Corporate News – 20 April 2020

Aves One exceeds revenue and earnings forecast for 2019 and looks confidently to the 2020 financial year

  • Increase in consolidated sales by around 50 % to EUR 116.8 million
  • EBITDA grows by around 62 % and reaches EUR 84.5 million
  • Adjusted EBT rises significantly to EUR 11.0 million (previous year: EUR 2.8 million)
  • Investment strategy: increasing focus on high-margin rail business
  • Positive outlook: Revenue and EBITDA at least at the 2019 level despite COVID-19

The 2019 financial year was another successful year for Aves One AG, a strongly growing logistics asset holder. According to preliminary figures, revenues again grew strongly. They rose by around 50% to EUR 116.8 million (previous year: EUR 77.7 million). EBITDA amounted to EUR 84.5 million (previous year: EUR 52.2 million) - a significant increase of around 62 %. Both revenues and earnings figures are thus exceeding the forecast. The forecast anticipated an increase in revenues to more than EUR 110.0 million and an EBITDA of more than EUR 80.0 million. EBT adjusted for exchange rate effects reported in the financial result rose to over EUR 11.0 million (previous year: EUR 2.8 million).

"Primarily due to delays in the delivery of new railway wagons as a result of overloaded manufacturing capacities, the billion euro asset portfolio could not be reached by the end of 2019. However, with an asset volume of more than EUR 920 million as at 31 December 2019, we are keeping a firm eye on this target," comments Jürgen Bauer, CEO of Aves One AG, and adds: "Our decision taken in the second half of the year to discontinue our investments in sea containers has also played its part, but due to the strong rail pipeline this would not have been decisive. In the current market environment 'the billion' asset value is not our primary target. Our main focus is on key earnings figures. In this area we have exceeded our forecasts."

Consistent focus of investments on the high-margin Rail segment

The decision to further strengthen its involvement in the Rail segment offers the company further opportunities in the long run. Thus, the earnings contributions of the rail segment are a key pillar of the group. The growth and investment opportunities in the Rail segment are continuously attractive and stable. In contrast, the growth opportunities in the sea container segment are not sustainable. In this context, the strategic decision was taken not to further expand the sea container portfolio, but to gradually reduce it in the upcoming years through age-related sales.

Good long-term operating prospects despite COVID-19

From the current perspective, the impact on the operating rental business is considered to be lower compared to the expected enormous impact in other sectors.

In the sea container segment (approx. 23 % contribution to revenue in 2019), the situation has currently led to shortages rather than overcapacity in some parts of the world. The prices for new containers have risen significantly in the last three months due to natural annual disposals (5-7 % p.a. of the global stock of containers in maritime use) and the lower amount of new containers being built by Chinese manufacturers. The capacity utilisation of container lessors is currently stable at a high level. This could have a similar effect on the rental business as in the last major crisis in 2009. At that time, shipping companies increasingly relied on rentals and further scaled back their own investment programmes in containers. Further developments are difficult to forecast from today's perspective and remain to be observed. Aves One remains cautiously neutral in its assessment.

For the swap body business (approx. 9% contribution to revenue in 2019), the company expects a stable development. This outlook is based on the historical decision that Aves One has relied heavily on logistics providers for online trade (B2C) in this area, which will continue to develop strongly in the current situation despite or rather because of COVID-19.

"Our most important segment, the rail sector, with a 65% contribution to revenues in 2019, has so far only been slightly affected by the COVID-19 pandemic. Although capacity utilization of the wagon fleet has currently decreased slightly, as expected, due to the poor state of the steel industry, it remains at a high level overall. Rent increases, as recently widely agreed, will hardly be feasible in 2020. Rental customers have become more cautious, but do not want to return any wagons at present due to the expected return to business as usual.

Rail freight transport, now also declared to be systemically important, could even emerge from the situation stronger in the long term. Due to time consuming border controls and a shortage of drivers, truck traffic does not appear to be in a position to handle the important international traffic and ensure reliable supplies. Rail freight transport is appearing to be logistically more reliable and is particularly strong in international freight transport. A freight train is currently averaging the transport volume of more than 50 trucks – excluding driver controls and border delays," says Jürgen Bauer.

He adds: "Of course we expect the COVID 19 pandemic to show diverse effects on various industries in which our freight cars are operating. This particularly affects industries in which production volumes or product demand decline in the short term. There will be areas with high wagon demand and areas with declining capacity utilization. In this situation, we consider Aves One to be well positioned with a very young and optimally diversified freight car portfolio compared with the other companies in the market. Thus, demand for modern and efficient wagons has been increasing in difficult market phases".

In the current challenging situation for many companies, we cannot exclude the possibility that certain customers will default on payments and that individual segments will experience weaker capacity utilization. However, due to Aves One's overall very strong customer base with a high proportion of state-owned railways and blue chip customers, the Management Board does not expect any significant negative effects for Aves One.

From today's point of view, the macroeconomic effects are difficult to predict. However, one can assume that after the COVID 19 pandemic, infrastructure investments will play a role in economic development programs and that the production region of Europe will be strengthened. Accordingly, European rail freight transport should benefit more from the overall development.

Outlook 2020: Group revenues and EBITDA at least at the previous year's level

Jürgen Bauer specifies the outlook for the 2020 financial year as follows:

"With regard to new investments, we have a strong pipeline, but we cannot yet estimate whether there will be any delays. In particular, the effects of the COVID 19 pandemic on the supply chains, further delays at producers of new wagons and reduced maintenance capacities are currently hard to predict. It is also uncertain at the present time to what extent the COVID 19 pandemic will change conditions on the capital market for Aves One. This applies above all to the question of the short or medium-term possibilities for financing and the conditions under which such financing could be arranged.

Despite the challenging environment the Management Board expects revenues and EBITDA to at least reach the level of the strong fiscal year 2019. The company will only comment on the expected volume of assets at the end of 2020 when reliable forecasts are possible".

Jürgen Bauer adds: "In view of the situation described, we have decided to make our forecasts for 2020 with due caution. Nevertheless, experience shows that opportunities always arise in challenging market environments for highly focused investors like Aves One. In view of this, we anticipate that the acquisition of existing portfolios will provide us with the opportunity to further expand our Rail portfolio - in the best case substantially".