DEUTZ achieves its targets for revenue and the EBIT margin in 2019 and confirms its medium-term targets for 2022

• Revenue surges in the Americas and Asia-Pacific
• Profitable service business maintains its rapid growth
• ‘Transform for Growth’ efficiency program launched with
  the aim of increasing competitiveness
• Forecast for 2020 heavily affected by weak economic
  conditions
• Proposed dividend of €0.15 per share, unchanged on 2018

Key figures for the DEUTZ Group

€ million	2019	Change	Q4 2019	Change
New orders	1,654.3	-15.3%	339.1	-16.0%
Unit sales (units)	211,667	-1.4%	55,887	-4.1%
Revenue	1,840.8	+3.5%	460.9	-4.3%
EBIT	88.1	+7.4%	9.6	-73.4%
EBIT before exceptional items	78.8	-3.9%	9.6	-73.4%
EBIT margin	4.8%	+20bps	2.1%	-540bps
EBIT margin before exceptional items	4.3%	-30bps	2.1%	-540bps
Net income	52.3	-25.2%	-2.4	–
Net income before exceptional items	44.2	-36.8%	-2.6	–

 

COLOGNE, GERMANY – EQS Newswire – 18 March 2020 – DEUTZ, one of the world’s leading manufacturers of innovative drive systems,
can look back on a satisfactory financial year overall, even though economic
conditions became increasingly gloomy over the course of 2019. “Despite a
challenging fourth quarter, we attained the targets that we had set ourselves
for revenue and the EBIT margin before exceptional items in 2019. We also
successfully forged ahead with implementing our growth initiatives. DEUTZ faces
a year of transition in 2020, but we are well on track to achieve the
medium-term targets that we have set ourselves for 2022. These are revenue of
more than €2 billion and an EBIT margin before exceptional items of between 7
percent and 8 percent. In our high-margin service business, we now hope to
achieve our revenue target of approximately €400 million in 2021, which is a
year earlier than planned,” said Dr. Frank Hiller, Chairman of the Board
of Management of DEUTZ AG.

New orders affected by weakening of demand as a result of the economic
climate

New orders totaled €1,654.3 million in 2019, which was down by 15.3 percent on
the strong figure for the previous year. As expected, the slowing economy
depressed demand across all of the main application segments. Moreover, the
figure for 2018 had been boosted by spending brought forward due to the
introduction of the EU Stage V emissions standard.

Unit sales slightly lower than in prior year

The DEUTZ Group sold a total of 211,667 engines in 2019, which was 1.4 percent
fewer than in the prior year. Unit sales increased by a significant 23.7
percent in Agricultural Machinery, but fell sharply in the other main
application segments: by 8.1 percent in Material Handling, by 10.4 percent in
Construction Equipment, and by 15.1 percent in Stationary Equipment. Unit sales
of boat drives at Torqeedo continued to surge, jumping by 104.2 percent to
20,942.

Revenue rises by 3.5 percent to €1,840.8 million

DEUTZ’s revenue rose by 3.5 percent to €1,840.8 million in the reporting
period. It therefore achieved its revenue guidance for 2019, which forecast
that revenue would increase to more than €1.8 billion. The Agricultural
Machinery application segment performed particularly well, delivering double-digit
revenue growth of 12.3 percent. The revenue increases in the Material Handling
segment and the high-margin service business were also healthy at 6.9 percent
and 6.8 percent respectively. However, revenue in the Construction Equipment
and Stationary Equipment application segments declined by 1.8 percent and 6.3
percent respectively compared with the previous year. All regions contributed
to the increase in revenue, with the Americas (up by 10.7 percent) and
Asia-Pacific (up by 7.6 percent) delivering the strongest growth. In the
Americas region, DEUTZ particularly benefited from the ramp-up of new engine
series and expansion of the service business with Xchange products. The main
factors in the substantial increase in revenue generated in the Asia-Pacific
region were revenue growth in China and the expansion of business with new
customers.

Year-on-year fall in operating profit; EBIT margin before exceptional
items within the updated forecast range

In 2019, operating profit (EBIT before exceptional items) fell by 3.9 percent
year on year to €78.8 million. This is because revenue growth was outweighed by
negative effects, particularly in connection with the opening of insolvency
proceedings at various suppliers and with impairment losses recognized on the
capitalized development expenditure on two engine series for reasons related to
demand. Effects related to the deconsolidation of Argentinian joint venture
DEUTZ AGCO Motores S.A. also depressed earnings, as did the recognition of
provisions due to a product recall involving Torqeedo companies. Consequently,
the EBIT margin before exceptional items fell by 30 basis points to 4.3 percent
and was therefore within the forecast range, which was updated to between 4
percent and 5 percent in September 2019.

