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.