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Kuka to buy back high-yield bond to cut costs - CFO
January 4, 2014 / 12:41 PM / 4 years ago

Kuka to buy back high-yield bond to cut costs - CFO

FRANKFURT, Jan 4 (Reuters) - German industrial robot maker Kuka plans to buy back a high-yield bond in November, ahead of schedule, to take advantage of low interest rates and cut its costs, its finance chief said.

“We are talking about 15 million euros of interest costs per year,” Peter Mohnen told Boersen-Zeitung newspaper in an interview published on Saturday.

“That is considerable and is equivalent to about a quarter of Kuka’s annual net profit.”

Kuka issued the 202 million euro ($275 million) bond in 2010, with a coupon of 8.75 percent and a May 2017 maturity.

“In November 2014 we will have the opportunity to take the whole bond off the market ahead of time,” Mohnen said.

The company has already started repurchasing shares in the bond on the open market, which weighed on the company’s profits in the third and fourth quarter of 2013 but will help lower interest costs for 2014, Mohnen said.

To help raise funds to buy back the bond, Kuka issued a convertible bond last year and secured a new five-year syndicated credit line worth 160 million euros.

Commenting on Kuka’s operating business, Mohnen said the Japanese yen’s decline against the euro and the U.S. dollar could enable Japanese rivals such as Fanuc and Yaskawa Electric to lower their prices by 20-30 percent.

“That will make it difficult to push through our margin targets,” he said but added that Kuka would rather accept lower margins than give up its global market share of 14 percent.

The yen effect, higher spending on research and development and a rising cost of sales will shrink the operating profit margin at Kuka’s Robotics business to about 9.5 percent this year from just over 10 percent last year, Mohnen said.

But margin improvement at its other main business, Systems, will help keep the group margin stable at about 6.5 percent this year, he said. ($1 = 0.7346 euros) (Reporting by Maria Sheahan; Editing by Susan Fenton)

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