Krones remains optimistic about the financial year 2018
With economic forecasts for the current year positive overall, Krones remains optimistic about 2018 despite several political and economic uncertainties. The packaging machinery market is growing at a relatively stable pace because demand for packaged beverages and foods is rising.
Revenue and earnings expected to increase further in 2018
Krones has taken the momentum from a successful drinktec 2017 into the current year. Launching new products and services and further reducing costs under our Value strategy remain important factors in our effort to grow further and increase group earnings in 2018. Moreover, Krones will increase its presence worldwide and move even closer to customers. Parts of procurement, engineering, and production will take place in the regions in which our customers operate their plants. That will enable us to deliver regionally-adapted products faster and at more competitive prices.
As of the start of this year, our core segment Machines and Lines for Product Filling and Decoration now also includes our machines and lines for the compact class, that is the subsidiaries Kosme and Gernep. Innovations and the continued expansion of international service centres will contribute to the newly structured core segment’s growth in 2018. We intend to improve our position in the emerging markets by offering less-complex systems that deliver high performance. In addition, Krones will continue to press ahead with the modularisation of our products in our core segment and expand our global footprint. That will enable us to achieve better procurement terms and increase efficiency within the company.
Krones expects core-segment revenue to increase by 4%, slightly more than the market as a whole, in 2018 on strong order intake and an attractive product range. Krones expects the reported EBT margin to be 8.3% in 2018 despite high capital expenditure.
We intend to significantly improve profitability in the Machines and Lines for Beverage Production/Process Technology segment in 2018. Measures implemented have not yet taken their full effect. However, we are confident that we will be able to leverage revenue and earnings potential this year by further expanding our global footprint and fully integrating the acquisitions in this segment.
Intralogistics, which is part of the Process Technology segment, is also expected to utilise the market’s high potential for growth this year. To accomplish that, we will further develop our subsidiaries System Logistics and Syskron, both regionally and in terms of product technology.
In all, we are forecasting 15% revenue growth and an EBT margin of 1.0% for the Process Technology segment for 2018.
Strong first quarter and price increases support outlook for 2018
We have got the year off to a positive start and demand for our products and services remains high. Therefore, we are confident that we will achieve our targets for 2018. To ensure Krones’ continued ability to offer innovative products and services despite rising costs for goods and services purchased and personnel, we have to raise our prices. For that reason, the company will be raising the prices on all machines for the bottling and packaging equipment and for the process technology by 4.5% on average effective 1 May 2018. Because the price adjustments are aimed at offsetting current cost increases, Krones is keeping its revenue and earnings forecast for 2018 and for the medium term unchanged. Krones intends to maintain its market position as a provider of solutions for food and beverage production within the bottling and packaging industry.
Based on the current macroeconomic prospects and expected development of the markets relevant to Krones, we are targeting consolidated revenue growth of 6% in 2018. The regional distribution of revenue in 2018 is likely to be little changed from the previous year.
Krones intends to keep profitability stable despite heavy investment in digitalisation and start-up costs associated with our global footprint, particularly the new site in Hungary. The company expects to post an EBT margin of 7.0% in 2018. We intend to improve our third financial performance target, working capital to revenue, to 26%.