Earnings forecast for 2019 adjusted

Krones AG | Based on current figures, Krones AG, the Neutraubling-based manufacturer of filling and packaging technology adjusts its earnings forecast for the fiscal year 2019.

Uncertain macroeconomic developments, such as the unsolved trade conflict between China and USA, as well as the debate about the sustainability of PET packaging, negatively influence the company’s customers and their willingness to invest. Nevertheless, revenue growth in the first six month of 2019 was still satisfactory. However, earnings before taxes (EBT) for this period will be significantly below the company’s expectations.

The company’s profitability is influenced by high costs; in particular the material cost ratio remains on high level. Also, the additional measures, which are implemented to reduce material costs, materialize with a delay. Furthermore, the product mix has an unfavorable effect on earnings for the period January till June 2019. Especially in the second quarter of 2019 sales of products with high own value added, like machines and lines for the plastic technology, were lower than expected.

Another important reason for the actual earnings development is that sales growth of the high-margin after sales business (LCS) was below expectations in the first 6 month of 2019.

The company still expects an unchanged growth target of 3% in 2019. The EBT margin is planned around 3% (prior target: around 6%). For its third target, working capital to revenue, Krones expects an unchanged figure of 26%.

The board has taken measures to counteract the earnings decline. This includes a hiring freeze and measures to reduce material costs. The current global footprint is on track.

Strategic measures introduced so far, like price increases and the development of the global footprint are however not sufficient to reach the ambitious targets. Hence, the board is working in additional structural changes in order to strengthen its earning level in the long run.

Krones keeps its mid-term targets. Depending on the macro economic environment and development of Krones markets, the board envisages a year-on-year revenue growth of 3 to 5% without acquisition effects, an EBT margin of 6 to 8% and a working capital to revenue ratio of 22 to 24%.