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Quarterly statement Q1 2017
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Quarterly statement Q1 2017

    Highlights and key figures

    Krones achieves strong operating growth in the first quarter of 2017

    • Revenue increased 16.5%. Adjusted for timing differences and acquisitions, revenue growth comes to 5.5%.
    • Order intake improved 6.5%. Without orders gained through acquisitions, growth came to 3.4%
    • Earnings before taxes increased 19.8% to €66.0 million.
    • Executive Board confirms targets for 2017 as a whole. Excluding effects from acquisitions, Krones expects 4% revenue growth and an EBT margin of 7.0%.
    Q1 2017 Selected Company data
        1 Jan-31 Mar 2017 1 Jan-31 Mar 2016 Change
    Revenue € million 899.4 772.1 +16.5%
    Order intake € million 875.5 822.2 +6.5%
    Orders on hand at 31 March € million 1,120.8 1,144.7 –2.1%
             
    EBITDA € million 87.2 76.0 +14.7%
    EBIT € million 64.0 54.2 +18.1%
    EBT € million 66.0 55.1 +19.8%
    EBT margin % 7.3 7.1
    Consolidated net income € million 43.7 38.4 +13.8%
    Earnings per share 1.40 1.23 +13.8%
             
    Capital expenditure for PP&E and intangible assets € million 19.6 15.2 +€4.4 million
    Free cash flow € million –112.8 –115.1 +€2.3 million
    Net cash and cash equivalents at 31 March € million 256.1 249.5 +€6.6 million
    Working capital to revenue % 26.8* 24.5*
    ROCE % 17.8 16.7
             
    Employees at 31 March        
    Worldwide   14,660 13,418 +1.242
    Germany   10,124 9,780 +344
    Outside Germany   4,536 3,638 +898

    * Average of last 4 quarters


    Letter from the Executive Board

    Dear shareholders and friends of Krones,

    Krones has got 2017 off to a good start. Revenue (+16.5%) and earnings before taxes (+19.8%) improved considerably in the first quarter of 2017. However, these strong growth rates cannot be extrapolated to the year as a whole. We were able to complete a number of projects faster than expected. And so, they yielded revenue in the first quarter instead of the second as initially forecast. Our targets for the year 2017 as a whole therefore remain unchanged at 4% revenue growth and an EBT margin of 7.0%.

    Krones’ market remains attractive because demand for packaging machinery is growing at a relatively stable pace. Experts are predicting that the world economy will grow by 3.5% in 2017 (previous year: 3.1%). Increasing protectionism, a rapid interest rate hike in the USA, and possible shifts in political power in the euro zone could create uncertainty.

    To ensure that Krones achieves its short- and medium-term targets in an environment that remains intensely competitive, we must keep steady our efforts. Increasing efficiency within the company and building out our product range with innovations remain crucial topics. We are further expanding our global footprint in order to seize the opportunities provided by the rapidly growing emerging markets. Krones intends to establish more of its value creation in the regions in which our customers operate their plants. It is the only way we can deliver regionally-adapted products to the emerging markets at competitive prices.

    As we continue our intensive day-to-day efforts, we are also keeping an eye to the future. The digitalisation of beverage plants opens up good potential for growth. And Krones intends to use it. The work we have invested in the past several years will be reflected in more and more new applications for our customers. For example, our IT subsidiary Syskron developed the Share2Act app, the first social network for the food and beverage industry. Despite our ambitious margin targets, investing in the company’s future will always remain a priority at Krones.

     

    Christoph Klenk
    CEO


    Report on expected developments

    Krones is confident about the year 2017 as a whole

    Despite many political and economic uncertainties, Krones is optimistic about the 2017 financial year. The packaging machinery market is growing at a relatively stable pace. Driving this growth are megatrends such as the steady growth of the middle class and increasing urbanisation in the emerging economies. Moreover, food and beverage producers increasingly must rely on innovative packaging solutions to distinguish themselves from the competition.

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    Krones intends to improve revenue and earnings in all three segments

    Given the competitive nature of our markets, Krones does not expect prices to improve this year. Launching new products and services and further reducing costs remain important factors in our effort to grow further and increase earnings before taxes in all three segments in 2017. Moreover, Krones intends to considerably increase its presence worldwide and move even closer to customers.

    In our core segment, machines and lines for product filling and decoration, Krones will continue to press ahead with the modularisation of our products in 2017. We will expand our international service structures and LCS Centres in the interest of further growth. We are also strengthening our mid-range business – that is, less complex lines with high performance. There is high demand for these lines in the emerging markets. Krones is projecting slightly lower-than-average revenue growth of 3% in 2017 for our core segment because we are intentionally forgoing low-margin orders. The EBT margin should be around 8%, as in the previous year.

    In our process technology segment, we will continue to implement the raft of measures developed in 2015 and complete implementation of several parts in 2017. This year, we intend to seize upon the considerable growth opportunities in intralogistics, which are also part of the process technology segment. Our acquisition of majority ownership of System Logistics and the expansion of Syskron put us in an excellent position to do that. In all, we expect the process technology segment to achieve revenue growth of around 10% and an EBT margin of 2% to 3% this year.

    We expect the machines and lines for the compact class segment to achieve revenue growth of around 5% and an EBT margin of at least 5% in 2017.

    Strong first quarter supports outlook for 2017 as a whole

    First-quarter revenue and earnings were positively impacted by projects that were completed earlier than expected. Therefore, we see no reason to raise our expectations for the year 2017 as a whole. Based on the current macroeconomic prospects and development of the markets relevant to Krones, we are still targeting consolidated revenue growth of 4% (excluding acquisitions) in 2017. The company’s profitability should remain stable this year. Krones expects to achieve an EBT margin of 7.0% in 2017. Our forecast for our third financial performance target, working capital to revenue, is 27% for the current financial year.

      Forecast for 2017* Actual value Q1 2017
    Revenue growth +4% +16.5%
    EBT margin 7.0% 7.3%
    Working capital to revenue 27% 26.8%

    * Excluding acquisitions

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