RCS - Deutz AG - Robust margin for DEUTZ in first half of 2024
08/08/2024 08:30
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RNS Number : 7020Z Deutz AG 08 August 2024
DEUTZ AG / Key word(s): Half Year Report
Robust margin for DEUTZ in first half of 2024 despite fall in demand
08.08.2024 /
The issuer is solely responsible for the content of this announcement.
· Revenue and earnings performance underscore increasing resilience
· At 5.7%, the adjusted EBIT margin is within the forecast target
range for 2024
· As expected, new orders declined further owing to sustained
market weakness
· Important milestones for future growth reached: completion of
transactions for Blue Star Power Systems acquisition and alliance with
Rolls-Royce Power Systems
Cologne, August 8, 2024 - DEUTZ remains highly profitable against a backdrop
of economically challenging market conditions. This can be seen from the
results released today for the first half of 2024. With EBIT before
exceptional items at €50.1 million, the Company achieved a strong adjusted
EBIT margin of 5.7%. Despite the significant drop in revenue, the margin was
therefore almost unchanged year on year at the level of the entire
Group 1 (Q1-Q2/2023: 6.1%) and down only slightly in respect of continuing
operations (Q1-Q2/2023: 7.1%). This trend not only confirms that DEUTZ is
becoming increasingly resilient but also underlines the success of the ongoing
optimization of the portfolio.
The economic environment remained weak in nearly all end customer markets,
leading to sharp falls of 18.1% and 18.9% in new orders and unit sales
respectively. However, the decline in revenue to €875.5 million was much
less severe at 12.6%. The contributing factors included the successful
measures implemented to optimize costs and boost performance and the ongoing
expansion of the less cyclical but high-margin service business, where revenue
rose by 6.5% compared with the first half of 2023 to €252.9 million. 2 The
Company's most profitable application segment was therefore its biggest source
of revenue too.
"Our business performance shows that we are not immune to what happens in the
market. Unlike in the past, however, we are operating profitably and earning
money during this phase," explains DEUTZ CEO Dr. Sebastian C. Schulte. "This
is thanks to the operational measures that we have implemented and the
strategic milestones that we have reached. They are enabling us to put DEUTZ
on a broader and thus more future-proof footing." This, according to Schulte,
is clearly illustrated by the expansion of the service business and the
acquisition of Blue Star Power Systems.
DEUTZ announced its entry into the market for decentralized energy supply at
the end of June when it signed an agreement to acquire Blue Star Power
Systems. The transaction was completed at the beginning of August. The
acquisition of this US manufacturer of electricity generators represents an
important strategic milestone in more ways than one. It is allowing DEUTZ to
make further progress in its transition from component manufacturer to system
provider, to gain access to new, complementary business models, and to tap
into a fast-growing and less cyclical market in which it is already familiar
with the technology and associated service business.
DEUTZ anticipates that the acquisition of Blue Star Power Systems will provide
it with additional profitable revenue ranging from more than US$ 100 million
to (in the medium term) more than US$ 150 million per year. Building on Blue
Star Power Systems' business, revenue in the energy business is expected to
increase to approximately €500 million by 2030 through both organic growth
and growth by acquisition.
DEUTZ is also continuing to expand its Classic business. At the end of July,
the Company completed the transaction announced in December 2023 for DEUTZ to
take over Rolls-Royce Power Systems' sales and service activities for
heavy-duty and medium-duty Daimler Truck engines. The Company expects the
transaction to generate additional annual revenue of around €300 million.
DEUTZ anticipates that the two aforementioned transactions will deliver an
EBIT margin that is above the current margin for the Group.
At the start of July, DEUTZ also announced an alliance with TAFE, a leading
agricultural machinery company in India. This alliance, which is primarily
aimed at expanding the internal combustion engine business, provides DEUTZ
with access to one of the world's fastest-growing markets and will allow it to
carry on manufacturing with a competitive cost structure in the future.
