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    Quarterly statement Q3 2019
    Quarterly statement Q3 2019

      Highlights and key figures

      Revenue growth of 7.3% in first three quarters of 2019 – structural measures to deliver sustained improvements in earnings launched by Krones Executive Board

      • High costs and an unfavourable product mix continue to impact profitability. EBT in the first nine months was €61.4 million (previous year: €139.4 million). The EBT margin decreased from 5.2% to 2.1%.
      • Revenue for the first three quarters, at €2,889.7 million, is 7.3% higher than in the previous year. Adjusted for currency and acquisition effects, revenue growth was 2.7%. Order intake, at €2,957.9 million, was slightly above the previous year’s level.
      • Executive Board launches structural measures for sustained improvements in profitability.
      • For the full year 2019, Krones expects revenue growth of 3% and an EBT margin of around 3%. The guidance for the EBT margin does not include any costs of structural measures.
      Key figures for Q1–Q3
          1 Jan – 30 Sep
      1 Jan – 30 Sep
      Revenue € million 2,889.7 2,692.8 +7.3%
      Order intake € million 2,957.9 2,940.0 +0.6%
      Orders on hand at 30 September € million 1,329.3 1,487.3 –10.6%
      EBITDA € million 164.3 206.1 –20.3%
      EBITDA margin % 5.7 7.7 –2.0 PP*
      EBIT € million 58.4 132.6 –56.0%
      EBT € million 61.4 139.4 –56.0%
      EBT margin % 2.1 5.2 –3.1 PP*
      Consolidated net income € million 40.3 99.4 –59.5%
      Earnings per share 1.28 3.16
      Capital expenditure for PP&E and intangible assets € million 138.3 89.6 +€48.7 million
      Free cash flow € million –294.5 –140.0 –€154.5 million
      Net cash and cash equivalents at 30 September** € million –153.1 –34.1 –€119.0 million
      Working capital to revenue *** % 25.8 28.8 –3.0 PP*
      ROCE % 4.8 12.3 –7.5 PP*
      Employees at 30 September        
      Worldwide   17,405 15,949 +1,456
      Germany   10,844 10,601 +243
      Outside Germany   6,561 5,348 +1,213
      Key figures for Q3
          1 Jul – 30 Sep
      1 Jul – 30 Sep
      Revenue € million 1,000.4 902.0 +10.9%
      Order intake € million 919.3 925.2 –0.6%
      EBITDA € million 47.4 48.8 –2.9%
      EBITDA margin % 4.7 5.4 –0.7 PP*
      EBIT € million 10.9 22.9 –52.4%
      EBT € million 13.5 26.7 –49.4%
      EBT margin % 1.4 3.0 –1.6 PP*
      Consolidated net income € million 7.0 22.5 –68.9%
      Earnings per share 0.22 0.71
      * 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,

      Since we revised our guidance at the end of the first half year, general economic conditions have further deteriorated. The tough wrangling over Brexit and the trade war that has been simmering for months between China and the USA are currently having an impact on the general economic environment. As a result, the International Monetary Fund now expects the global economy to grow by just 3.0%. The forecast had stood at 3.3% in April and 3.5% in January. 

      Despite the political uncertainties, our orders and revenue developed positively in the third quarter. Revenue exceeded the billion euro mark in the third quarter and was up 7% year-on-year in the first nine months, at €2,890 million. Order ­intake was slightly higher than the previous year at €2,958 million. 

      Nevertheless, 2019 is not an easy year for Krones. To deliver long-term, profitable growth, we must improve cost structures, raise efficiency, review our portfolio and create new growth momentum. We have already launched short and medium-term structural measures in the past few months. 

      This package of measures does not yet show through in our third-quarter profitability. Overall, the earnings before taxes (EBT) of €61.4 million in the first nine months and the EBT margin of 2.1% fall short of our expectations. The main causes are high material and labour costs and temporarily weak demand in the PET and the after-sales business. We have already developed and introduced measures in these areas. Following the second-quarter loss, the earnings situation eased slightly in the third quarter, partly because the PET business, which is important to Krones, has stabilised since mid-year.

      For the full year 2019, Krones continues to expect revenue growth of 3% and an EBT margin of around 3%. The guidance for the EBT margin does not include any costs of structural measures.

      Without any doubt, the company is currently in a challenging and, for Krones, unusual situation. I am nevertheless firmly convinced that the opportunities far outweigh the risks. We are the market and technology leader in a globally growing market. The task now is to continue implementing the structural aspects ­together with our strong world-wide team.


      Christoph Klenk

      Report on expected developments

      Long-term growth trend in Krones’ market remains 

      Krones has a very good market position and is a healthy and strong company. We operate in a market with stable medium and long-term growth. More than seven billion people need to be supplied with food and above all beverage products. The market for Krones’ products and services is expected to continue growing faster on average than the global economy.

      Krones’ customers nevertheless display a degree of uncertainty at present ­because, like others, they take current economic developments into account in their decision processes. The global economic slowdown and the many sources of geopolitical and economic uncertainty are causing investment decisions to be delayed. Together with continued high material and labour costs, this currently presents Krones with major challenges.

      Krones expects significantly better earnings in the fourth quarter

      The Executive Board has taken further action to counter the negative impacts on earnings. In addition to short-term measures such as a hiring freeze and savings in budgets, Krones will significantly cut capital expenditure for the next one to two years. Acquisitions will likewise be suspended for the time being.

      Krones expects good production capacity utilisation in the fourth quarter. That will have a positive impact on profitability. We are therefore sticking to our earnings guidance for the full year 2019 and continue to expect an EBT margin of approximately 3%. Attaining this target is challenging, however. The guidance for the EBT margin does not include any costs of structural measures. The company continues to expect revenue to increase by 3% in the full year 2019.

      For its third performance target, working capital to revenue, Krones continues to predict a figure of 26%.

        Target 2019 Actual 9m 2019
      Revenue growth 3% 7.3
      EBT margin around 3% 2.1
      Working capital to revenue 26% 25.8

      Krones launches structural measures

      Krones works on consistently competitive cost structures in order to maintain and ideally expand its market share. The strategic measures launched so far, such as the price rises and the expansion of our global footprint to date, are not enough for the medium-term earnings targets to be attained. There will therefore also be structural adjustments. All processes, organisational structures and resources are to be optimised. Portfolio stream­lining will also contribute to improving the company’s efficiency. Overall, it can not be avoided that 300 to 500 jobs, mainly at the German locations, will be eliminated.