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RCS - Deutz AG - Jump in profits for DEUTZ in Q2 2023

Deutz AGAnnouncement

10/08/2023 08:30

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RNS Number : 9222I Deutz AG 10 August 2023

DEUTZ AG / Key word(s): Half Year Results

DEUTZ AG: Jump in profits for DEUTZ in the first half of 2023

10.08.2023

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

· Adjusted EBIT rises by almost 50 percent to €62.5 million

· Revenue increases by 10.0 percent to €1.02 billion

· At €0.99 billion, new orders are down slightly compared with
the high level in the prior-year period

· DEUTZ confirms it is likely to reach the upper end of the
forecast ranges for 2023

Cologne, August 10, 2023 - DEUTZ maintained its growth trajectory in the first
half of the year, with revenue rising by 10.0 percent year on year to reach
€1,023.5 million. The drive manufacturer's profitability also improved
significantly, as can be seen from the increase in the EBIT margin before
exceptional items from 4.6 percent to 6.1 percent. In view of this positive
business performance, the Company confirms that its full-year results for 2023
are likely to be at the upper end of the forecast ranges published in March.

"Our results for the first six months of this year show that we are now
operating much more profitably. This is hugely important to us because it is
helping us to forge ahead with our Dual+ strategy and thus achieve our
overarching strategic objectives," says DEUTZ CEO Dr. Sebastian C. Schulte.
"Underpinned by the improving performance of our Classic business in
combination with the ongoing expansion of our service business and the shift
toward alternative drives that is now under way, we are excellently positioned
to continue on our long-term growth trajectory."

Whereas DEUTZ registered sharp rises in revenue and earnings in the first half
of 2023, new orders were down by 8.0 percent compared with the very high
level recorded in the prior-year period. The latter was predominantly
attributable to the Asia-Pacific region, where signs of saturation in the
Chinese market and, in particular, high inventory levels at construction
equipment manufacturers in China led to declining demand.

"Our performance initiatives are not only boosting our earnings but also
having a positive impact on our cash flow," adds DEUTZ CFO Timo Krutoff,
commenting on the Group's financial position. "Cash flow from operating
activities more than tripled compared with the first half of 2022, and our
free cash flow improved by €33 million to €8.3 million."

As well as its operational success, DEUTZ made further progress with
implementing its Dual+ strategy, especially the global expansion of the
service and parts business. Firstly, DEUTZ began the process of acquiring its
long-standing service partner M. Hochschild S.A., based in Santiago, Chile, in
the reporting period. The transaction was completed at the end of July.
Secondly, DEUTZ signed an agreement in July concerning the acquisition of
another service partner, the Diesel Motor Nordic Group, which is headquartered
in Järfälla, Sweden. The transaction is expected to be completed at the
start of the fourth quarter. As well as strengthening DEUTZ's regional service
networks in South America and northern Europe, these acquisitions will expand
business involving the servicing of competitors' engines. The two acquisitions
should together contribute a total of around €25 million 1 to annual
consolidated revenue. In the Green segment, DEUTZ signed a letter of intent
for a small-scale production run of hydrogen-powered gensets in the second
quarter. Then in mid-July, DEUTZ took a big step toward volume production of
hydrogen engines when it chose automotive supplier MAHLE to supply hydrogen
engine components. DEUTZ intends to start full production of hydrogen engines
for stationary applications in 2024.

The Group's key figures for the first half of 2023 in detail

New orders received by the DEUTZ Group in the first six months of 2023
amounted to €991.7 million, which was down by 8.0 percent compared with
the prior-year period. From a regional perspective, this was due to the sharp
fall in orders in the Asia-Pacific region. By contrast, new orders declined in
the EMEA region only slightly and the Americas region recorded a significant
increase. At application segment level, new orders went up year on year in the
service business and the Miscellaneous application segment but went down in
the other application segments.

Orders on hand stood at €739.8 million as at June 30, 2023 (June 30, 2022:
€768.9 million), which should provide stability for the business in the
months ahead. Within the total figure, the orders on hand attributable to the
service business amounted to €47.9 million (June 30, 2022:
€36.6 million).

Unit sales of DEUTZ engines 2 stood at 91,451 in the first half of 2023, a
year-on-year rise of 1.1 percent. By contrast, the Group's total unit sales
decreased by 1.3 percent to 107,345 units compared with the first six months
of 2022 owing to the sharp fall at DEUTZ subsidiary Torqeedo 3 .

At regional level, unit sales edged up in the EMEA and Asia-Pacific regions
but declined year on year in the Americas, mainly owing to the aforementioned
reduction in unit sales of electric boat drives. From an application segment
perspective, the decrease in unit sales was attributable to the Miscellaneous,
Agricultural Machinery, and Construction Equipment application segments.

DEUTZ generated revenue of €1,023.5 million in the reporting period, an
increase of 10.0 percent that was driven by all regions and application
segments. The much faster rise in revenue than in unit sales was primarily due
to market-oriented pricing in the Classic segment and positive product mix
effects.

Strong improvement in profitability

EBIT before exceptional items (adjusted EBIT) improved markedly in the first
half of 2023, advancing from €42.6 million in the prior-year period to
€62.5 million. This increase was due to the higher volume of business
combined with economies of scale and, in particular, positive price and
product mix effects in the engine and service business. 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 EBIT margin before
exceptional items also made a strong year-on-year improvement, from
4.6 percent to 6.1 percent.

