Ad-hoc press release – Krones improves operating earnings

Despite the adverse macroeconomic environment, Krones, the world’s market leader in beverage filling and packaging technology, continued to grow in the third quarter of 2012.
From July to September, our sales improved 9.2% year-on-year to €607.9 million. In the first nine months of 2012, sales revenue increased 4.6% year-on-year to €1,897.6 million.
New orders at Krones also picked up in the third quarter. At €639.5 million, the new orders volume exceeded the year-earlier period by 12.3%.
In all, new orders were up 3.9% year-on-year to €1,967.3 million in the first nine months of 2012. At 30 September 2012, orders on hand totalled €1,012.1 million (previous year: €987.3 million).

Krones’ earnings before taxes (EBT) for the third quarter of 2012 came to -€13.6 million (previous year: positive EBT of €14.9 million). The reason for the negative result is that the company increased its provision for legal disputes in the US, which resulted in a one-time expense of around €40.6 million. Operating earnings before taxes, that is earnings before taxes without accounting for the one-time expense, were up year-on-year in the third quarter, from €14.9 million to €27.0 million. Thus, operating earnings before taxes in the first three quarters of 2012 were improved from €84.1 million to €91.0 million. Taking into account the one-time expense, EBT declined in the first nine months of 2012, from €84.1 in the year-earlier period to €50.4million. Consolidated net income for the first three quarters was €36.2 million (year-earlier period: €59.3 million). That corresponds to earnings per share of €1.20 (previous year: €1.97).

Outlook

In the first three quarters, Krones laid a good foundation for achieving its growth target. The company expects sales to increase by as much as 4% year-on-year in 2012. Because the increase in the provision for the legal disputes in the USA is a one-time expense burdening earnings for 2012, the company will not achieve its target for absolute earnings. The ratio of earnings before taxes to sales will exceed 3.5%. However, Krones is standing by its target for operating earnings, that is without taking into account the one-time expense. The company expects the pre-tax operating return on sales (the ratio of operating earnings before taxes to sales) to exceed 5% for the year 2012 as a whole.
According to forecasts by the International Monetary Fund, the global economy is not likely to improve significantly next year. The sovereign debt crisis remains a major source of uncertainty and it can escalate further at any time. Nevertheless, Krones is looking to the future with reserved optimism.

The company’s products and services address basic human needs for food and drink and its customer sectors are stable. The measures taken under the Value programme are expected to have an increasingly positive impact on earnings. Nevertheless, the company must step up its efforts to achieve sales growth between 4% and 6% in 2013 and to further improve its pre-tax return on sales.