DEUTZ records growth in revenue, but new orders fall

Off-highway engine manufacturer DEUTZ posted a 5.9% increase in revenue to €929.8m in the first half of 2019. The German company said its material handling application segment performed particularly strongly, delivering revenue growth of 8.8%, as did the high-margin service business, whose revenue was up by 7.9%. DEUTZ received orders worth €953.3m in H1. New orders were 13.1% lower than what DEUTZ says was the "exceptionally robust volume" reported for the prior-year period, which it added had been
Ancillary Equipment / August 2, 2019

Off-highway engine manufacturer 617 DEUTZ posted a 5.9% increase in revenue to €929.8m in the first half of 2019.

The German company said its material handling application segment performed particularly strongly, delivering revenue growth of 8.8%, as did the high-margin service business, whose revenue was up by 7.9%.

DEUTZ received orders worth €953.3m in H1. New orders were 13.1% lower than what DEUTZ says was the "exceptionally robust volume" reported for the prior-year period, which it added had been positively influenced by a change in customers’ ordering patterns. In addition to this year-on-year effect, DEUTZ said a weakening of demand as a result of the economic climate had an adverse impact at the end of the reporting period, with new orders in the second quarter decreasing by 15.9% year on year to €438.8m.

In the regions, the strongest growth momentum was recorded in the Americas and in Asia-Pacific, which grew by 15.8% and 15.5% respectively. In the Americas region, DEUTZ says it particularly benefited from the general recovery in the market and from higher demand for new engine series. Factors in the substantial increase in revenue generated in the Asia-Pacific region included business with new customers as well as revenue growth in China and other Asian countries.

“We maintained our growth trajectory in all regions and main application segments and did so despite emerging signs of an economic slowdown,” said Dr. Frank Hiller, chairman of the board of management of DEUTZ. "We also demonstrated our operational strength and increased earnings by a significant double-digit amount. Our orders on hand remain at a high level, so we are on track to achieve the targets that we set ourselves for the year as a whole."

Operating profit (EBIT before exceptional items) went up by 41.3% year on year in H1 2019 to €47.2m. Besides the growth in revenue, DEUTZ said this significant increase was primarily 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, Dalian, China. The joint venture has since been sold. However, there were also negative effects on earnings in the first half of 2019 relating to the deconsolidation of the Argentinian company DEUTZ 381 AGCO Motores in the first quarter of 2019.

The DEUTZ board of management confirmed its full-year guidance for 2019. The company said that, because of the current volume of orders on hand, which remains at a high level, revenue is expected to rise to more than €1.8bn. As a result of this and due to various measures aimed at raising efficiency, the EBIT margin before exceptional items is projected to improve to at least 5.0 percent. The ongoing expansion of the service business will also help to improve the margin overall.

Hiller said the company is well positioned to weather the economic challenges that lie ahead: “We are open to embrace new technologies and offer our customers a range of products tailored to their individual needs. The ongoing expansion of our high-margin service business is succeeding, and the initiatives that we have introduced to reap further efficiency gains are bearing fruit. Good progress is also being made with the internationalization of our business. We reached an important milestone in our China strategy by signing an agreement to form a joint venture with 4334 SANY."

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