Strong market position
As the market leader, Krones is in an excellent position to benefit from industry growth
Krones operates worldwide, delivering leading technologies for filling and packaging, process engineering, and intralogistics as well as solutions for digitalization for the food and beverage industries.
In its core business area, Filling and Packaging Technology, Krones is by far the world’s market leader. Besides the two major European competitors, KHS (a subsidiary of the Salzgitter Group) and Tetra-Pak subsidiary Sidel, there are also many smaller competitors.
In the process technology segment, Krones offers products for breweries and producers of soft drinks, milk and dairy drinks, and water (SDW). We are the world’s second-largest supplier of brewing technology. Krones’ market position is not quite as strong in SDW process technology. We aim to achieve better than average growth in this attractive market in the years ahead.
Commencing in 2022, Krones reports on the Intralogistics business as a third segment. In this segment, under subsidiary System Logistics, Krones provides the planning and design of fully automated warehousing, order-picking and material flow systems with high-speed feeders, conveyors and automated guided vehicle (AGV) systems.
Because of the fast expanding intralogistics operations, Krones is now well represented for all stages of value creation in beverage production and able to deliver everything from a single source.
Since Krones knows all of the processes involved in beverage production and bottling down to the smallest details, the company is in an excellent position to be part of the increasing digitalization of beverage production. By intelligently connecting data, we are developing solutions that give our customers clear, comprehensive added value.
Services are also an important part of Krones’ business model. Our around 3,000 service employees support our customers around the world on site with a comprehensive range of services.
Megatrends benefit Krones
Many long-term global trends are supporting Krones’ growth. Steady global population growth, the rapid expansion of a consumption-driven middle class in the emerging markets, and urbanisation all serve to increase demand for packaged beverages. The digitalization of the beverage and packaging industry as well as the increasing focus on sustainability also presents further growth opportunities for Krones.
Increasing urbanisation, the migration of people from rural areas to the cities, is promoting demand for packaged food and beverages. That is because city-dwellers generally tend to consume more packaged products.
In Africa and Asia, most of the population still lives in the countryside. However, more and more people there will crowd into the cities in the years and decades ahead.
According to forecasts by the OECD, the middle classes worldwide will grow from 3.2 billion people to 4.9 billion between 2020 and 2030. As incomes rise, so too does consumer spending. Total consumer spending by the global middle classes is likely to increase from US$35 trillion to US$55.7 trillion in that time Asia accounts for a large share of the growth of the middle class and the corresponding increase in buying power worldwide.
The world’s population will continue to grow in the coming years and decades. At the end of 2021, some 7.9 billion people inhabited the earth. That number is growing at a rate of some 70 million each year. Population growth is especially strong in Africa and Asia. The world’s population is expected to reach about 8.5 billion by 2030. And all those people will need to eat and drink.
The digitalisation of beverage plants is advancing at a rapid pace. New data and Internet-based business models are built on collecting and analysing data and using the results to derive benefits for customers. Krones intends to be a leader in this area for the beverage and packaging industry.
Sustainability is very important to our customers. They want to save resources and reduce their carbon footprint. With the enviro sustainability program, Krones has been focusing on the eco-efficiency of its products and services for many years. We are thus also playing a pioneering role in the growing area of sustainability.
We are located where beverage consumption is growing strongly
Thanks to its broad global footprint, Krones is well positioned in the regions where consumption of packaged beverages is expected to grow at an above-average rate in the coming years. The strongest growth in demand is likely to be in China. According to Global Data figures, consumption there is expected to increase by an average of 3.2 % per year from 2021 to 2024. In the large sales regions of Africa/Middle East (+2.4% p.a.) and Asia/Pacific (+2.1% p.a.), demand for packaged beverages is also expected to increase at an above-average rate during this period.
Revenue by region
Balanced revenue worldwide
Krones is represented in all regions of the world and occupies a strong market position. The company is in a position to even out fluctuations in individual regions. On the whole Krones has a well-balanced distribution of sales. In 2021, the company generated half of its consolidated turnover on the emerging market and half in mature industrial countries.
Krones intends to increase profitability
Krones' profitability has been impacted by high material and personnel costs in recent years. In 2020, the Corona crisis and restructuring expenses weighed on earnings. Krones has adjusted its capacities and laid the foundation for increasing profitability with further structural measures. In 2021, the margin already increased significantly. In order to consistently develop the Group further and be able to finance growth - without significant use of debt - Krones' goal is to further increase profitability. In addition, profitable operations create scope for investments and dividends.
Expanding our global footprint
In order to improve profitability, Krones will strengthen its global presence. In the future, more procurement, engineering, and parts of production will take place in the regions in which our customers operate their plants. That will enable us to deliver regionally-adapted products to the emerging markets at competitive prices.
Strong services business
Being close to customers is critical
Short response times are essential to the success of any service business. That is why we are continually moving closer to our customers and increasingly deploying local staff to carry out LCS projects. Key spare parts are kept on hand at regional warehouses. Fifteen Centers at strategically important locations serve as bases for our international service activities. Each of these service hubs is responsible for a set of countries and branch offices.
Large installed base as the foundation for stable service revenue
Krones has a broad installed base of beverage and packaging machinery worldwide. To ensure that these systems remain productive over their entire service lives, we offer our customers a wide range of services as well as replacement parts and upgrades. That makes for stable revenue growth overall.
Long-term value creation
Krones distributes 25 % to 30 % of its consolidated result to its shareholders
Krones intends to pay appropriate interest on the assets that shareholders make available to the company. The equity yield before taxes is a key performance indicator with regard to this. It shows the earnings before tax in relation to the average equity capital. Irrespective of the Corona-related losses experienced in 2020, at Krones this figure is above the capital market interest rate plus a risk premium. Krones is thus generating a long-term additional value for its shareholders who are participating in the company’s success through dividends. The company generally distributes 25% to 30% of its consolidated result to its shareholders.
The Krones share in a ten-year review
The past ten years from 2012 to 2021 have seen our share price increase by 160 %. Krones’ average annual share price gain over the ten-year period comes to 10.1 %. This is slightly less than the SDAX price index (+11.8 %), meaning the SDAX excluding dividends. Including paid-out dividends, and assuming these were reinvested in Krones shares after payout, the average annual return on our shares since 2012 comes to 11.8 %. The comparable SDAX performance index gained by 14.0 % annually.