Taking account of exceptional items amounting to an expense of
€0.7 million, EBIT for the period under review amounted to €61.8 million
(H1 2022: €35.5 million 4 ). The EBIT margin came to 6.0 percent (H1 2022:
3.8 percent).

The improvement in adjusted EBIT meant that the Company's net income came to
€44.3 million, compared with €28.0 million in the prior-year period. As
a result, earnings per share rose from €0.23 to €0.36.

Financial position remains comfortable

Cash flow from operating activities increased to €48.9 million in the
period under review (H1 2022: €14.6 million), primarily thanks to the
improved earnings performance. This meant that free cash flow amounted to
€8.3 million, an improvement of €33.0 million compared with the first
half of 2022.

The equity ratio stood at 44.6 percent at the end of June. The DEUTZ Group's
financial position therefore remains comfortable.

Full-year guidance for 2023 confirmed

Back in April, DEUTZ refined the guidance that it had published in mid-March.
It expects its full-year results for 2023 to be at the upper end of the
original forecast ranges. In view of its positive business performance in the
second quarter, DEUTZ confirms its refined guidance. The Company therefore
continues to anticipate unit sales of around 195,000 DEUTZ engines 5 in 2023,
an accompanying rise in revenue to around €2.1 billion, and an adjusted
EBIT margin of approximately 5.0 percent. Free cash flow before mergers and
acquisitions is still predicted to be in the mid-double-digit millions of
euros.

DEUTZ Group: Overview of key figures

€ million H1 2023 H1 2022 Change
New orders 991.7 1,077.6 -8.0 %
Group unit sales (units) 107,345 108,741 -1.3 %
thereof DEUTZ engines 91,451 90,462 1.1 %
thereof Torqeedo 15,894 18,279 -13.0 %
Revenue 1,023.5 930.4 10.0 %
EBIT 61.8 35.5 74.1 %
thereof exceptional items -0.7 -7.1 -90.1 %
Adjusted EBIT (EBIT before exceptional items) 62.5 42.6 46.7 %
EBIT margin 6.0 % 3.8 % +2.2 pp
EBIT margin before exceptional items 6.1 % 4.6 % +1.5 pp
Net income 44.3 28.0 58.2 %
Net income before exceptional items 44.9 34.0 32.1 %
Earnings per share (€) 0.36 0.23 56.5 %
Earnings per share before exceptional items (€) 0.36 0.28 28.6 %
Equity (Jun. 30/Dec. 31) 712.3 668.8 6.5 %
Equity ratio 44.6 % 45.3 % -0.7 pp
Cash flow from operating activities 48.9 14.6 234.9 %
Free cash flow 8.3 -24.7 -
Net financial position (Jun. 30/Dec. 31) -181.4 -164.2 -10.5 %
Employees 6 (Jun. 30) 5,147 4,946 4.1 %

DEUTZ Classic segment: Overview of key figures

€ million H1 2023 H1 2022 Change
New orders 964.2 1,050.6 -8.2 %
Unit sales (units) 91,424 90,459 1.1 %
Revenue 997.0 900.1 10.8 %
Adjusted EBIT 86.7 61.3 41.4 %
Adjusted EBIT margin 8.7 % 6.8 % +1.9 pp

DEUTZ Green segment: Overview of key figures

€ million H1 2023 H1 2022 Change
New orders 27.5 27.0 1.9 %
Unit sales 7 (units) 15,921 18,282 -12.9 %
Revenue 26.5 30.3 -12.5 %
Adjusted EBIT -24.4 -18.1 -34.8 %
Adjusted EBIT margin -92.1 % -59.7 % -32.4 pp

The interim report for the first half of 2023 is available at
www.deutz.com/investor-relations (http://www.deutz.com/investor-relations) .

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

Forward-looking statements

This press release may contain certain forward-looking statements based on
current assumptions and forecasts made by the DEUTZ management team. Various
known and unknown risks, uncertainties, and other factors may lead to material
differences between the actual results, the financial position, or the
performance of the DEUTZ Group and the estimates and assessments set out here.
These factors include those that DEUTZ has described in published reports,
which are available at www.deutz.com (http://www.deutz.com) . The Company does
not undertake to update these forward-looking statements or to change them to
reflect future events or developments.

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 5,000 employees worldwide and almost 900 sales and service partners in
more than 130 countries. It generated revenue of more than €1.9 billion in
2022. Further information is available at www.deutz.com (http://www.deutz.com)
.

( 1 ) Additional consolidated revenue.

( 2 ) Excluding electric boat drives from DEUTZ subsidiary Torqeedo.

( 3 ) H1 2023: 15,894 electric units; H1 2022: 18,279 electric units.

( 4 ) The exceptional items in the first half of 2022 amounting to an expense
of €7.1 million had resulted from the recognition of provisions following
several changes at senior management level.

( 5 ) Excluding electric boat drives from DEUTZ subsidiary Torqeedo.

( 6 ) Number of employees expressed in FTEs (full-time equivalents), incl.
trainees; excl. temporary workers.

( 7 ) Torqeedo boat drives and other electric drives, hybrid-electric drives,
hydrogen drives, battery systems with a motor, DEUTZ PowerTree. From
2023, Torqeedo's unit sales also include battery systems (H1 2023:
2,686 units). The figure for the prior-year period has not been
retrospectively adjusted.

10.08.2023 CET/CEST Dissemination of a Corporate News, transmitted by EQS News
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