RCS - Deutz AG - Half Year Results

Deutz AGAnnouncement

11/08/2022 08:30

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RNS Number : 6878V  Deutz AG  11 August 2022

 ·      Orders on hand increase to around €770 million

 ·      Revenue increase by around 21 percent

 ·      Full-year guidance for 2022 remains subject to change

 After a successful start to the year, DEUTZ - one of the world's leading
 manufacturers of innovative drive systems for off-highway applications -
 continued to benefit from the sustained recovery in relevant downstream
 industries in the second quarter and improved its earnings in the first half
 of 2022. The outbreak of the war in Ukraine has not had a negative impact on
 demand so far. In this respect, it is proving favorable for DEUTZ that
 business activities in Russia, Belarus, and Ukraine account for only around
 €20 million of total annual revenue. Moreover, DEUTZ has no branches in
 Ukraine or Belarus and also no direct suppliers based in the crisis regions.

 "In spite of the outbreak of the war in Ukraine, we increased our revenue by
 around 21 percent to €930.4 million. At the same time, we raised our
 adjusted EBIT margin by 2.4 percentage points to 4.6 percent. We want to
 sustain this growth because we still have a long way to go to reach our
 envisaged target range. But we have taken the first important steps toward
 achieving this goal, for example by strengthening our focus on disciplined
 cost management," says CEO Dr. Sebastian C. Schulte. Looking ahead to the
 second half of 2022, he adds: "Our orders on hand totaled more than
 three-quarters of a billion euros at the end of June and were thus at a very
 high level. This means that we are tackling the coming months from a solid
 position. Nonetheless, our full-year guidance is still subject to change. The
 supply situation remains challenging and the geopolitical implications of the
 war in Ukraine are very uncertain. The trajectory of macroeconomic conditions
 is a cause for concern and highlights once again that we need to make DEUTZ
 even more resilient to economic downturns. However, we are making good
 progress on this front."

 As well as a healthy operating performance, DEUTZ reached further strategic
 milestones. At the start of 2022, the Company initiated a multi-phase strategy
 process called Powering Progress in order to secure its long-term
 competitiveness. Its objectives include improving the Company's commercial
 performance and technological capabilities. To this end, four priority areas
 of action were defined together with a range of sub-initiatives, such as
 passing on increased costs to customers in the short term in the form of
 multiple rounds of price increases and establishing a process to completely
 overhaul pricing in the Classic business. The aim for 2022 is to implement
 price increases of between 8 and 12 percent for the new engine portfolio.
 DEUTZ also set itself the target of increasing the amount of annual revenue
 generated by its high-margin service business to over €500 million by 2025
 through both organic growth and growth by acquisition. Two initial
 acquisitions for the service business were made at the start of May, with
 DEUTZ acquiring its former service partners AUSMA Motorenrevisie B.V.
 (Netherlands) and South Coast Diesels (Ireland). The two companies sell and
 service diesel engines in their home markets, where they operate as
 multi-brand dealers.

 The newly launched strategy program also aims to accelerate the development of
 alternative drive solutions. At the end of June, DEUTZ reached a key milestone
 on the path toward preparing its TCG 7.8 H2 hydrogen engine for volume
 production. An H2 genset has gone into operation in a joint pilot project
 between DEUTZ and Cologne-based energy provider RheinEnergie. The combination
 of a DEUTZ hydrogen engine and a generator will deliver electric power of up
 to 170 kilovolt-amperes during the initial six-month test phase. This
 electricity will be fed directly into the local power grid. In a second step,
 the genset's waste heat is to be utilized. The solution being piloted by DEUTZ
 and RheinEnergie has huge potential for the local, carbon-neutral supply of
 energy in urban centers. With an output of around 200 kilowatts, the hydrogen
 engine is generally suitable for all current DEUTZ applications. Volume
 production of this engine model is scheduled to begin in 2024.

 Solid rise in new orders; double-digit increases in unit sales and revenue

 In the first half of 2022, new orders received by DEUTZ increased by
 4.7 percent year on year to €1,077.6 million. All regions contributed to
 this growth.

 Orders on hand climbed to a substantial €768.9 million as at June 30, 2022
 (June 30, 2021: €531.3 million). This points to a consistently stable order
 situation in the months ahead. The proportion of orders on hand attributable
 to the service business stood at €36.6 million (June 30, 2021:
 €35.1 million).

 Having sold a total of 108,741 engines, the DEUTZ Group grew its unit
 sales by 16.1 percent in the first half of 2022 with the two largest sales
 regions, EMEA and the Americas, contributing double-digit percentage growth.
 Unit sales of DEUTZ engines 1  rose by 19.9 percent to reach 90,462 engines
 sold. Unit sales of electric boat drives at DEUTZ's subsidiary Torqeedo were
 slightly higher year on year at 18,279 (H1 2021: 18,196 electric drives). All
 the major segments generated significant growth, with Material Handling making
 the largest contribution to unit sales growth in absolute figures.

