Annual Report 2020 DEUTZ GROUP: OVERVIEW € Million
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Growth – Innovation – Sustainability NOW DEUTZ AG Annual Report 2020 DEUTZ GROUP: OVERVIEW € million 2020 2019 Change (%) New orders 1,322.5 1,654.3 – 20.1 Unit sales (units) 150,928 211,667 – 28.7 Revenue 1,295.6 1,840.8 – 29.6 EBITDA – 0.2 175.5 –100.1 EBITDA (before exceptional items) 31.7 166.2 – 80.9 EBIT – 106.6 88.1 –221.0 EBIT (before exceptional items) – 74.7 78.8 –194.8 EBIT margin (%) – 8.2 4.8 – EBIT margin (before exceptional items, %) – 5.8 4.3 – Net income – 107.6 52.3 –305.7 Net income (before exceptional items) – 75.7 44.2 –271.3 Earnings per share (€) – 0.89 0.43 – 307.0 Earnings per share (before exceptional items, €) – 0.63 0.37 –270.3 Total assets 1,180.5 1,301.2 – 9.3 Non-current assets 613.6 619.5 – 1.0 Equity 535.2 652.4 – 18.0 Equity ratio (%) 45.3 50.1 – Cash flow from operating activities 44.9 115.6 – 61.2 Free cash flow1 – 35.8 – 36.6 2.2 Net financial position2 – 83.8 – 15.2 –451.3 Working capital3 235.0 293.2 – 19.8 Working capital ratio4 (average, %) 21.8 17.4 – Capital expenditure (after deducting grants)5 91.7 86.5 6.0 Depreciation and amortization 106.4 87.4 21.7 Research and development (after deducting grants) 81.4 95.8 – 15.0 thereof capitalized 12.6 21.7 – 41.9 Employees 6 (number as at Dec. 31) 4,586 4,906 – 6.5 1 Cash flow from operating and 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. 6 From 2019 onward, the number of employees is expressed in FTEs (full-time equivalents). DEUTZ Compact Engines DEUTZ Customized Solutions 2020 2019 Change (%) 2020 2019 Change (%) New orders (€ million) 954.3 1,268.4 –24.8 New orders (€ million) 324.5 341.7 –5.0 Unit sales (units) 102,054 164,677 –38.0 Unit sales (units) 18,980 26,048 –27.1 Revenue (€ million) 943.8 1,446.4 –34.7 Revenue (€ million) 310.1 362.5 –14.5 EBIT (€ million)1 –80.5 57.7 –239.5 EBIT (€ million)1 18.7 42.8 –56.3 EBIT margin (%)1 –8.5 4.0 – EBIT margin (%) 1 6.0 11.8 – 1 before exceptional items. 1 before exceptional items. DEUTZ AG ANNUAL REPORT 2020 Growth – Innovation – Sustainability Vision DEUTZ builds the most advanced drive systems for professionals, providing outstanding performance to shape the world. Mission Through pioneering spirit and innovation, DEUTZ shaped the industrial revolution. Now, we are driving the next revolution – delivering efficiency, performance, and sustainability for our customers. 1 DEUTZ ANNUAL REPORT 2020 DEUTZ ANNUAL REPORT 2020 As of the end of 2020, for environmental reasons, we will no longer be printing annual reports, half-year reports, or quarterly statements for distribution. The online version of the annual report contains the complete report, further information about the overarching corporate strategy, and strategic highlights. This information is additionally summarized in a separate magazine that is also available on our website. THE 2020 ONLINE ANNUAL REPORT DEUTZ 2020 – THE MAGAZINE INCLUDING A KPI TOOL AND INTERACTIVE FEATURES PRINTED OR AS A PDF AT AT annualreport.deutz.com/2020 www.deutz.com/magazin2020/en Follow us on: 2 ANNUAL REPORT 2020 DEUTZ AG ABOUT THIS REPORT About this report This annual report takes an in-depth look at the business per- The remit of PwC’s audit engagement did not include audi- formance of the DEUTZ Group and DEUTZ AG. It covers both ting the online version of the report or references to external financial and non-financial aspects. See ‘Separate combined non-finan- sources, such as the Company’s website. cial report’, p. 70 onward. Forward-looking statements Reporting structure This report includes certain statements and assumptions about The reporting period covers the 2020 financial year, which future events and developments. Such forward-looking state- began on January 1 and ended on December 31, 2020. To ments include known and unknown risks, uncertainties, and ensure that it is as up to date as possible, this report also con- other factors. These means that the actual future performance, tains any relevant information that was available by the time that development, and results of the Company, and of sectors the responsibility statement was issued on February 26, 2021. important to the Company, may be significantly different – in The consolidated financial statements and group manage- particular, may differ negatively – from those expressly or impli- ment report have been prepared in accordance with Internati- citly assumed in these statements. It is therefore not possible to onal Financial Reporting Standards (IFRS), as adopted by the make any guarantees with regard to the forward-looking state- European Union (EU), and the additional