Report for the first half of 2019

Difficult economic conditions and uncertainties increasingly affected Krones’ business in the first half of 2019. After strong growth in the first quarter (by 10.3%), revenue from April to June increased by 0.7% year-on-year. In total, the company’s revenue from January to June 2019 improved by 5.5. Adjusted for acquisitions and currency effects, growth was 1.8%.

The company experienced weak demand in parts of its portfolio between April and June 2019. Order intake from January to June 2019 increased by 1.2. Adjusted for acquisition effects, the contract value of orders increased by 0.4% in the first six months of 2019.

Earnings before taxes (EBT) decreased year-on-year in the first half of 2019, from EUR 112.7 million to EUR 47.9 million. The EBT margin dropped from 6.3% to 2.5%. The company’s profitability was impacted by high material and labour costs. The product mix also had an adverse effect on earnings. Another major reason for the lower earnings is that revenue in parts of the high-margin after-sales business was above 2018 but below budget. Krones generated consolidated net income of EUR 33.3 million from January to June 2019 (previous year: EUR 76.9 million). This corresponds to earnings per share of EUR 1.06 (previous year: EUR 2.45).

The Neutraubling-based company has improved the ratio of average working capital to sales over the past four quarters. The ratio decreased from 28.8% in the previous year to 26.0%. Free cash flow went down to –EUR 259.4 million (previous year: −EUR 56.2 million).

Action to offset the negative impacts on earnings includes a recruitment freeze, measures to reduce material costs and expanding the global footprint.

Krones expects, in line with previous year, that especially in Q4 the production capacity utilisation will increase as well as the high-margin life-cycle services (LCS) business. Therefore they expect better earnings in the second half of 2019 than in the first six months.

In total, the company expects growth of 3% in 2019 and an EBT margin to be around 3%. For its third performance target, working capital to revenue, they anticipate a figure of 26%. The Executive Board is currently working on further structural changes for a sustained increase in profitability.

Krones is maintaining its mid-term targets. Depending on the overall economic situation and developments in the company’s markets, the Executive Board expects average annual revenue growth of 3% to 5% excluding acquisition effects, an EBT margin of 6% to 8% and working capital at 22% to 24% of revenue.