The strategic milestones reached are proof positive that DEUTZ is continuing
to focus on the objectives defined under its Dual+ strategy despite the
challenging environment. At the start of July, DEUTZ placed 12.6 million new
shares with institutional investors, generating gross issue proceeds of around
€72 million and thus creating the flexibility it needs, for example to fund
further growth projects.
"High demand from investors showed that the capital markets support our
strategy, sending us an important signal," states DEUTZ CFO Timo Krutoff. "In
view of the successful capital increase and our comfortable financial position
with an equity ratio of just under 50%, we are well equipped financially to
fund our operating business and, at the same time, continue with our
buy-and-build strategy."
Given the fall in demand as a result of the economic situation, DEUTZ now
anticipates that, at best, it will reach the lower end of its forecast range
for unit sales of 160,000 to 180,000 engines in 2024. Nevertheless, the
Company still expects to generate revenue within a range of €1.9 billion to
€2.1 billion thanks to its increasing resilience. The prediction for the
adjusted EBIT margin is also unchanged at between 5.0% and 6.5%, with free
cash flow (before potential M&A activities) in the mid-double-digit
millions of euros. The forecast ranges for revenue and the adjusted EBIT
margin are due to be firmed up and announced during the Capital Markets Day in
October.
The Group's key figures for the first half of 2024 in detail
(Note: Unless otherwise indicated, all figures disclosed below are for
continuing operations only.)
As expected, new orders received by the DEUTZ Group fell sharply in the
first half of 2024, declining by -18.1% year on year to €791.0 million owing
to the decrease in demand caused by the difficult economic situation. Among
the application segments, only the service business recorded order growth,
with its new orders rising by 6.5% year on year to €257.2 million. This
increase was due to stronger demand in parts sales and, in particular, the
business of the service company Diesel Motor Nordic, which was acquired in the
second half of 2023 and was renamed DEUTZ Nordic in January 2024. The positive
trend in the high-margin service business affirms the Company's strategic
focus on these activities and, at the same time, is proof of the success of
the service-related growth initiatives that DEUTZ is pursuing under its Dual+
strategy. All regions reported a significant fall in new orders compared with
the first half of 2023.
As at June 30, 2024, orders on hand stood at €365.9 million, compared with
€450.4 million at the end of 2023. Within this total, the orders on hand
attributable to the service business were up sharply at €44.5 million
(December 31, 2023: €40.3 million).
As expected, DEUTZ saw a considerable decrease in unit sales in the first
half of 2024 as a result of falling new orders in previous quarters. It sold
74,162 engines in the reporting period, a drop of -18.9% compared with the
91,451 engines sold in the prior-year period. All of the application segments
except Material Handling saw a substantial decrease in unit sales. The
Material Handling application segment's unit sales jumped by 14.1%, as a
result of which the Americas region recorded a small rise in unit sales of
0.9%. By contrast, the EMEA and Asia-Pacific regions both saw double-digit
percentage decreases in unit sales.
The decline in consolidated revenue reflected the decline in unit sales.
However, revenue did not fall as significantly as unit sales thanks to
market-oriented pricing, active portfolio management, and a jump in service
revenue. As a result, consolidated revenue amounted to €875.5 million, a
year-on-year decrease of 12.6% (H1/2023: €1,001.2 million). In line with the
trend in unit sales, revenue went down in all application segments except
Material Handling and the service business. Reflecting its growth in unit
sales, the Material Handling application segment increased its revenue by 9.2%
to €234.9 million. Service revenue rose by 6.5% to €252.9 million. This
uptrend was thanks to growth resulting from the consolidation of the companies
DEUTZ Nordic and Mauricio Hochschild (both acquired in the second half of
2023) and, in particular, the expansion of parts sales. At regional level, the
decline in revenue was attributable to the EMEA and Asia-Pacific regions, with
Germany and the rest of Europe experiencing the sharpest decreases. However,
favorable price and portfolio effects meant that the reductions in revenue
there were far less pronounced than the reductions in unit sales. In the
Americas, by contrast, DEUTZ generated revenue growth of 2.0% that was
primarily due to increased revenue in the Construction Equipment and Material
Handling application segments.
