DEUTZ AG Interim Report for the First Half of 2020
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DEUTZ AG Interim report for the first half of 2020 2 DEUTZ AG FIRST HALF OF 2020 DEUTZ AT A GLANCE DEUTZ is one of the world’s leading manufacturers of innovative The Company’s operating activities are divided into three drive systems. The Company was founded in 1864 and has approx- segments: DEUTZ Compact Engines (DCE), DEUTZ Customized imately 4,670 employees worldwide. Its core competencies are the Solutions (DCS), and Other. The DCE segment, which generated development, production, and distribution of drive solutions with around 79 percent of consolidated revenue in 2019, comprises a power output of up to 620 kW for off-highway applications. The liquid-cooled engines with capacities of up to 8 liters. The DCS current portfolio extends from diesel and gas engines to hybrid and segment specializes in liquid-cooled engines with capacities all-electric drives that are used in various applications, including of over 8 liters and in air-cooled drives. It also includes recon- construction equipment, agricultural machinery, material handling ditioned exchange engines and parts produced under the name equipment such as forklift trucks and lifting platforms, commercial DEUTZ Xchange, along with engine series that are soon to be vehicles, rail vehicles, and boats used for private or commercial discontinued. The DCS segment’s share of revenue in 2019 purposes. The engine specialist also offers a comprehensive range was around 20 percent. The Torqeedo subsidiary is included of services through more than 800 sales and service partners in in the Other segment and focuses on electric-powered water- over 130 countries. craft. Futavis, a development service provider that specializes in high-voltage battery management systems and safety engineering, DEUTZ Group: overview is also included in the Other segment. It was acquired in 2019. € million 4–6/2020 4–6/2019 1–6/2020 1–6/2019 DEUTZ Group: segments New orders 266.9 438.8 623.6 953.3 € million Unit sales (units) 33,790 53,856 73,859 101,591 4–6/2020 4–6/2019 1–6/2020 1–6/2019 Revenue 280.2 477.0 620.0 929.8 New orders EBITDA -11.8 50.2 -1.9 95.1 DEUTZ Compact Engines 184.6 346.9 439.9 756.2 EBITDA before exceptional items -11.8 40.9 -1.9 85.8 DEUTZ Customized Solutions 72.9 83.6 165.4 180.5 EBIT -38.1 31.4 -49.9 56.5 Other 9.8 9.4 19.5 18.6 EBIT before exceptional items -38.1 22.1 -49.9 47.2 Consolidation -0.4 -1.1 -1.2 -2.0 EBIT margin (%) -13.6 6.6 -8.0 6.1 Total 266.9 438.8 623.6 953.3 EBIT margin before exceptional items (%) -13.6 4.6 -8.0 5.1 Unit sales (units) Net income -42.3 24.4 -52.3 45.3 DEUTZ Compact Engines 21,180 42,954 48,173 81,924 Net income DEUTZ Customized (before exceptional items) -42.3 16.6 -52.3 37.5 Solutions 4,889 6,415 9,442 13,509 Earnings per share (€) -0.35 0.20 -0.43 0.37 Other 7,721 4,487 16,244 6,158 Earnings per share (before Consolidation 0 0 0 0 exceptional items, €) -0.35 0.14 -0.43 0.31 Total 33,790 53,856 73,859 101,591 Total assets 1,229.9 1,295.9 1,229.9 1,295.9 Non-current assets 619.1 560.6 619.1 560.6 Revenue Equity 596.4 643.7 596.4 643.7 DEUTZ Compact Engines 197.8 373.6 453.7 729.8 Equity ratio (%) 48.5 49.7 48.5 49.7 DEUTZ Customized Solutions 70.2 93.8 145.0 185.0 Cash flow from operating activities -31.8 3.7 -43.7 0.9 Other 12.6 10.7 22.5 17.0 Free cash flow1) -50.2 -16.0 -85.7 -46.2 Consolidation -0.4 -1.1 -1.2 -2.0 Net financial position2) -117.8 -17.8 -117.8 -17.8 Total 280.2 477.0 620.0 929.8 Working capital3) 308.9 336.7 308.9 336.7 EBIT before Working capital ratio4) exceptional items (average, %) 20.2 16.8 20.2 16.8 DEUTZ Compact Engines -33.1 16.4 -49.8 34.9 Capital expenditure5) (after deducting grants) 14.4 23.4 38.9 42.2 DEUTZ Customized Solutions -1.7 10.8 6.6 23.6 Depreciation and amortization 26.3 18.8 48.0 38.6 Other -3.3 -5.1 -6.7 -11.3 Research and Consolidation 0.0 0.0 0.0 0.0 development expenditure Total -38.1 22.1 -49.9 47.2 (after deducting grants) 21.4 21.1 46.2 44.7 thereof capitalized 4.6 4.2 9.1 9.6 Employees (number as at Jun. 30) 4,673 4,863 4,673 4,863 1) Cash flow from operating activities and from investing activities less interest expense. 2) Cash and cash equivalents less current and non-current interest-bearing financial debt. 3) Inventories plus trade receivables less trade payables. 4) Average working capital at the four quarterly reporting dates divided by revenue for the previous twelve months. 