requirements pursuant ments made in this annual report. to the German Commercial Code (HGB).The separate combi- ned non-financial report has been prepared in accordance with Further information section 315c in conjunction with sections 289c to 289e HGB. In this report, references to further information are highlighted However, the reporting is in parts based on the aspects covered in the text and the relevant page number is given. A gray font is by particular criteria of the German Sustainability Code. used to highlight glossary terms, explanations of which can be found on p. 188 onward in this report, and references to further Independent audit information that is available online. The consolidated financial statements prepared by DEUTZ AG – comprising the balance sheet, income statement, statement of Miscellaneous comprehensive income, statement of changes in equity, cash This annual report is available in German and English. To improve flow statement, and notes to the consolidated financial state- readability, we do not indicate rounding differences in this report. ments – and the group management report were audited by Pri- cewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC). See ‘Independent auditor’s report’, p. 171 onward. The combined non-financial statement for DEUTZ AG and the Group was subject to a separate review with limited assurance by PwC that was conducted in accordance with the Internatio- nal Standard on Assurance Engagements, ISAE 3000 (Revised). See ‘Independent practitioner’s report’, p. 93 onward. ANNUAL REPORT 2020 DEUTZ AG 3 CONTENTS 3 About this report 6 To our shareholders 6 Foreword by the Chairman of the Board of Management 10 Board of Management 12 Report of the Supervisory Board 17 DEUTZ in the capital markets 20 Combined management report of DEUTZ AG and the DEUTZ Group 22 Fundamental features of the Group 35 Macroeconomic and industry-specific environment 36 Business performance in the DEUTZ Group 40 Business performance in the segments 42 Financial position 45 Net assets 47 Overall assessment for 2020 48 DEUTZ AG 52 Non-financial report pursuant to sections 289b and 315b HGB 52 Corporate governance declaration pursuant to section 289f HGB 52 Disclosures pursuant to sections 289a, 315a HGB 54 Further disclosures 54 Explanatory statement by the Board of Management in connection with sections 289a, 315a HGB 55 Remuneration report 59 Risk report 66 Outlook 69 Outlook for 2023/2024 4 70 Separate combined non-financial report 72 About this non-financial report 72 Business model and corporate philosophy 72 Materiality assessment 73 Sustainability strategy 76 Non-financial report 77 Social responsibility 80 Corporate responsibility 89 Environmental responsibility 93 Independent practitioner’s report 96 2020 consolidated financial statements 98 Income statement for the DEUTZ Group 98 Statement of comprehensive income for the DEUTZ Group 99 Balance sheet for the DEUTZ Group 100 Statement of changes in equity for the DEUTZ Group 101 Cash flow statement for the DEUTZ Group 102 Notes to the 2020 consolidated financial statements 168 2020 annual financial statements in accordance with the German Commercial Code (HGB) 170 Additional information 170 Responsibility statement 171 Independent auditor’s report 178 Corporate governance declaration and corporate governance report 188 Glossary 192 DEUTZ Group: multi-year overview 5 FOREWORD BY THE CHAIRMAN OF THE BOARD OF MANAGEMENT FOREWORD BY THE CHAIRMAN OF THE BOARD OF MANAGEMENT The coronavirus pandemic dominated everything in 2020 and changed the world. The virus created unprecedented challenges for DEUTZ too, as a global player with international sales markets and supply chains. We responded with rapid and decisive action, for example temporarily suspending production in Europe in April last year to protect the health of our employees. One key achievement was the swift formulation and implementation of our ‘Vision of Success’, a set of guidelines that served as a compass in these extraordinary times, steering DEUTZ through the crisis in the best way possible. Despite all the measures we put in place, there is no denying that the economic fallout from the coronavirus pandemic took its toll on our 2020 financial results. The massive slump in demand in what was already a challenging market environment resulted in a year-on-year decline in revenue of 29.6 percent to €1,295.6 million and an EBIT margin before exceptional items of minus 5.8 percent. The Company reported a net loss adjusted for exceptional items of € 75.7 million, which translated into earnings per share of minus € 0.63. The DEUTZ share price was also severely impacted by the coronavirus crisis in 2020.