Dear shareholders and friends of Krones,
2017 was a successful year overall for Krones. Despite a market and competitive environment that are not altogether easy, business was good and our numbers were on target. Krones also made important decisions in the reporting period to ensure our continued strong performance.
Drinktec 2017 was a huge success for Krones
Of course, the drinktec trade fair was the absolute highlight of 2017. Drinktec is the beverage and liquid food industry’s equivalent of the World Economic Summit and takes place only once every four years. The fair was a resounding success for Krones. Attendee feedback on our innovations was very positive and our customers’ interest in placing orders was more than satisfactory. Some of the innovations we took to the fair are described on pages 39 to 43 of this report. One topic that dominated drinktec like no other was digitalisation. That shows that there is a general sense of excitement about it across the industry and confirms that we are on the right track.
Digitalisation is an enormous opportunity for growth
The digitalisation of beverage plants holds enormous potential for Krones. As a fullservice supplier, we are able to connect all processes and data along the entire value chain. We intend to increase the efficiency of our customers’ lines considerably by intelligently analysing and linking data with human and machine knowledge. In so doing, we are creating real added value for our customers. Fortunately for us, that is by no means new territory for Krones. We are already supporting our customers with IT products and services and will continue to place particular emphasis on the digital intelligence of all new and evolving developments.
Business development satisfactory overall
Although sales prices provided no support once again in 2017, we were able to offset rising costs for personnel and purchased goods and services to such an extent that we achieved our growth and earnings targets for the year. Revenue increased 8.8% to €3.69 billion. Earnings before taxes (EBT) improved by 8.9% to €259 million. And at 7.0%, our EBT margin was as forecast. (All figures relate to the group).
Investing heavily in sites in Germany and abroad
With more than 10,000 people, our team in Germany makes up around two-thirds of the group’s total workforce. Germany offers us myriad advantages such as highly skilled workers and outstanding infrastructure. Krones remains committed to Germany as a business location and has underscored this commitment with a promise to secure employment and the future of our German sites until the end of the year 2022. We will invest around €200 million in our German sites over the next five years. For example, we intend to build the factory of the future, equipped with the very latest logistics and digitalisation solutions, at our headquarters in Neutraubling.
However, the fact is that Krones generates almost 90% of revenue in markets abroad, around the globe. For this reason, Krones will continue to invest heavily in expanding its global footprint. Being as close to our customers as possible is of great strategic importance. That applies especially to after-sales service but also to production.
Because we have to expand value creation abroad in our core segment, we will establish a new plant in Hungary. The new production site is slated to go into operation in early 2019. We intend to employ 500 new people there. Krones will assemble components and modules at the site, which will be located in Debrecen, Hungary.
Changes to the executive management team
Rainulf Diepold, who served as Chief Sales Officer on Krones’ Executive Board since the year 2000, retired from the board at the end of 2017, having reached the age limit for membership stipulated under the company’s internal Executive Board rules. The entire Executive Board would like to thank Rainulf Diepold for his many years and extremely successful work at Krones. Thomas Ricker succeeds Rainulf Diepold as CSO. Ricker has been a member of the Executive Board, responsible for Bottling and Packaging Equipment, since 2012. He switched over to CSO on 1 January 2018.
Ambitious growth targets for 2018
Despite the many opportunities our market offers, conditions are unlikely to improve in the near future. Nevertheless, we have some pretty big plans for 2018. We aim to further increase Krones’ revenue and earnings. For 2018, we are forecasting revenue growth of 6%. We intend to maintain an EBT margin of 7.0% despite start-up costs for the plant in Hungary. (All figures relate to the group).
People are the bedrock of Krones’ success
Highly qualified, motivated employees will be crucial to our ability to meet our short and medium-term goals. Getting new employees excited about working for Krones will be as important as continuing to train and educate our existing personnel. Krones’ success depends on our people. That is why, on behalf of the entire Executive Board, I would like to extend my sincere thanks to the entire Krones team for contributing their dedication and skill. As a team, we will ensure Krones’ continued success.