Cash flows

Capital expenditure

Capital expenditure on intangible assets and property, plant and equipment increased by EUR 3.1 million year on year to EUR 109.5 million, thereby reaching a new record high. In accordance with the strategic objective of long-term profitable growth, capital expenditure was again primarily aimed at the enhancement of capacity and structures in manufacturing and sales and the implementation of new technologies. Core aspects in the year under review were the targeted expansion and ongoing modernisation of production capacity, the establishment of structures as part of the digital transformation, new production technologies and new and expanded sales and production locations. In the year under review, a large part of the investment activity again related to the modernisation and expansion of production capacities at key European locations in Germany and France. As part of the strategic location development project, a state-of-the-art smart factory incorporating significant elements of the Industry 4.0 vision will be realised at the Wilo Group’s headquarters in Dortmund over the coming years, among other things. For this purpose, additional land was acquired and the preparatory construction measures were continued in the year under review. In October 2016, the construction of the new smart factory was officially started with a symbolic ground-breaking ceremony.

In addition to the investments in the location development project, investments were made in adjusting production capacities to current and future changes in the product portfolio. For example, an investment was made for new, modern production facilities for the innovative pump Wilo-Stratos MAXO. In addition, a large portion of the investments went on the expansion of IT infrastructure as part of the digital transformation. Development costs including borrowing costs were capitalised in the amount of EUR 18.5 million.

After hefty investment in emerging economies in previous years, capital expenditure on property, plant and equipment and intangible assets including capitalised development costs at the locations in Germany and France totalled EUR 86.9 million in 2016. This corresponds to nearly 80 percent of the Wilo Group’s total capital expenditure in the year under review and reflects the importance of the Group’s Western European locations in terms of its strategic focus. With these future-oriented investments, the Group is seeking to actively strengthen these locations even further.

 

Another portion of these investments related to the construction of new production sites including sales and administrative buildings in Russia. EUR 6.5 million was spent on this in 2016, thus completing the planned construction at this location. The total investment volume in Russia including production machinery and resources was around EUR 35 million. In June 2016, the new branch near Moscow commenced operations. This investment is Wilo’s response to the expected above-average growth in the medium to long term, as well as the size and significance of the Russian market. Adequate measures have been taken to reduce the risk of possible political influence, which could have a negative impact on future business.

In recent years, the Wilo Group has expanded sales and production locations in the high-growth markets of Korea, China, India, Turkey and now Russia in order to lay the necessary groundwork for taking a share in the substantial growth potential in these markets. In 2016, further investments were made in the sales infrastructures in Southeast Asia, Africa and Latin America, further expanding the foundations for accelerated growth outside of the Group’s established markets in Europe.

In addition to the capital expenditure on intangible assets and property, plant and equipment, WILO SE acquired all of the shares in GVA Gesellschaft für Verfahren der Abwassertechnik mbH & Co. KG at cost amounting to EUR 3.5 million in 2016 and renamed this company WILO GVA GmbH. The acquisition resulted in derivative goodwill of EUR 1.2 million. The acquisition improved the Wilo Group’s position in the wastewater sector and increased its application expertise.

Capital expenditure on intangible assets (excluding goodwill) and property, plant and equipment broke down as follows in the 2016 and 2015 financial years:


Capital expenditure on intangible assets and property, plant and equipment

EUR million 2016 2015 Change
Capital expenditure on intangible assets 31.6 25.3 6.3
Land and buildings 18.5 17.7 0.8
Technical equipment and machinery 7.6 8.9 -1.3
Operating and office equipment 22.4 20.7 1.7
Advance payments made and assets under construction 29.4 33.8 -4.4
Capital expenditure on property, plant and equipment 77.9 81.1 -3.2
Total 109.5 106.4 3.1

Cash flow and liquidity

In the 2016 financial year, the positive cash flow from operating activities increased by EUR 5.1 million to EUR 137.4 million, likewise reaching a new high. The previous year’s operating cash flow figure was strongly negatively influenced by a considerable cash decrease in advance payments on account of orders and by a decline in other liabilities. In contrast, the balance of other assets and liabilities improved slightly in 2016. The EUR 2.2 million reduction in income tax payments and negative exchange rate effects, which were eliminated in operating cash flow, likewise contributed to the improvement of cash flow from operating activities.