Adjusted EBIT (EBIT before exceptional items) fell to €50.1 million in the
first half of 2024 (Q1-Q2/2023: €71.4 million), mainly due to the decline in
revenue. The equivalent figure for the DEUTZ Classic segment was €67.7
million (Q1-Q2/2023: €86.8 million); the Green segment's adjusted EBIT
amounted to a net loss of €-17.8 million (Q1-Q2/2023: net loss of €-15.6
million).
The adjusted EBIT margin was down only slightly year on year at 5.7% despite
the significant drop in revenue (Q1-Q2/2023: 7.1%).
As a result of the decrease in operating profit (EBIT), net income from
continuing operations fell year on year from €53.8 million to €25.6
million. Furthermore, there was net income from the discontinued
operations of the Torqeedo Group 3 of €10.2 million (Q1-Q2/2023: net loss
of €-9.5 million), predominantly due to the net gain on
deconsolidation. Net income from continuing and discontinued
operations therefore came to €35.8 million (Q1-Q2/2023: €44.3 million).
Accordingly, earnings per share declined from €0.36 in the prior-year
period to €0.28, or from €0.44 to €0.20 for continuing operations only.
Cash flow from operating activities amounted to €3.3 million in the first
half of 2024, which was down by €-52.9 million compared with the figure for
the prior-year period of €56.2 million. This was mainly attributable to the
year-on-year decline in earnings resulting from the fall in revenue and to the
change in other provisions and liabilities.
DEUTZ generated free cash flow from continuing operations of -€-35.1
million in the first half of 2024, down from €18.1 million in the prior-year
period because of the decline in cash flow from operating activities. There
were no changes to this figure as a result of M&A activities in the
reporting period.
At €-166.2 million as at June 30, 2024, the DEUTZ Group's net financial
debt was up marginally by €-2.8 million compared with December 31, 2023.
The equity ratio for the entire Group improved to 49.8% as at June 30, 2024
(December 31, 2023: 46.7%). The DEUTZ Group's financial position therefore
remains comfortable.
DEUTZ Group | Overview of key figures for continuing operations
€ million Q1-Q2/2024 Q1-Q2/2023 Change
New orders 791.0 965.9 -18.1 %
Group unit sales (units) 74,162 91,451 -18.9 %
Revenue 875.5 1,001.2 -12.6 %
EBIT 39.2 70.7 -44.6 %
thereof exceptional items -10.9 -0.7 -1,457.1%
Adjusted EBIT (EBIT before exceptional items) 50.1 71.4 -29.8 %
EBIT margin before exceptional items (%) 5.7 % 7.1 % -1.4 pp
Net income 25.6 53.8 -52.4 %
Earnings per share (€) 0.20 0.44 -54.5 %
Earnings per share before exceptional items (€) 0.28 0.44 -
Equity (Jun. 30/Dec. 31) 4 761.2 743.2 2.4 %
Equity ratio (%) 5 49.8 46.7 +3.1 pp
Cash flow from operating activities 3.3 56.2 -94.1 %
Free cash flow -35.1 18.1 -
Net financial position (Jun. 30/Dec. 31) -166.2 -163.4 -1.7 %
Employees (Jun. 30) 6 5,043 4,963 1.6 %
DEUTZ Classic segment: Overview of key figures
€ million Q1-Q2/2024 Q1-Q2/2023 Change
New orders 788.0 964.2 -18.3 %
Unit sales (units) 73,806 91,424 -19.3 %
Revenue 873.0 997.0 -12.4 %
Adjusted EBIT (EBIT before exceptional items) 67.7 86.8 -22.0 %
EBIT margin before exceptional items (%) 7.8 8.7 -0.9 pp
DEUTZ Green segment: Overview of key figures for continuing operations
€ million Q1-Q2/2024 Q1-Q2/2023 Change
New orders 3.0 1.7 76.5 %
Unit sales (units) 7 356 27 1,218.5 %
Revenue 2.5 4.2 -40.5 %
Adjusted EBIT (EBIT before exceptional items) -17.8 -15.6 -14.1 %
EBIT margin before exceptional items (%) -712.0 -371.4 -340.6 pp
The interim report is available at www.deutz.com/en/investor-relations.
