Earnings

We expect to see a moderate increase in the EBIT margin before exceptional items. The improvement to the EBIT margin will be mainly due to greater capacity utilisation. We also anticipate lower R&D costs, savings on the cost of materials as a result of using new suppliers and improved efficiency compared with 2017. Conversely, collectively agreed pay increases, higher commodity prices and exchange rate movements will squeeze earnings. We believe the improvement in earnings will come mainly from the DCE segment, whereas the DCS segment’s operating profit will be on a par with 2017. The consolidation of Torqeedo is expected to have a negative impact on the Other segment’s earnings in the high-single-digit millions of euros.

The final instalment of the purchase consideration from the disposal of the Cologne-Deutz site could provide a positive exceptional item. After the development plan for the site has been approved, we will receivable a variable payment in the region of around €50 million. The amount and timing of this payment depends on this approval and is therefore not yet certain. From a current perspective, we assume that the payment will be made in 2019 but it could be as early as this year if the plans progress very well.

As a result of the anticipated increase in operating profit, we believe that the return on capital employed (ROCE) before exceptional items will see a further improvement towards the double-digit percentage level in 2018.