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    Quarterly statement Q3 2020
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    Quarterly statement Q3 2020

      Highlights and key figures

      Order intake picks up in third quarter – Krones provides guidance for 2020

      • Due to corona, revenue in the third quarter of 2020 fell 25.0% year-on-year to €750.4 million. Revenue from January to September was down 15.3% to €2,449.0 million (previous year: €2,889.7 million).
      • Order intake picked up in the third quarter. At €843.6 million, the contract value of orders was about 37% or €227.4 million higher than in the second quarter. Order intake in the first nine months was down 22.2% overall to €2,300.9 million.
      • Systematic cost savings reduced the negative impact of the revenue shortfall on earnings. Earnings before interest, taxes, depreciation and amortisation (EBITDA), at €147.3 million in the first nine months of 2020, was 10.3% below the previous year’s €164.3 million. The EBITDA margin increased to 6.0% (previous year: 5.7%).
      • For the Krones Group in the full year 2020, the Executive Board expects revenue of approximately €3.3 billion (2019: €3,959 million), representing a decrease of about 17% and an EBITDA margin of 5.5% to 6.0% (2019: 5.7%).
      Key figures for Q1–Q3 2020
          1 Jan – 30 Sep
      2020
      1 Jan – 30 Sep
      2019
      Change
      Revenue € million 2,449.0 2,889.7 –15.3%
      Order intake € million 2,300.9 2,957.9 –22.2%
      Orders on hand at 30 September € million 1,116.6 1,329.3 –16.0%
               
      EBITDA € million 147.3 164.3 –10.3%
      EBITDA margin % 6.0 5.7 +0.3 PP*
      EBIT € million 27.5 58.4 –52.9%
      EBT € million 26.7 61.4 –56.5%
      EBT margin % 1.1 2.1 –1.0 PP*
      Consolidated net income € million 17.4 40.3 –56.8%
      Earnings per share 0.55 1.28
               
      Capital expenditure for PP&E and intangible assets € million 68.5 138.3 –€69.8 million
      Free cash flow € million –58.4 –294.5 +€236.1 million
      Net cash and cash equivalents at 30 September** € million –78.8 –153.1 +€74.3 million
      Working capital to revenue *** % 28.3 25.8 +2.5 PP*
      ROCE % 2.1 4.8 –2.7 PP*
               
      Employees at 30 September        
      Worldwide   16,839 17,405 –566
      Germany   10,408 10,844 –436
      Outside Germany   6,431 6,561 –130
      Key figures for Q3
          1 Jul – 30 Sep
      2020
      1 Jul – 30 Sep
      2019
      Change
      Revenue € million 750.4 1,000.4 –25.0%
      Order intake € million 843.6 919.3 –8.2%
               
      EBITDA € million 28.8 47.4 –39.2%
      EBITDA margin % 3.8 4.7 –0.9 PP*
      EBIT € million –5.7 10.9
      EBT € million –5.1 13.5
      EBT margin % –0.7 1.4 –2.1 PP*
      Consolidated net income € million –4.1 7.0
      Earnings per share –0.13 0.22
      * 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,

      Over the last few quarters, Krones has significantly improved its cost structures and increased the company’s overall flexibility. This has also been necessary, because the Covid-19 pandemic continues to have a negative impact on the global economy and on our industry. Krones’ revenue in the first three quarters was down 15.3% year-on-year, at €2.45 million. Lower material and labour costs than in the previous year enabled us to limit the impact of the revenue shortfall on earnings. Earnings before interest, taxes, depreciation and amortisation (EBITDA) fell by 10.3% to €147.3 million.

      Despite the lower figures for the first nine months, there is also positive news. Revenue and earnings stabilised in the third quarter relative to the second quarter, and order intake even picked up significantly. Krones received €843.6 million in new orders between July and September 2020. This was 37% or €227.4 million more than in the second quarter. Based on the figure for the first three quarters and the outlook for the fourth quarter, the Executive Board expects consolidated revenue for the full year 2020 to be about 17% down on the previous year. The target for the EBITDA margin is 5.5% to 6.0% (previous year: 5.7%).

      This guidance does not include any one-off expenditure for impairments and structural measures for capacity adjustment.

      If further countries and regions impose lockdowns, partial lockdowns or travel restrictions, this could negatively impact the completion of orders and order intake and consequently have a negative influence on Krones’ financial performance.

      If the corona situation does not deteriorate further in the short to medium term, Krones is on a stable footing. That does not mean, however, that the Executive Board is expecting revenue to quickly regain pre-crisis levels. This is the most important insight from the customer survey we conducted in the third quarter of 2020. Many of our customers plan to invest less in the years ahead than in 2019, the year before the corona crisis.

      To stay competitive and not endanger our company’s long-term performance, we will continue to work more intensively at the cost side. The cost-cutting measures we launched in 2019 are taking effect, but they are not enough. One key problem is that our current capacity cannot be fully utilised with the level of business expected in the short to medium term. Commencing the end of September, we have therefore made offers to some of our workforce to voluntarily terminate their contracts.

      Focusing exclusively on cost-cutting measures, however, would be short-sighted. Krones will therefore continue to invest in new products and services and press ahead with digitalisation. Because in the long term, the market in which Krones operates is a growth market that will once again present numerous opportunities after the crisis. 

       

      Christoph Klenk
      CEO

      Report on expected developments

      Ongoing extreme uncertainty due to the Covid-19 pandemic – Krones provides guidance for full year 2020 

      Macroeconomic forecasts for 2020 stabilised at a very low level during the third quarter. In October, the International Monetary Fund (IMF) projected that the world economy will contract by 4.4% in 2020. In its June forecast, the IMF was still projecting a 4.9% fall. Developments going forward are subject to great uncertainty due to the Covid-19 pandemic. These general economic uncertainties are also affecting order placement by Krones customers.

      Krones expects that the global market for bottling and packaging equipment will temporarily shrink overall. Nevertheless, the medium and long-term outlooks remain positive. This is because consumer demand for packaged beverages and liquid foods is growing over the long term based on a number of megatrends.

      In the short term, it remains difficult to estimate the negative impacts of the Covid-19 pandemic on demand and investment confidence among our customers. For this reason, it has not previously been possible to provide reliable forecasts for the 2020 financial year. Based on the figures for the first three quarters of 2020 and the current economic environment, the company is now providing guidance for 2020 at group level for the main financial performance indicators.

      For the Krones Group in the full year 2020, the Executive Board expects revenue of approximately €3.3 billion (2019: €3,959 million), representing a decrease of about 17%. The forecast for the EBITDA margin is 5.5% to 6.0% (2019: 5.7%). This guidance does not include any one-off expenditure for impairments and structural measures for capacity adjustment.

      If further countries and regions impose lockdowns, partial lockdowns or travel restrictions, this could negatively impact the completion of orders and order intake and consequently have a negative influence on Krones’ financial performance.

        Guidance for 2020 Actual 9M 2020
      Revenue growth about –17% –15.3%
      EBITDA margin 5.5–6.0% 6.0%
      Working capital to revenue 28% – 29% 28.3%
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