Revenue growth over first nine months of 2015, slowdown in the third quarter
Group revenue for the first nine months of 2015 rose 8.7 percent relative to the prior-year period to reach EUR 1.017,4 million (9M 2014: EUR 936.2 million). “Bolstered above all by strong performance over the first six months of the year, this is a good figure in light of the difficult conditions that are affecting the construction equipment industry as a whole,” explains Cem Peksaglam, CEO of Wacker Neuson SE.
Demand for light equipment in the raw material and energy sectors declined at an unexpectedly sharp rate in the third quarter. “Raw material prices are extremely low at present, making it almost impossible for companies to extract oil and gas profitably in North America. This has brought the industry more or less to a standstill. Difficult market conditions in South America compounded the situation here. In addition, declining demand in the European agricultural equipment sector together with disappointing levels of demand in markets such as France, Russia and Australia had an unexpectedly strong impact on our business,” continues Peksaglam. As a result, Group revenue for Q3 2015 was 1.6 percent lower than the prior-year figure at EUR 311.0 million (Q3 2014: EUR 316.2 million). At EUR 107.2 million, revenue from the light equipment segment increased 1.2 percent compared with the previous year. When adjusted to discount currency effects, however, this figure was below last year’s figure. Revenue from the compact equipment segment amounted to EUR 136.4 million, which is a decrease of 5.4 percent. Revenue for the services segment, which includes the Group’s spare parts business, increased 4.3 percent relative to the prior-year quarter.
The industries in which the Wacker Neuson Group distributes its products and services can be volatile. The fall in revenue in the third quarter was primarily influenced by external factors and had a negative impact on cost ratios. Profit before interest and tax (EBIT) for the third quarter fell 61.3 percent to EUR 15.5 million (Q3 2014: EUR 40.1 million). This corresponds to an EBIT margin of 5.0 percent (Q3 2014: 12.7 percent). It should be noted, however, that the prior-year quarter was an unusually strong period for revenue and earnings. Major orders, an advantageous regional and product mix and clearly favorable currency gains positively influenced the Group’s performance here. In contrast, currency gains declined markedly in the third quarter of 2015. “The strong US dollar made exports from our two production sites in the US more expensive. This had a negative effect on our profit levels. Profitability in South America, especially in Brazil, developed unfavorably under the pressure of the escalating local crises. The sharp depreciation in local currencies in recent months had a clear impact on revenue and earnings,” adds Peksaglam.
EBIT for the first nine months of the year declined 21.5 percent to EUR 81.2 million (9M 2014: EUR 103.5 million). The EBIT margin amounted to 8.0 percent (9M 2014: 11.1 percent).
Focus on medium-term growth
The Group is taking action to counter the current market squeeze. “As part of our day-to-day approach to business, we are firmly committed not only to strict cost control, but also to targeted implementation of cost-optimization programs and further improvements in the quality and efficiency of processes across all areas of the company. We systematically analyze and leverage synergies and potential for improvement,” assures Peksaglam. All of these initiatives are already paying dividends and will have an even more positive impact on earnings when markets recover.
Annual forecast for 2015
The Group recently adjusted its forecast for the current year as a result of these latest business developments. It expects Group revenue to amount to between EUR 1.35 and 1.40 billion (2014: EUR 1.28 billion) and the EBIT margin to range between 7.0 and 8.0 percent (2014: 10.6 percent). The Group has implemented measures to reduce inventory.
The company plans to announce its forecast for the coming year in March 2016 when it publishes its results for 2015.
|Key figures in € in million||Q3/15||Q3/14||Change (adjusted for currency effects)||9M/15||9M/14||Change (adjusted for currency effects)|
|Revenue||311.0||316.2||-1.6 % (-4.4 %)||1,017.4||936.2||8.7 % (4.0 %)|
|EBIT as a %||5.0||12.7||-7.7 PP||8.0||11.1||-3.1 PP|
|Total profit / loss for the period (after minority interests)||8.5||26.5||-67.9%||53.7||69.0||-22.0 %|