 Reflecting the growth in unit sales, DEUTZ's revenue swelled by
 20.8 percent to €930.4 million in the reporting period. This rise was
 driven by all regions and major application segments. Only the Miscellaneous
 application segment fell short of the figure for the prior-year period. This
 was due to lower revenue from engines with capacities over 8 liters and from
 older engine series, which the increase in revenue from electric boat drives
 at DEUTZ subsidiary Torqeedo could not offset.

 Strong improvement in profitability

 Despite a rise in research and development spending, EBIT before exceptional
 items (adjusted EBIT) improved significantly to €42.6 million in the first
 half of 2022, compared with €16.8 million in the prior-year period. This
 rise was mainly attributable to growth in the volume of business, economies of
 scale, and the effects of cost-saving measures. The impact of additional costs
 stemming from persistent supply bottlenecks and higher materials prices is
 being increasingly mitigated thanks to these costs being passed on to our
 customers through price increases. In addition, DEUTZ benefited from positive
 currency effects. However, the Group's adjusted EBIT was once again squeezed
 by the loss reported by DEUTZ subsidiary Torqeedo, which has not yet managed
 to break even. The adjusted EBIT margin made a strong year-on-year
 improvement from 2.2 percent to 4.6 percent.

 The increase in adjusted EBIT meant that net income before exceptional
 items improved to €34.0 million (H1 2021: €14.0 million)
 while earnings per share before exceptional items rose to €0.28 (H1 2021:
 €0.12).

 Financial position remains comfortable

 Cash flow from operating activities amounted to €14.6 million in the first
 half of 2022 (H1 2021: €44.7 million). This reduction was predominantly
 driven by the need to increase inventories in order to manage the significant
 expansion in the volume of business and longer sea freight times and to secure
 production in a challenging procurement environment. As a result of the
 decrease in cash flow from operating activities, free cash flow amounted to
 minus €24.7 million. This equated to a deterioration of €34.4 million
 compared with the first half of 2021.

 As a result of drawing down an existing credit line in an amount of around
 €60 million,

net financial debt rose to €123.2 million as at June 30, 2022. This
 equates to an increase of €43.5 million compared with the end of 2021.

 The equity ratio stood at 44.5 percent, compared with 45.6 percent at the
 end of 2021. The DEUTZ Group's financial position therefore remains
 comfortable. The unused volume of the syndicated loan stood at around
 €155 million at the end of the reporting period. DEUTZ thus has sufficient
 financial means to be able to fund its operating business, invest in its
 transformation, and generate growth through acquisitions.

 Guidance for 2022 still subject to change due to persistently high levels of
 uncertainty

 Although the outbreak of the war in Ukraine did not have a material adverse
 impact on demand in the first half of 2022, the geopolitical implications of
 the war and its future trajectory are still creating significant uncertainty
 that does affect DEUTZ, for example with regard to energy and commodity
 prices, the availability of materials and freight capacity, and the
 possibility of Russia cutting off the supply of gas to parts of Europe. For
 this reason, the guidance published in the 2021 annual report for the full
 2022 financial year continues to be subject to change.

 After discontinuing all new engine business with Russia and Belarus until
 further notice immediately after the outbreak of the war in Ukraine, DEUTZ
 decided to go one step further by suspending all technical and sales
 activities in these markets.

 The interim report for the first half of 2022 is available on our website
 at www.deutz.com/en/investor-relations
 (http://www.deutz.com/investor-relations) .

 DEUTZ Group: Overview of key figures

€ million                                          H1 2022  H1 2021  Change  Q2 2022  Q2 2021  Change
 New orders                                         1,077.6  1,028.8  4.7%    568.0    564.0    0.7%
 Group unit sales (units)                           108,741  93,627   16.1%   58,726   55,243   6.3%
    thereof Torqeedo                                18,279   18,196   0.5%    11,825   12,061   -2.0%
 Revenue                                            930.4    770.2    20.8%   482.5    426.8    13.1%
 EBIT                                               35.5     16.1     120.5%  26.5     15.7     68.8%
    thereof exceptional items 2                     -7.1     -0.7     914.3%  -0.3     -0.3     0.0%
 Adjusted EBIT                                      42.6     16.8     153.6%  26.8     16.0     67.5%

(EBIT before exceptional items)
 EBIT margin (%)                                    3.8      2.1      +1.7pp  5.5      3.7      +1.8pp
 EBIT margin before exceptional items (%)           4.6      2.2      +2.4pp  5.6      3.7      +1.9pp
 Net income                                         28.0     13.3     110.5%  21.2     14.2     49.3%
 Net income before exceptional items                34.0     14.0     142.9%  21.5     14.5     48.3%
 Earnings per share (€)                             0.23     0.11     109.1%  0.17     0.12     41.7%
 Earnings per share before exceptional items (€)    0.28     0.12     133.3%  0.18     0.12     50.0%
 Equity (Jun. 30)                                   620.8    555.1    11.8%
 Equity ratio                                       44.5     44.3     +0.2pp

