Talgo increased revenue by 23.2% to September as a result of greater industrial activity - corporate
null Talgo increased revenue by 23.2% to September as a result of greater industrial activity
12 Nov 2020
Talgo increased revenue by 23.2% to September as a result of greater industrial activity
- Talgo also registered an increase in revenues of up to 18% compared to the previous quarter, which reflects a recovery and an increase in industrial activity despite the impact of the Covid-19
- The Company has a robust backlog with excellent visibility of industrial activity for the coming years. The Company is in an optimal financial situation to successfully execute the projects
- Since March, Talgo has adopted contingency plans and significant cost savings across the Company to limit the economic impact of the Covid-19
Talgo S.A., a leading company in the design, manufacture and maintenance of high-speed light trains, registered a net turnover of 339.4 million euros in the first nine months of 2020, 23.2% more than the 275.5 million euros registered in the same period of the previous year. Likewise, revenues were up by 18% during the third quarter of 2020, compared with last quarter. Revenue growth was driven by an increase in industrial activity, as a result of the successful operational measures implemented to normalize the manufacturing pace, which has recovered its levels prior to the Covid-19 outbreak in March.
The company registered an adjusted EBITDA of 22.6 million euros in the first nine months of 2020, compared to 52.2 million euros in the same period of the previous year. This downturn in EBITDA reflects the extraordinary situation caused by the economic context due to the impact of Covid-19. Operational profitability fell until September mainly due to a lower productivity of manufacturing projects and limited cost overruns due to the supply chain disruptions, and the drop in maintenance service activity due to the pandemic. However, the recovery of adjusted Ebitda margins in the quarter (from 0% in the second quarter to 6.5% in the third quarter) confirms the strong capacity of the business to recover normalized profitability, once service business rapidly reacts to higher levels of interurban mobility and the execution of high-quality manufacturing projects upturns.
Talgo has a strong backlog of 3.6 billion euros, of which 1.1 billion euros correspond to manufacturing projects, generating long-term revenue visibility and ensuring industrial activity for the period 2020-2024. Thus, the high quality of the backlog and the exhaustive cost control will allow the company to continue to recover its margins in the next months.
Also, it should be noted that Talgo is in a suitable financial situation to successfully execute the projects in its portfolio. The company also has credit lines of up to 150 million euros.
Since the Covid-19 outbreak in March, Talgo has adopted contingency plans and significant cost savings across the company and its various business units to limit the economic impact of Covid-19. The objective has been to ensure the continuity of the industrial activity by maintaining its commitment to customers, preserve the operating margins of the projects and protect its workers, in full compliance with the indications of the Ministry of Health and competent authorities in Spain.
These results confirm the capacity of Talgo’s business model and its cost structure to successfully adapt with high flexibility to adverse and changing environments.
Strong backlog and commercial visibility
Concerning the volume of new orders in the first nine months of 2020, it is worth highlighting the project awarded in Denmark for the manufacture of 8 Talgo 230 compositions for 134 million euros, as part of a framework agreement worth up to 500 million euros. This contract is a further step towards consolidating the brand in European Union markets.
The company is currently working on commercial opportunities for the next 24 months for a total value of approximately 7.8 billion euros, following a strategy based on consolidating a high-quality portfolio to ensure sustainable growth in the long term. Europe remains as the main geographical area targeted by Talgo, highlighting commuter opportunities in Spain and HS/VHS opportunities in northern Europe and the UK. The demand for rolling stock is expected to outperform across accessible markets, lead by opportunities in the HS and VHS segment, up by 8% CAGR in the 2020-2025 period, according to the latest UNIFE WRMS analysis. There have been no significant cancellations on identified opportunities due to Covid-19.
In March, Talgo withdrew its forecast for 2020 until it had greater visibility of the current situation caused by COVID. Given the significant level of uncertainty about the business performance during the second half of 2020, mainly in relation to maintenance activity, the Company will not reveal new perspectives for the year at this time.
Talgo's commitment to the fight against the Covid-19
Talgo's commitment to the fight against the Covid-19 has been clearly reflected in actions such as Talgo's transformation, in record time, of several Talgo S-730 trains for possible use by RENFE as medical trains.
Talgo has also worked to incorporate health and safety solutions into its fleets, aiming at minimizing the risks of mass exposure for passengers, thus ensuring health conditions and non-exposure.
Additionally, in July 2020, Talgo donated the amount of the 2020 edition of its emblematic "Talgo Award for Women’s Professional Excellence in Engineering" to the platform of the Spanish National Research Council (CSIC), which is coordinating the efforts for the development of a vaccine against Covid-19.
Note to editors:
Talgo S.A., is the leading Company in the design, manufacture and maintenance of high-speed light trains with an industrial presence in seven countries: Spain, Germany, Kazakhstan, Uzbekistan, Russia, Saudi Arabia and the United States. The Company is recognized worldwide for its innovative capacity, unique and distinctive technology and reliability. Talgo is the train supplier for the "Haramain" high-speed rail project between Mecca and Medina in Saudi Arabia.