Krones remains moderately optimistic for 2019 as a whole
With the year’s economic forecasts still positive overall, Krones is moderately optimistic for the 2019 financial year despite political and economic uncertainties. The packaging machinery market is growing at a relatively stable pace because demand for packaged beverages and foods is rising on the back of multiple megatrends. Despite the positive environment, our market remains challenging. Competition for orders is intense, and customers are tending to gain in purchasing power due to mergers and acquisitions. Pressure on material and labour costs is expected to continue in 2019.
Revenue and profitability to increase in both segments in 2019
The key to profitable growth for Krones lies in expanding our global footprint. Establishing a cost-optimised supplier network in the various regions plays a major part here. In addition, launching new products and services and further reducing costs remain important factors in order to grow further and improve profitability in both segments in 2019. In addition, our price increases should help to improve profitability slightly. In the core segment, Machines and Lines for Product Filling and Decoration, Krones will further expand its global footprint in 2019. An important step here is the start of production at our new plant in Hungary in the second half of 2019. Innovation will also contribute to growth. To further offset the rising cost of material, we will continue to press ahead with modularisation. That enables us to secure better procurement terms and increase efficiency within the company.
For the core segment, Krones expects sales growth of around 3% in 2019, which is temporarily below the market growth rate due to the price increases. The EBT margin is expected to be around 7%.
In the Machines and Lines for Beverage Production/Process Technology segment, the focus is likewise on expanding our global footprint. By establishing additional international hubs, we aim to fulfil orders from within the various regions faster and more cost-efficiently. We plan to increase order quality and hence profitability in the high-revenue brewery business. Rapid integration of the 2018 acquisitions in this segment will enable us to unlock additional revenue and earnings potential going forward.
The intralogistics business, which is part of the Process Technology segment, is once again expected to use the good market growth opportunities and make a positive contribution to earnings this year. Intralogistics is becoming ever more important to our customers as it helps them properly manage and distribute the increasing diversity of packaging types and forms. It is also a major element of the digital beverage plant.
For the Process Technology segment in 2019, we are targeting revenue growth by 5% and an EBT margin of approximately 1%.
Based on the prevailing macroeconomic outlook and the current expected development of the markets relevant to Krones, the company expects consolidated revenue growth of 3% in 2019. In order to achieve its medium-term corporate targets, Krones will continue in 2019 to work towards a future-ready global structure. The company expects a further increase in material procurement prices in 2019; the same applies to labour costs. Krones’ price increases on all bottling and packaging equipment and for process technology with effect from 1 May 2018 are likely to have a slight positive effect on earnings in the 2019 financial year. Overall, Krones expects an EBT margin of around 6% for 2019.
Above all due to the focus on increases in the price level, in the current economic and geopolitical climate, Krones sees the management of its targets for 2019 subject to greater uncertainties than in the past.
For its third performance target, working capital to revenue, Krones expects a figure of 26% in 2019.