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    Report for the second quarter 2018
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    Report for the second quarter 2018

      Highlights and key figures

      After a strong first half, Krones confirms outlook for growth and earning targets for 2018

      • At €1,790.8 million, revenue was up 0.9% from the prior-year figure, which had been quite high due to timing.
      • Order intake rose 13.2% to €2,014.8 million. Acquisitions had no significant impact on revenue or order intake in the first half.
      • EBT decreased 6.9% to €112.7 million due to a one-time effect within personnel expenses and rising expenditure for goods and services purchased. The EBT margin decreased from 6.8% to 6.3%. In the second quarter the EBT margin was stable at prior year level of 6.3%.
      • Executive Board confirms targets for growth and earnings for 2018. Krones expects 6% revenue growth and a reported EBT margin of 7.0%.
      Key figures for H1 2018
          1 Jan – 30 Jun
      1 Jan – 30 Jun
      Revenue € million 1,790.8 1,775.2 + 0.9 %
      Order intake € million 2,014.8 1,779.3 + 13.2 %
      Orders on hand at 30 June € million 1,464.1 1,148.8 +27.4 %
      EBITDA € million 157.3 164.4 – 4.3 %
      EBIT € million 109.7 117.1 – 6.3 %
      EBT € million 112.7 121.0 – 6.9 %
      EBT margin % 6.3 6.8 – 0.5 PP*
      Net income € million 76.9 82.4 – 6.7 %
      Earnings per share 2.45 2.64 – 7.2 %
      Capital expenditure for PP&E and intangible assets € million 58.5 46.1 +€ 12.4 million
      Free cash flow € million – 56.2 – 159.5 +€ 103.3 million
      Net cash and cash equivalents at 30** € million 49.7 160.4 –€ 110.7 million
      Working capital to revenue *** % 28.8 26.3 + 2.5 PP*
      ROCE % 15.5 16.3 – 0.8 PP*
      Employees at 30 June        
      Worldwide   15,568 14,794 + 774
      Germany   10,376 10,106 + 270
      Outside Germany   5,192 4,688 + 504
      * Percentage points
      ** Cash and cash equivalents less debt
      *** Average of last 4 quarters
      Key figures for Q2 2018
          1 Apr – 30 Jun
      1 Apr – 30 Jun
      Revenue € million 899.1 875.8 + 2.7 %
      Order intake € million 1,022.4 903.8 + 13.1 %
      EBITDA € million 78.4 77.2 +  1.6 %
      EBIT € million 54.2 53.1 + 2.1 %
      EBT € million 56.5 55.0 + 2.7 %
      EBT margin % 6.3 6.3 ± 0 PP
      Net income € million 38.2 38.7 – 1.3 %
      Earnings per share 1.22 1.24 – 1.6 %

      Letter from the Executive Board

      Dear shareholders and friends of Krones,

      The second quarter was dominated by news on trade disputes and import tariffs among the world’s biggest economic regions – the USA, China, and Europe. These developments have had a slight dampening effect on sentiment, which was more positive at the start of the year. The International Monetary Fund has left its projection for 2018 global economic growth unchanged at 3.9% but warns of the increasing risks to this forecast. 

      Investment in our industry has remained acceptable. However, we must be ready to cope with challenges such as steadily rising prices for goods and services and labour. In order to compensate the increasing costs, we have raised the prices on all machines for bottling and packaging and process technology effective May 1st 2018. 

      Krones had overall a successful first half of 2018. Revenue was up slightly on the very high prior-year level to 0.9% and order intake rose 13.2% in the first six months of the year. It should be noted that the May 1st price increase did not apply to quotations that were already being negotiated at that time. The price increase will likely only begin to be reflected in order intake in the third quarter. Krones’ profitability was down in the first half due to rising prices for goods and services and personnel expenses. Overall, we are confident that we will achieve our growth and earning targets for the year.

      After nearly 23 years in Germany’s MDAX index, Krones’ share moved to the SDAX in mid-June. The SDAX contains many successful companies and is expected to gain in attractiveness to investors as a result of the reform of Germany’s stock market indexes in September 2018. Regardless of which index the Krones share is part of, the entire team will continue to focus on moving Krones forward.


      Christoph Klenk

      Report on expected developments

      Krones remains optimistic about the financial year 2018

      As economic forecasts for the current year remain positive overall, Krones is still confident about 2018 despite several political and economic uncertainties. The packaging machinery market is growing at a relatively stable pace because demand for packaged beverages and foods is rising. 

      As of the start of this year, our core segment Machines and Lines for Product Filling and Decoration now also includes our machines and lines for the compact class, that is subsidiaries Kosme and Gernep. Krones expects core-segment revenue to increase by 4%, slightly more than the market as a whole, in 2018 on strong order intake and an attractive product range. Krones expects the reported EBT margin to be 8.3% in 2018 despite high capital expenditure. 

      We intend to significantly improve profitability in the Machines and Lines for Beverage Production/Process Technology segment in the future. We are confident that we will be able to leverage revenue and earnings potential by further expanding our global footprint and fully integrating acquisitions. In the area of intralogistics, which is part of our Process Technology segment, we will further develop our subsidiaries System Logistics and Syskron, both regionally and in terms of product technology. In all, we are forecasting 15% revenue growth and a reported EBT margin of 1.0% for the Machines and Lines for Beverage Production/Process Technology segment for 2018. 

      Growth and earning targets for 2018 confirmed

      Because of the strong results achieved in the first half and continued high demand for our products and services, Krones’ forecast for the growth and earning targets for the year 2018 remains unchanged. To ensure Krones’ continued ability to offer the highest quality, innovative products and services despite rising costs for goods and services purchased and personnel, Krones raised its prices on all machines for bottling and packaging equipment and for process technology by 4.5% on average effective 1 May 2018. Because the price adjustments are aimed at offsetting current cost increases, Krones is keeping its revenue and earnings targets for 2018 and for the medium term unchanged. Krones intends to maintain its market position.

      Based on the current macroeconomic prospects and expected development of the markets relevant to Krones, we are targeting consolidated revenue growth of 6% in 2018. Krones intends to keep profitability stable despite heavy investment in digitalisation and start-up costs associated with our global footprint, particularly the new site in Hungary. The company expects to post an EBT margin of 7.0% in 2018. Our third financial performance target, working capital to revenue, will be slightly improved in the second half-year. The target of 26% for the full year 2018 cannot be achieved. The new target is 28%.

        Forecast for 2018 Actual value H1 2018
      Revenue growth +6% +0.9%
      EBT margin 7.0% 6.3%
      Working capital to revenue 28% 28.8%