DEUTZ, one of the world’s leading manufacturers of innovative drive systems, recorded further growth in revenue and earnings in the first nine months of 2019.
“Despite a general slowdown in market growth, we saw revenue advance in all regions and major application segments and also demonstrated our operational strength by delivering a high double-digit percentage increase in earnings,” said Dr. Frank Hiller, CEO of the Germany-headquartered DEUTZ Group.
“Overall, we believe that we are on track to achieve the current full-year guidance for revenue and earnings. We also reached important milestones in the implementation of our growth strategy. Preparations for our joint venture with SANY to commence production as planned in 2021 are progressing very well. At the end of September, the foundation stone was laid for the new high-performance engine factory in the Chinese city of Changsha. And at the beginning of the fourth quarter, we added high-voltage battery technology as a key component of our E-DEUTZ strategy by acquiring the battery specialist Futavis, taking us another big step closer to a future of carbon-neutral off-highway vehicles.”
DEUTZ received orders worth €1.315.2bn in the period under review. This was 15.1% lower than the robust volume reported for the prior-year period, which had been positively influenced by a change in customers’ ordering patterns. In addition to this year-on-year effect, a weakening of demand as a result of the economic climate had an adverse impact from the end of the second quarter. New orders in the third quarter decreased by 20% year on year to €361.9mn.
DEUTZ sold a total of 155,780 engines in the first nine months of this year, meaning the Group’s overall unit sales were close to the level of the prior-year period.
In the first three quarters of 2019, DEUTZ’s revenue grew by 6.4% to €1.379.9 billion. The Material Handling application segment performed particularly strongly, delivering double-digit revenue growth of 11.3%, as did the Agricultural Machinery application segment and high-margin service business, whose revenues were up by 9.5% and 7.3% respectively. The Americas and Asia-Pacific were especially buoyant, with business in these regions expanding by 16.3% and 14.8% respectively. In the Americas region, DEUTZ particularly benefited from the ramp-up of new engine series, the service business with Xchange products, and higher demand for electric boat drives. 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.
In the first three quarters of 2019, DEUTZ operating profit went up by 50.8% year on year to reach €69.2mn. Besides the growth in revenue, this significant increase was predominantly due to a low figure being reported in the prior-year period, which had been adversely affected by a drag on earnings resulting from the joint venture DEUTZ Dalian Engine Co. Ltd. The joint venture has since been sold. However, there were also negative effects on earnings in the first nine months of 2019 relating to the deconsolidation of the Argentinian company DEUTZ AGCO Motores S.A. Furthermore, provisions had to be recognised in the first half of the year due to a product recall involving Torqeedo companies.
Despite a persistently challenging macroeconomic and geopolitical environment, the DEUTZ management board believes the group’s revenue is still expected to rise to more than €1.8bn in 2019 and the EBIT margin before exceptional items is predicted to be in the range of 4 to 5%.
This article first appeared on our sister title Aggregates Business.