Upcoming financial dates
October 8, 2024: Capital Markets Day, Cologne
November 7, 2024: Quarterly statement for the first to third quarter of 2024
March 20, 2025: Annual Report 2024
May 8, 2025: General Annual Meeting
For further information on this press release, please contact
DEUTZ AG | Mark C. Schneider | Head of Investor Relations, Communications
& Marketing
Tel. +49 (0) 221 822-3600 | Mark.Schneider@deutz.com
DEUTZ AG | Svenja Deißler | Senior Manager Investor Relations &
ESG
Tel. +49 (0) 221 822-2491 | Svenja.Deissler@deutz.com
Forward-looking statements
This press release may contain certain forward-looking statements based on
current assumptions and forecasts made by the DEUTZ management team. Various
known and unknown risks, uncertainties, and other factors may lead to material
differences between the actual results, the financial position, or the
performance of the DEUTZ Group and the estimates and assessments set out here.
These factors include those that DEUTZ has described in published reports,
which are available at www.deutz.com. The Company does not undertake to update
these forward-looking statements or to change them to reflect future events or
developments.
About DEUTZ AG
DEUTZ AG, a publicly traded company headquartered in Cologne, Germany, is one
of the world's leading manufacturers of innovative drive systems. Its core
competencies are the development, production, distribution, and servicing of
drive solutions in the power range up to 620 kW for off-highway applications.
The current portfolio extends from diesel, gas, and hydrogen engines to
all-electric drives. DEUTZ drives are used in a wide range of applications
including construction equipment, agricultural machinery, material handling
equipment such as forklift trucks and lifting platforms, stationary equipment
such as generator sets (gensets) as well as commercial and rail vehicles. With
over 5,000 employees worldwide and around 1,000 sales and service partners in
more than 120 countries, DEUTZ generated revenue of around €2.1 billion in
the 2023 financial year. Further information is available at www.deutz.com.
( 1 ) Including the Torqeedo Group, which was part of the DEUTZ Group until
April 3, 2024.
( 2 ) Figures relating to continuing operations.
( 3 ) In January 2024, DEUTZ signed an agreement to sell its subsidiary
Torqeedo, which specializes in electric boat drives. The transaction was
completed on April 3.
( 4 ) Figure for the entire Group including discontinued operations.
( 5 ) Figure for the entire Group including discontinued operations.
( 6 ) Number of employees expressed in FTEs (full-time equivalents);
excluding temporary workers.
( 7 ) Electric drives, hydrogen engines, battery systems with a motor, DEUTZ
PowerTree.
08.08.2024 CET/CEST Dissemination of a Corporate News, transmitted by EQS News
- a service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
The EQS Distribution Services include Regulatory Announcements,
Financial/Corporate News and Press Releases.
Archive at www.eqs-news.com
DEUTZ Classic segment: Overview of key figures
€ million Q1-Q2/2024 Q1-Q2/2023 Change
New orders 788.0 964.2 -18.3 %
Unit sales (units) 73,806 91,424 -19.3 %
Revenue 873.0 997.0 -12.4 %
Adjusted EBIT (EBIT before exceptional items) 67.7 86.8 -22.0 %
EBIT margin before exceptional items (%) 7.8 8.7 -0.9 pp
DEUTZ Green segment: Overview of key figures for continuing operations
€ million Q1-Q2/2024 Q1-Q2/2023 Change
New orders 3.0 1.7 76.5 %
Unit sales (units) 7 356 27 1,218.5 %
Revenue 2.5 4.2 -40.5 %
Adjusted EBIT (EBIT before exceptional items) -17.8 -15.6 -14.1 %
EBIT margin before exceptional items (%) -712.0 -371.4 -340.6 pp
The interim report is available at www.deutz.com/en/investor-relations.
