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    Quarterly statement Q1 2019
    Quarterly statement Q1 2019

      Highlights and key figures

      Krones continues growth in first quarter of 2019

      • Revenue increased 10.3% to €983.5 million. Adjusted for acquisitions and currency effects, the growth is 5.9%.
      • Order intake improved by 5.0% to €1,041.6 million. Excluding acquisitions, the contract value of new orders increased by 4.1%.
      • Earnings before taxes (EBT) went down 8.4% to €51.5 million in the first quarter of 2019.
        The EBT margin was 5.2% (previous year: 6.3%).
      • The Executive Board has confirmed the targets for 2019. Krones expects 3% revenue growth and an EBT margin of 6%.
          1 Jan-31 Mar
      1 Jan-31 Mar
      Revenue € million 983.5 891.7 + 10.3%
      Order intake € million 1,041.6 992.4 + 5.0%
      Orders on hand at 31 March € million 1,319.2 1,340.8 – 1.6%
      EBITDA € million 86.0 78.9 + 9.0%
      EBITDA margin % 8.7 8.9 – 0.2 PP*
      EBIT € million 51.8 55.5 – 6.7%
      EBT € million 51.5 56.2 – 8.4%
      EBT margin % 5.2 6.3 – 1.1 PP*
      Consolidated net income € million 36.3 38.7 – 6.2%
      Earnings per share 1.15 1.23 – 6.5%
      Capital expenditure for PP&E and intangible assets € million 46.6 27.4 + €19.2 million
      Free cash flow € million – 136.6 – 14.1 – €122.5 million
      Net cash and cash equivalents at 31 March** € million 70.9 143.8 – €72.9 million
      Working capital to revenue*** % 26.4 28.2 – 1.8 PP*
      ROCE % 13.2 15.3 – 2.1 PP*
      Employees at 31 March         
      Worldwide   16,695 15,461 + 1,234
      Germany   10,835 10,394 + 441
      Outside Germany   5,860 5,067 + 793

      * PP = percentage points ** Cash and cash equivalents less debt
      *** Average of last 4 quarters

      Letter from the Executive Board

      Dear shareholders and friends of Krones,

      Krones made a good start to into the year 2019. The demand for our machines, systems and services was stable overall, allowing us to continue our growth in the first quarter. Revenue went up by 10.3%. Adjusted for acquisitions and currency effects, the growth was 5.9%. Order intake adjusted for acquisitions increased by 4.1%. Due to the tight cost situation earnings before taxes were down 8.4% on the prior-year period.

      Overall, it will not be easy to achieve our targets for 2019. The dynamics of global economic growth has slowed noticeably in recent months. International Monetary Fund (IMF) experts now expect growth of 3.3% for 2019 as a whole, down from the 3.5% forecast at the beginning of the year. The simmering trade conflicts and Brexit continue to cause uncertainty. Looking ahead, this could additionally have an impact on our customers’ investment behaviour. Krones also expects that the competitive environment will remain difficult this year.

      Due to the many uncertainties, Krones’ growth target for 2019 is lower than in previous years. Satisfied customers comprise the basis for sustained profitable growth. We are therefore constantly improving the quality of our products and services. In addition, we continue to pursue our strategy and will further expand our global footprint. Cost reductions also remain an important part of our strategy throughout this year. We place a clear focus here on material and labour costs. Alongside this, we will work hard to push through and sustain our price increases in the market. The LCS business continues to benefit from our customers’ growing installed base.

      Krones continues to pursue ambitious medium-term targets. Given the fragile state of the economic and geopolitical environment, however, forecasts are subject to significantly greater uncertainties than in the past. For this reason, we state ranges for each of our mid-term targets. Depending on the overall economic situation and developments in our markets, we expect average annual revenue growth of 3% to 5% excluding acquisition effects, an EBT margin of 6% to 8% and working capital at 22% to 24% of revenue. 

      Christoph Klenk

      Report on expected developments

      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.

        Target 2019 Actual Q1 2019
      Revenue growth 3% 10.3%
      EBT margin 6% 5.2%
      Working capital to revenue 26% 26.4%