(Jun. 30, %)
 Cash flow from operating activities                14.6     44.7     -67.3%  4.9      27.6     -82.2%
 Free cash flow                                     -24.7    9.7      -       -19.8    11.4     -
 Net financial position (Jun. 30)                   -123.2   -84.3    46.1%
 Employees 3 ( )(Jun. 30)                           4,946    4,631    6.8%

Contact

 DEUTZ AG / Christian Ludwig / SVP Communications & Investor Relations

Tel: +49 (0)221 822 3600 / Email: Christian.Ludwig@deutz.com

 DEUTZ AG / Svenja Deißler / Senior Manager Investor Relations & ESG

Tel: +49 (0)221 822 2491 / Email: Svenja.Deissler@deutz.com

 About DEUTZ AG

 DEUTZ AG, a publicly traded company headquartered in Cologne, Germany, is one
 of the world's leading manufacturers of innovative drive systems. Its core
 competencies are the development, production, distribution, and servicing of
 drive solutions in the power range up to 620 kW for off-highway applications.
 The current portfolio extends from diesel, gas, and hydrogen engines to hybrid
 and all-electric drives. DEUTZ drives are used in a wide range of applications
 including construction equipment, agricultural machinery, material handling
 equipment such as forklift trucks and lifting platforms, commercial vehicles,
 rail vehicles, and boats used for private or commercial purposes. DEUTZ has
 around 4,750 employees worldwide and over 800 sales and service partners in
 more than 130 countries. It generated revenue of around €1.6 billion in
 2021. Further information is available at www.deutz.com
 (http://www.deutz.com) .

 ( 1 ) Excluding electric boat drives from DEUTZ subsidiary Torqeedo.
 ( 2 ) Significant income generated or expenses incurred outside the scope of
 the Company's ordinary business activities that   are unlikely to recur.
 ( 3 ) Number of employees expressed in FTEs (full-time equivalents);
 including trainees, excluding temporary workers.

11.08.2022 CET/CEST Dissemination of a Corporate News, transmitted by DGAP - a
 service of EQS Group AG.

The issuer is solely responsible for the content of this announcement.

The DGAP Distribution Services include Regulatory Announcements,
 Financial/Corporate News and Press Releases.

Archive at www.dgap.de

Contact

DEUTZ AG / Christian Ludwig / SVP Communications & Investor Relations

Tel: +49 (0)221 822 3600 / Email: Christian.Ludwig@deutz.com

DEUTZ AG / Svenja Deißler / Senior Manager Investor Relations & ESG

Tel: +49 (0)221 822 2491 / Email: Svenja.Deissler@deutz.com

About DEUTZ AG

DEUTZ AG, a publicly traded company headquartered in Cologne, Germany, is one
of the world's leading manufacturers of innovative drive systems. Its core
competencies are the development, production, distribution, and servicing of
drive solutions in the power range up to 620 kW for off-highway applications.
The current portfolio extends from diesel, gas, and hydrogen engines to hybrid
and all-electric drives. DEUTZ drives are used in a wide range of applications
including construction equipment, agricultural machinery, material handling
equipment such as forklift trucks and lifting platforms, commercial vehicles,
rail vehicles, and boats used for private or commercial purposes. DEUTZ has
around 4,750 employees worldwide and over 800 sales and service partners in
more than 130 countries. It generated revenue of around €1.6 billion in
2021. Further information is available at www.deutz.com
(http://www.deutz.com) .

( 1 ) Excluding electric boat drives from DEUTZ subsidiary Torqeedo.
( 2 ) Significant income generated or expenses incurred outside the scope of
the Company's ordinary business activities that   are unlikely to recur.
( 3 ) Number of employees expressed in FTEs (full-time equivalents);
including trainees, excluding temporary workers.

 

11.08.2022 CET/CEST Dissemination of a Corporate News, transmitted by DGAP - a
service of EQS Group AG.

The issuer is solely responsible for the content of this announcement.

The DGAP Distribution Services include Regulatory Announcements,
Financial/Corporate News and Press Releases.

Archive at www.dgap.de

 Language:     English
 Company:      DEUTZ AG
               Ottostraße 1
               51149 Köln (Porz-Eil)
               Germany
 Phone:        +49 (0)221 822 0
 Fax:          +49 (0)221 822 3525
 E-mail:       ir@deutz.com
 Internet:     www.deutz.com
 ISIN:         DE0006305006
 WKN:          630500
 Indices:      SDAX
 Listed:       Regulated Market in Dusseldorf, Frankfurt (Prime Standard); Regulated
               Unofficial Market in Berlin, Hamburg, Hanover, Munich, Stuttgart, Tradegate
               Exchange
 EQS News ID:  1418019

 

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