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    Report for the second quarter 2020
    Report for the second quarter 2020

      Highlights and key figures

      Krones closes second quarter 2020 with a loss due to Covid-19 situation

      • Revenue from April to June fell by 16.5% year-on-year. In the first half of 2020, revenue went down by 10.1% to €1,698.6 million. 
      • Extreme uncertainty due to the corona situation is affecting investment confidence among customers. Order intake decreased by 38.2% in the second quarter. In the first half year, the contract value of orders went down by 28.5% to €1,457.3 million. 
      • Cost reductions due to structural measures mitigate the negative earnings impact of the lower revenue. Earnings before interest, taxes, depreciation and amortisation (EBITDA) remained stable at €118.5 million compared with €116.9 million in the previous year. EBT of €31.8 million for first half year includes a second-quarter loss of €21.2 million.
      • The development of the economy continues to be subject to great uncertainty in the short term. Because of this, it remains difficult to estimate the size of the adverse impacts on demand and investment confidence among our customers. The Krones Executive Board has consequently decided once again not to provide an outlook for the 2020 financial year.
      Key figures for H1 2020
          1 Jan – 30 Jun
      1 Jan – 30 Jun
      Revenue € million 1,698.6 1,889.3 – 10.1 %
      Order intake € million 1,457.3 2,038.6 – 28.5 %
      Orders on hand at 30 June € million 1,133.4 1,410.4 – 19.6 %
      EBITDA € million 118.5 116.9 + 1.4 %
      EBITDA margin % 7.0 6.2 + 0.8 PP*
      EBIT € million 33.2 47.5 – 30.1 %
      EBT € million 31.8 47.9 – 33.6 %
      EBT margin % 1.9 2.5 – 0.6 PP*
      Consolidated net income € million 21.5 33.3 – 35.4 %
      Earnings per share 0.68 1.06 – 35.8 %
      Capital expenditure for PP&E and intangible assets € million 55.2 91.4 –€ 36.2 million
      Free cash flow € million – 64.8 – 259.4 +€ 194.6 million
      Net cash and cash equivalents at 30 june** € million – 77.9 – 108.7 +€ 30.8 million
      Working capital to revenue *** % 27.6 26.0 + 1.6 PP*
      ROCE % 3.8 5.5 – 1.7 PP*
      Employees at 30 June        
      Worldwide   16,906 17,128 + 222
      Germany   10,422 10,764 + 342
      Outside Germany   6,484 6,364 + 120
      Key figures for Q2 2020
          1 Apr – 30 Jun
      1 Apr – 30 Jun
      Revenue € million 756.6 905.8 + 16.5 %
      Order intake € million 616.2 997.0 – 38.2 %
      EBITDA € million 29.0 30.9 –  6.1 %
      EBITDA margin % 3.8 3.4 + 0.4 PP
      EBIT € million – 20.5 – 4.3
      EBT € million – 21.2 – 3.6
      EBT margin % – 2.8 – 0.4 – 2.4 PP
      Consolidated net income € million – 17.6 – 3.0
      Earnings per share – 0.56 – 0.09
      * Percentage points
      ** Cash and cash equivalents less debt
      *** Average of last 4 quarters

      Letter from the Executive Board

      Dear shareholders and friends of Krones,

      The coronavirus continues to dominate global developments. While we have corona more or less under control after the first wave in Germany and the rest of western Europe, the pandemic has not yet peaked worldwide. The virus continues to spread rapidly in the USA, South America, Africa and India. In parallel with a health crisis, Covid-19 has also caused a global economic crisis. Many economists expect this to be deeper and longer-lasting than the 2008/09 financial crisis. The International Monetary Fund forecasts that the global economy will contract by 4.9% this year. And Covid-19 will continue to impact the global economy for several years to come. 

      Krones, too, is affected by the general uncertainty among customers. Investment is being postponed until certainty and confidence improve. As expected, the corona crisis had a massive impact on the figures for the second quarter – most of all on order intake, which was 38.2% down between April and June. Revenue fell by 16.5% year-on-year. Due to the comparatively good first quarter, the half-year figures do not show such a large decrease in order intake (down 28.5%) and revenue (down 10.1%), although there will be substantial impacts in the following quarters. 

      There is also positive news. The structural measures to improve profitability launched in the second half of 2019 are taking effect. Despite lower revenue, earnings before interest, taxes, depreciation and amortisation (EBITDA) improved by 1.4% between January and June to €118.5 million and the EBITDA margin from 6.2% to 7.0%. However, this was mainly due to the relatively good first quarter, which was scarcely affected by corona. Krones recorded earnings before taxes of −€21.2 million in the second quarter of 2020.

      Although the impacts of the recession will certainly continue to be with us for several more quarters, Krones will master this difficult situation. Together, we will further strengthen Krones’ market position in the crisis. Key factors here are good service and on-time contract fulfilment, especially under the current worldwide travel restrictions due to corona. We are also increasing our focus on innovation. This will enable us to profit on a lasting basis from the medium­term recovery of our markets. And that our market will grow in the medium and long term is beyond question. Moreover, Krones is very well positioned structurally and financially to emerge from the crisis stronger than before.


      Christoph Klenk

      Report on expected developments

      Extreme levels of uncertainty due to corona; as before, reliable -­guidance for 2020 not possible

      The overall economic outlook continued to deteriorate worldwide in the second quarter of 2020. In June, the International Monetary Fund (IMF) predicted that the corona crisis would slow down the global economy by more than expected and that the recovery would take longer than previously hoped. For 2020, the IMF expects a sharp, 4.9% contraction of the global economy. The further outlook is subject to great uncertainty due to the Covid-19 pandemic. This uncertainty regarding the general economy is also affecting order placement by Krones customers. 

      Krones expects overall that the global market for bottling and packaging equipment will shrink. Nevertheless, the medium and long-term outlooks remain positive. This is because consumer demand for packaged beverages and liquid foods will continue to grow worldwide in the medium to long term. 

      For the short term, it remains difficult to estimate the size of the adverse impacts on demand and investment confidence among our customers. Current market developments will have a negative impact on Krones’ sales and earnings for the whole of 2020. However, due to the great uncertainty, the Krones Executive Board has consequently decided once again not to provide a quantified outlook for the 2020 financial year. The indications given by the Executive Board for the current year in the report on expected developments as part of the 2019 Annual Report (based on information as of the beginning of March 2020) no longer apply due to the subsequent dynamic negative impact of corona.

      As the results for the first half of 2020 show, the company is making good progress with implementing the structural measures.