuneration for the performance of the duties as Chairman or member of the Board of Directors and 13 439 shares were transferred to members of the BGE pursuant to the Bekaert share-matching plan. A total of 10 766 own shares were sold to members of the BGE in the framework of the Bekaert personal shareholding requirement plan. In addition, 29 300 stock options were exercised under the Stock Option Plan 2010-2014 and 29 300 treasury shares were used for that purpose. The company did not purchase any shares in the course of 2020 and no treasury shares were cancelled. As a result, the Company held an aggregate 3 809 534 treasury shares as of 31 December 2020.
Bekaert’s Rubber Reinforcement business has been significantly affected by the impact of the Covid-19 pandemic in the first half of the year, but reported a strong and fast rebound in the second half (sales up +28% from the first half). In the fourth quarter of 2020, sales volumes surged +7% higher than the same quarter last year, driven by very strong demand from tire markets in Asia and EMEA and recovering demand for hose reinforcement wire products.
The business unit reported a sales decrease of -17.3% for the full year, compared to 2019. This stemmed from lower volumes (-11.5%), unfavorable currency movements (-1.9%), and passed-on wire rod price changes and other price-mix effects (-3.9%).
The business unit implemented extensive measures to lower the cost structure in order to partly offset the severe impact of the Covid-19 pandemic on demand from tire markets in the first half of 2020. The benefits of those efforts delivered their full potential during the rebound in the second half, which resulted in a strong H2 underlying EBIT margin of 12.6%, far exceeding previous reporting periods.
The segment reported an underlying EBIT of € 144 million for the full year or 8.8% margin on sales, slightly above last year. Reported EBIT was € 136 million with a margin on sales of 8.3%. The one-off elements (€ -8 million) included restructuring costs, impairment losses and increased environmental provisions.
The underlying EBITDA margin was 15.1%, up 0.3 ppt from last year.
Capital expenditure (PP&E) amounted to € 37 million and included investments in all continents, particularly in Asia and in Central and Eastern Europe.
Combined sales and joint venture performance
Bekaert’s Steel Wire Solutions business, significantly affected by the impact of the Covid-19 pandemic in the second quarter of 2020, saw a turning point early in the third quarter and delivered robust organic sales growth in the last quarter (+10% compared to Q4 last year). This organic growth, driven by increased sales in EMEA, China and Latin America was, however, largely offset by adverse currency movements.
The business unit reported a sales decrease of -7.9 % for the full year, compared to 2019. This stemmed from lower volumes (-3.4%) and unfavorable currency movements (-4.9%). The year-on-year effect of passed-on wire rod price changes and other price-mix effects was about neutral (+0.4%).
Overall, demand in most sectors and regions remained below pre-Covid levels until the end of 2020. However, Bekaert’s agile response to customer needs, global access to raw materials, and effective safety measures in the plants, enabled the business unit to keep the operations running and to secure delivery to customers worldwide. This resulted in positive customer appreciation and increased market share.
Steel Wire Solutions delivered a robust underlying EBIT result of € 96 million and strong underlying EBIT margin on sales of 7.0%, doubling the margin of last year. Reported EBIT was € 88 million with a margin on sales of 6.4%. The one-off elements (€ -8 million) mainly related to restructuring costs. The strong margin increase was the result of an improved business mix and footprint optimization (reduced impact of lower margin activities), stringent cost control, and the effectiveness of Covid-19 mitigation actions.
Underlying EBITDA improved to a double-digit margin of 10.9%.
Capital expenditure (PP&E) amounted to € 21 million and mainly included investments in Central Europe, China, Chile and Colombia.
The Steel Wire Solutions joint venture in Brazil reported +8.5% sales growth at constant exchange rates but the strong devaluation of the Brazilian real affected the top-line by -16%. Including joint ventures, the business unit’s combined sales decreased by -10.5% versus last year.
The margin performance of the Steel Wire Solutions joint venture was strong. The results are accounted for in Bekaert’s Income Statement under the equity method as part of the ‘share in the results of joint ventures and associates’.
The business unit Specialty Businesses reported a sales decrease of -5.9% for the full year 2020, compared to 2019. This stemmed from lower volumes (-8.7%) and adverse currency effects (-1.4%), partly tempered by positive mix effects (+4.1%).
Specialty Businesses delivered an underlying EBIT result of € 45 million, -13% below last year and reaching an underlying EBIT margin on sales of 11.4% (versus 12.2% last year). The reduction primarily resulted from inventory write-offs and other adjustments in Combustion Technologies (€ -5 million), a lower result in Fiber Technologies due to weaker demand for high-value adding products, and higher loss generation in (diamond) sawing wire versus last year. The profit contribution of Building Products remained strong.
Reported EBIT was € 36 million with a margin on sales of 9.2%, both exceeding last year’s performance. The one-off elements in 2020 (€ -9 million) were mainly due to restructuring programs in (diamond) Sawing Wire and Combustion Technologies, implemented in China in December 2020. The respective business mix and footprint adjustments will positively influence the uEBIT performance as of the beginning of 2021.
The underlying EBITDA margin reached 15.5%, slightly below the margin of last year.
Capital expenditure (PP&E) amounted to € 29 million and mainly included investments in Building Products (Czech Republic and India) and to a lesser extent in Fiber and Combustion Technologies.
Bridon-Bekaert Ropes Group (BBRG) recorded a sales decline of -13% compared to last year, all of which was driven by lower volumes. Part of the volume decrease was a result of BBRG’s strategy to reduce its presence in lower margin rope applications. The A-Cords (advanced cords) business saw decreased sales in automotive markets and solid demand from elevator and timing belt markets.
BBRG accelerated the implementation of the profit restoration program for the ropes activities and further boosted profitability with a stronger business mix and significant cost savings and Covid-19 mitigation actions. The A-Cords activities continued to deliver a solid margin performance.
The business unit delivered an underlying EBIT of € 34 million at a margin of 7.9% on sales, more than tripling the margin of the previous year. Underlying EBITDA reached a strong margin of 15.1%, compared with 9.0% in 2019. As anticipated, BBRG’s sales and margins trended lower in the second half of the year, due to weaker business conditions in the Americas and less project business and seasonality effects in the second half of the year.
Reported EBIT was € 24 million and included € -10 million in one-offs, mainly due to impairments related to the planned plant closure in Pointe-Claire, Canada, and restructuring programs in EMEA. The benefits from these restructuring programs are expected to start to flow through from 2021 onwards.
BBRG invested € 16 million in PP&E, mainly in ropes plants in the UK and the US and in the Belgian A-Cords plant.
Despite a fast and strong rebound in several markets in the past months, the global economic uncertainty remains high.
The structural improvement actions we have been implementing since the end of 2019 and our agile response to
Covid-19 have demonstrated their effectiveness in strengthening Bekaert’s overall performance.
Actions to further step up our performance should generate robust progress towards our long term goals:
The strong performance we delivered in the difficult year 2020 and our determination to stimulate value creation by further enhancing our business portfolio and seizing value growth in robust markets, have made us more confident about the future potential of Bekaert. We are therefore raising our ambitions for the coming years.