Taking account of positive exceptional items of €9.3 million resulting from
the realization of gains on the sale of a small part of the land at the former
Cologne-Deutz site that were recognized in the reporting year in accordance
with the agreement from 2017 regarding the sale of this land, EBIT rose by 7.4
percent to €88.1 million. The corresponding EBIT margin increased from 4.6
percent in the previous year to 4.8 percent.

Net income fell by 25.2 percent to €52.3 million in the reporting year.
Earnings per share stood at €0.43 as a result (2018: €0.58). Adjusted for
exceptional items, net income amounted to €44.2 million, which led to adjusted
earnings per share of €0.37 (2018: €0.58).

DEUTZ Compact Engines segment

€ million	2019	Change	Q4 2019	Change
New orders	1,268.4	-22.6%	248.9	-23.7%
Unit sales (units)	164,677	-15.7%	42,039	-22.5%
Revenue	1,446.4	-2.5%	366.7	-8.0%
EBIT	57.7	-8.7%	11.9	-66.0%
EBIT margin	4.0%	-30bps	3.2	-560bps

• Reassignment
  of the 2011 engine series to the DEUTZ Customized Solutions segment impacted on
  business performance, as did the weakening of demand as a result of the
  economic climate
• Revenue
  was below the 2018 level owing to reassignment of the engine series
• The
  EBIT margin was affected by various factors, including supplier insolvencies
  and impairment losses recognized on capitalized development expenditure for
  reasons related to demand

DEUTZ Customized Solutions segment

€ million	2019	Change	Q4 2019	Change
New orders	341.7	+19.5%	74.5	+5.4%
Unit sales	26,048	+181.3%	5,896	+113.2%
Revenue	362.5	+33.7%	86.0	+8.3%
EBIT	42.8	+30.1%	5.2	-21.2%
EBIT margin	11.8%	-30bps	6.0	-230bps

• Revenue
  grew substantially in all regions, with a particularly strong performance by
  the service business with Xchange products in the Americas region
• The
  operating profit for the segment rose sharply, due in large part to
  reassignment of the 2011 engine series
• The
  EBIT margin was just below the prior-year level, mainly because the profit
  margin of the 2011 engine series is lower than that of the other series

Proposed dividend of €0.15 per share, unchanged on 2018

As in 2018, the Board of Management and Supervisory Board are jointly
proposing to use €18.1 million of the accumulated income to pay a dividend of
€0.15 per share. Under its dividend policy, DEUTZ is aiming to maintain a
dividend ratio of around 30 percent of net income over a number of years. Based
on the amount of net income, the proposed dividend would give a dividend ratio
of 34.9 percent.

Economic climate and coronavirus make 2020 a year of transition

The downturn in key customer industries as a result of economic conditions led
to a low level of orders on hand at the end of 2019, a situation that is
continuing in 2020. From the current perspective, this is likely to cause a
decline in performance this year. The Company is forecasting a year-on-year
decrease in revenue in the low double-digit percentage range. The fall in the
EBIT margin before exceptional items is expected to be in the mid double-digit
percentage range relative to the prior-year figure. Aside from the decline
caused by economic conditions, the DEUTZ engine business will be hit this year
by customers selling the inventories of engines they had built up before new
emissions standards came into force. The establishment of second-source
suppliers will also be a drag on earnings, particularly in the first half of
2020. Furthermore, DEUTZ cannot exclude the possibility of its business and its
supply chain being affected by the outbreak of coronavirus. The Company has
launched an efficiency program, ‘Transform for Growth’, in order to counteract
the factors that are expected to depress earnings. This groupwide program aimed
at increasing competitiveness is designed to reduce complexity along the entire
value chain and to improve the Company’s efficiency.

 

Forward-looking statements

This investor news 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. 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
diesel, gas, and electric drive systems for professional applications. It
offers a broad range of engines delivering up to 620 kW that are used in
construction equipment, agricultural machinery, material handling equipment,
stationary equipment, commercial vehicles, rail vehicles, and other
applications. DEUTZ has around 4,900 employees worldwide and over 800 sales and
service partners in more than 130 countries. It generated revenue of €1,840.8
million in 2019.

Further information is available at www.deutz.com.