Upcoming financial dates
October 8, 2024: Capital Markets Day, Cologne
November 7, 2024: Quarterly statement for the first to third quarter of 2024
March 20, 2025: Annual Report 2024
May 8, 2025: General Annual Meeting
For further information on this press release, please contact
DEUTZ AG | Mark C. Schneider | Head of Investor Relations, Communications
& Marketing
Tel. +49 (0) 221 822-3600 | Mark.Schneider@deutz.com
DEUTZ AG | Svenja Deißler | Senior Manager Investor Relations &
ESG
Tel. +49 (0) 221 822-2491 | Svenja.Deissler@deutz.com
Forward-looking statements
This press release may contain certain forward-looking statements based on
current assumptions and forecasts made by the DEUTZ management team. Various
known and unknown risks, uncertainties, and other factors may lead to material
differences between the actual results, the financial position, or the
performance of the DEUTZ Group and the estimates and assessments set out here.
These factors include those that DEUTZ has described in published reports,
which are available at www.deutz.com. The Company does not undertake to update
these forward-looking statements or to change them to reflect future events or
developments.
About DEUTZ AG
DEUTZ AG, a publicly traded company headquartered in Cologne, Germany, is one
of the world's leading manufacturers of innovative drive systems. Its core
competencies are the development, production, distribution, and servicing of
drive solutions in the power range up to 620 kW for off-highway applications.
The current portfolio extends from diesel, gas, and hydrogen engines to
all-electric drives. DEUTZ drives are used in a wide range of applications
including construction equipment, agricultural machinery, material handling
equipment such as forklift trucks and lifting platforms, stationary equipment
such as generator sets (gensets) as well as commercial and rail vehicles. With
over 5,000 employees worldwide and around 1,000 sales and service partners in
more than 120 countries, DEUTZ generated revenue of around €2.1 billion in
the 2023 financial year. Further information is available at www.deutz.com.
( 1 ) Including the Torqeedo Group, which was part of the DEUTZ Group until
April 3, 2024.
( 2 ) Figures relating to continuing operations.
( 3 ) In January 2024, DEUTZ signed an agreement to sell its subsidiary
Torqeedo, which specializes in electric boat drives. The transaction was
completed on April 3.
( 4 ) Figure for the entire Group including discontinued operations.
( 5 ) Figure for the entire Group including discontinued operations.
( 6 ) Number of employees expressed in FTEs (full-time equivalents);
excluding temporary workers.
( 7 ) Electric drives, hydrogen engines, battery systems with a motor, DEUTZ
PowerTree.
08.08.2024 CET/CEST Dissemination of a Corporate News, transmitted by EQS News
- a service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
The EQS Distribution Services include Regulatory Announcements,
Financial/Corporate News and Press Releases.
Archive at www.eqs-news.com
Language: English
Company: DEUTZ AG
Ottostraße 1
51149 Köln (Porz-Eil)
Germany
Phone: +49 (0)221 822 2491
Fax: +49 (0)221 822 3525
E-mail: svenja.deissler@deutz.com
Internet: www.deutz.com
ISIN: DE0006305006
WKN: 630500
Indices: SDAX
Listed: Regulated Market in Dusseldorf, Frankfurt (Prime Standard); Regulated
Unofficial Market in Berlin, Hamburg, Hanover, Munich, Stuttgart, Tradegate
Exchange
EQS News ID: 1963457
End of News EQS News Service
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