5) Capital expenditure on property, plant and equipment (including right-of-use assets in connection with leases) and intangible assets, excluding capitalization of R&D. DEUTZ AG FIRST HALF OF 2020 3 INTERIM REPORT OF THE DEUTZ GROUP FOR THE FIRST HALF OF 2020 OVERVIEW China strategy continues to be implemented successfully and the revenue target for 2022 is raised from €500 million to around Sales figures decline sharply overall due to the impact of €800 million1) the coronavirus pandemic on the global economy and the Company’s business activities Operating profit decreases significantly to a loss of €49.9 million owing to the fall in revenue and related diseconomies of scale New orders fall by 34.6 percent to €623.6 million, but the service business continues to hold steady Measures under the global Transform for Growth efficiency pro- gram have been defined and initiated; implementation of the Consolidated unit sales drop by 27.3 percent to 73,859 measures is predicted to generate annual cost savings of around engines, whereas unit sales of Torqeedo’s electric drives €100 million from the end of 2022 onward increase rapidly Group guidance for 2020 remains under review due to the Consolidated revenue goes down by 33.3 percent to ongoing uncertainty about how the coronavirus crisis will unfold €620.0 million Medium-term targets have been confirmed despite the outbreak of the coronavirus pandemic 1) The revenue target of approximately €800 million includes the revenue generated by the joint venture with SANY. Under the equity method, this revenue is not recognized in the consolidated financial statements. 4 DEUTZ AG FIRST HALF OF 2020 MACROECONOMIC AND INDUSTRY-SPECIFIC ENVIRONMENT INDUSTRY-SPECIFIC The market data currently available to us shows that the majority ENVIRONMENT of the individual markets relevant to DEUTZ declined in the first half of 2020. ECONOMIC ENVIRONMENT According to the latest data from Germany’s Mechanical The coronavirus pandemic and the resulting crisis plunged the Engineering Industry Association (VDMA), the global market for global economy into a deep recession in the first half of 2020. The construction equipment had been at a record high level in the Kiel Institute for the World Economy (IfW) published its economic previous two years. This sustained upturn was already showing report in June 2020 in which it estimated that worldwide economic signs of ending in late 2019, and this trend accelerated significantly activity would likely decline by almost 10 percent in the period as a result of the coronavirus pandemic.3) January to June 2020.1) Unit sales of construction equipment in North America and According to the latest data from the World Trade Organization Europe are likely to have fallen significantly in the first half of 2020 (WTO), global trade contracted by roughly 3 percent in the first compared with the same period of 2019.3) In the second quarter, quarter of 2020 compared with the first quarter of 2019. For the however, the Chinese market was able to make up for much of second quarter, the WTO expects an even sharper decrease of the sales lost in the first quarter and returned to the high level of up to 18.5 percent.2) unit sales that it had seen before the shutdown in response to the coronavirus outbreak.4) The action taken around the world during the coronavirus pandemic, such as travel restrictions and lockdowns, were at Demand for material handling applications followed the trend in their height between mid-March and mid-May, thereby disrupting the construction industry. Unit sales, for example of forklift trucks transport, tourism, consumer spending and, as a result, macro- in North America and Europe, showed a sustained downturn.5) economic activity. The gradual easing of measures in European In China, however, a very positive trend is discernible – despite countries from mid-May onward did lead to a piecemeal increase the sharp falls in the first quarter – and unit sales in the reporting in economic activity, but almost no country saw a return to the period are likely to have been at more or less the same level as in pre- crisis level. the first half of 2019.4) The coronavirus crisis had a negative impact on the market for agricultural machinery in Europe, North America, and China alike.6) 1) https://www.ifw-kiel.de/publications/kiel-institute-economic-outlook/2020/ 4) CCMA, CE Sales Data, May 2020.