VTG continues positive development – All relevant Group indicators improved in the first half of 2018

VTG Aktiengesellschaft (WKN: VTG999), one of the leading railcar leasing and rail logistics companies in Europe, carried its very bright start to the year over into the second quarter of 2018 and can now look back on a successful first six months. Group revenue went up by 3 percent to EUR 513.8 million (H1 2017: EUR 498.8 million). Compared to the same period a year ago, EBITDA – before one-time charges for the ongoing Nacco takeover – increased by an impressive 8.3 percent to EUR 177.0 million (unadjusted figure: EUR 173.7 million; H1 2017: EUR 163.3 million). Also adjusted for Nacco-related expenses, earnings per share (EPS) were up by around 30 percent to EUR 0.96 in the first half of 2018 (H1 2017: EUR 0.74; H1 2018, unadjusted: EUR 0.76). This sustained positive development in the first half of 2018 is attributable above all to the increase in revenue and earnings in the Railcar Division. 

"Our results for the first half of 2018 pick up where we left off with the positive development seen in recent quarters", notes Dr. Heiko Fischer, Chairman of the Executive Board of VTG AG. "All relevant Group indicators have improved further. A large part was played by the sustained buoyant economic situation and associated stronger demand for our railcars and services."

Railcar capacity utilization up again – Sharp improvement in revenue and EBITDA in the first half of 2018

The Railcar Division posted revenue of EUR 272.9 million in the first half of 2018, 7.4 percent higher than in the same period a year ago (EUR 254.1 million). The reason for this development was a further increase in fleet capacity utilization, which stood at 93.0 percent at the end of the first half of 2018 (H1 2017: 91.2 percent). Demand for intermodal railcars in particular made a positive contribution, while fleet expansion in the second half of 2017 also had a healthy impact. Due to better fleet capacity utilization and comparatively lower maintenance costs, EBITDA rose by a forceful 9.2 percent to EUR 177.5 million (H1 2017: EUR 162.6 million). Accordingly, the EBITDA margin edged up 1.1 percent to 65.1 percent (H1 2017: 64.0 percent). Capital expenditure of EUR 136.3 million in the first half of 2018 was lower than in the same period of the prior year (EUR 150.8 million). More than 90 percent of this sum was channeled into fixed assets in the Railcar Division.

Tank Container Logistics: Revenue and EBITDA up – Rail Logistics: EBITDA unchanged year on year

The Tank Container Logistics Division ended the first half of 2018 with revenue 6.5 percent higher than in the prior year at EUR 83.1 million (H1 2017: EUR 78.1 million). Sustained high capacity utilization in Europe's chemical industry in particular prompted growth in transportation volumes. Intercontinental transports to and from Asia likewise experienced pleasing development. In the period under review, EBITDA improved faster than revenue, ending the first half-year at EUR 5.9 million – 14.5 percent higher than in the prior year. This gain was attributable to the gradual replacement of more than 1,000 rented tank containers with new equipment of our own, which reduced rental and maintenance costs. The gross-profit-based EBITDA margin accordingly improved by 10.3 percentage points to 45.0 percent (H1 2017: 34.7 percent).
Revenue at the Rail Logistics Division declined by 5.3 percent to EUR 157.8 million in the first half of 2018 (H1 2017: EUR 166.6 million), primarily because of project delays, the loss of large orders and the rail strike in France. On the other hand, lower transportation costs led to a slight increase in gross profit. It was thus gratifying to see EBITDA, at EUR 3.3 million, reach the previous year's levels. The EBITDA margin for Rail Logistics, based on gross profit, was down 21.7 percent in the first half of 2018, after falling by 22.2 percent in the same period a year ago.

Takeover bid announced by Morgan Stanley Infrastructure

On July 16, after the mid-year balance sheet date, major VTG shareholder Morgan Stanley Infrastructure (MSI) announced a voluntary takeover bid that would offer shareholders EUR 53.00 in cash per share. Kühne Holding, hitherto VTG's second-largest shareholder, stated its willingness to offer its 20 percent stake to MSI. The Executive Board believes that, from a present perspective, the bid price reflects neither the fundamental value nor the full potential of the company, and that it is therefore inadequate. "I see the positive development of the first half-year as the fruit of our sustainable business model and our long-term corporate development strategy", explains Dr. Heiko Fischer. "Seen in this light, Morgan Stanley Infrastructure's desire to step up its commitment comes as a sign of recognition and respect." As soon as the bid documents are available, VTG will conduct an in-depth assessment to determine whether the bid is in the best interests of the company, its employees and its shareholders.

Forecast for 2018 

Bearing in mind that global economic conditions remain generally stable and in light of forecast economic expectations, the Executive Board stands by its expectation of positive revenue and EBITDA development for the VTG Group in 2018. Group revenue from VTG's existing activities should thus be slightly higher than a year ago (2017: EUR 1,014 million). Earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to be in a corridor between EUR 340 million and EUR 370 million.

On July 1, 2017, VTG announced its intention to buy all shares in CIT Rail Holding (Europe) SAS, the owner of the Nacco Group, off the American CIT Group. At the end of March, the relevant antitrust authorities approved the takeover subject to certain conditions. These conditions obliged VTG to sell around 30 percent of the Nacco business it intended to acquire to third parties in advance. Only after closure of this sale is VTG authorized to acquire the Nacco Group's remaining 10,000 or so freight cars. There is no way of reliably assessing the outcome of this process, either in terms of its timing or its possible impact on earnings in the 2018 financial year. For this reason, all statements about business expectations relate to developments excluding any effects from the planned takeover of the Nacco Group.