Net cash used in investing activities in the 2016 financial year increased by EUR 2.6 million year on year to EUR 107.6 million. In the year under review, purchases of property, plant and equipment decreased slightly by EUR 3.1 million, while purchases of intangible assets increased by EUR 5.6 million. In addition, the acquisition of GVA Gesellschaft für Verfahren der Abwassertechnik mbH & Co. KG resulted in cash outflow of EUR 3.5 million. 

Net cash used in financing activities increased by EUR 8.2 million year on year to EUR 18.6 million. This was primarily due to the repayment of the senior note of USD 40.0 million redeemed in the year under review. Furthermore, dividends of EUR 4.0 thousand were paid in 2016, while there was no distribution in the previous year. The sale of treasury shares increased liquidity with incoming payments of EUR 21.2 million. In addition, net interest expense improved by EUR 1.7 million to EUR 5.6 million. 

The individual cash flows for the 2016 and 2015 financial years were as follows:


Cash flows

EUR million 2016 2015 Change
Cash flow from operating activities 137.4 132.3 5.1
Cash flow from investing activities 107.6 -105.0 -2.6
Cash flow from financing activities -18.6 -10.4 -8.2

Change in cash

Cash at the end of the financial year

11,2

178.3

16.9

165.8

-5.7

12.5

Free cash flow 24.2 19.9 4.3

Despite the increase in investment to record levels, the Wilo Group again generated a positive free cash flow of EUR 24.2 million in the 2016 financial year, calculated as the difference between the cash flows from operating and investing activities including interest income and expenses and dividends received. The funds generated are available to the Wilo Group for servicing providers of capital. The Wilo Group therefore retains its very high capacity for self-financing.

Including positive exchange rate effects of EUR 1.3 million, cash increased by EUR 12.5 million to EUR 178.3 million as at 31 December 2016.

Financial management

The goal of financial management is to maintain the financial independence of the company, ensure liquidity at all times and support the operating activities of the Wilo Group. In addition to its operating cash flow, the Wilo Group still has sufficient financing facilities from international banks for this purpose, consisting of short and medium-term cash credit facilities of more than EUR 200 million as previously. This includes a syndicated loan agreement of EUR 120.0 million with a term of five years that was concluded in 2013 and adapted to reflect the Group’s requirements and future challenges. EUR 15.3 million of the cash credit facilities had been utilised as at 31 December 2016. The Wilo Group operates active portfolio management with regard to the origin, type and maturity structure of its borrowings. Financing policy focuses primarily on both return and security targets.

The Wilo Group repaid scheduled financial liabilities of EUR 39.2 million in the 2016 financial year. This related to the redemption of a senior note of USD 40.0 million and the annual repayment of existing promissory note loans. All repayments were primarily financed from the operating cash flow of the year under review.

The Wilo Group’s financial liabilities therefore fell by EUR 30 million to EUR 137.3 million as at 31 December 2016. They primarily comprise senior notes of EUR 75.0 million and EUR 37.0 million. The senior notes were issued by WILO SE in the context of US private placements in 2011 and 2013. They mature in 2021 and 2023 and were issued as part of a private shelf facility (non-binding debt commitment). The private shelf facility of USD 150.0 million has been utilised in full. The Group also has a promissory note loan with a volume of EUR 25.0 million, which was taken out in 2011 and will be repaid in instalments until 2020. This promissory note loan had a carrying amount of EUR 10.0 million as at 31 December 2016 (previous year: EUR 12.5 million). The Group also had short-term current account liabilities with a volume of EUR 15.3 million (previous year: EUR 6.1 million).

WILO SE currently expects to be able to repay the tranches of the senior notes and promissory note loans on maturity from its budgeted cash flows from operations, as well as through refinancing measures as required. It has no knowledge of whether the uncertainty affecting the global economic and financial market environment will have any material negative impact on the Wilo Group’s financing activities. As at 31 December 2016, cash amounted to EUR 178.3 million (previous year: EUR 165.8 million). The Wilo Group therefore reported its net financial position (financial liabilities less cash) as excess liquidity of EUR 41.0 million and was thus free of net debt. The Wilo Group’s leverage, which describes the ratio of the net financial position to consolidated EBITDA, decreased from 0.01 at the end of the previous year to -0.26 as at 31 December 2016.

Order report

WILO SE
Corporate Communications
Nortkirchenstraße 100
44263 Dortmund
T +49 231 4102-0
F +49 231 4102-7363

Contact

WILO SE
Corporate Communications
Nortkirchenstraße 100
44263 Dortmund
T +49 231 4102-0
F +49 231 4102-7363