Krones revises forecast for 2018
Based on the results for the first nine months of 2018 and the forecast for the fourth quarter, the company is reducing its turnover and earnings forecast. Due to rising costs of goods and labour, investment in digitalisation, start-up costs for expansion of the company’s global footprint and one-time expenses in connection with setting up the new production location in Hungary, Krones’ EBT margin will be below the 7.0% projected for 2018. Adjusted for one-time expenses, Krones now expects an operating EBT margin of approximately 6.5% for the full year 2018.
Krones now expects a 4% increase in turnover compared to the previous turnover target of 6%. This is due to currency effects and large-scale projects postponed into 2019. With respect to its third performance target – working capital as a percentage of turnover – Krones expects to reach the communicated target of 28%.
Both segments below target
From the start of this year, the core segment – Machines and Lines for Product Filling and Decoration – additionally includes Machines and Lines for the Compact Class, comprising the subsidiaries Kosme and Gernep. Based on strong order intake and an attractive product range, Krones expects core segment turnover to increase by just under 3% in 2018. Due to rising costs of goods and labour and to one-time expenses in connection with setting up the production location in Hungary, the EBT margin will not reach the 8.3% previously aimed for. Adjusted for one-time expenses, the operative EBT margin is targeted at approximately 8%.
We intend to improve operating profitability in the Machines and Lines for Beverage Production/Process Technology segment – which also includes intralogistics – by the end of 2018. We are confident that we will be able to leverage turnover and earnings potential by further expanding our global footprint and fully integrating acquisitions. In all, for the Process Technology segment in 2018, we are forecasting 10% turnover growth with operating EBT close to breakeven.
Medium-term goals to be reached later
To compensate for cost increases and to enhance profitability, Krones is implementing extensive measures under its Value strategy program. Additionally, Krones raised the prices for all bottling and packaging equipment and for process technology by an average of 4.5% effective 1 May 2018. The strategic measures implemented by Krones have not yet taken full effect.
Overall, Krones is maintaining its mid-term targets of an 8% EBT margin and 22% working capital as a percentage of turnover. However, reaching these targets will take one or two years longer than planned.