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05 November 2015

Deutz new orders value down 13.4% year-on-year in first nine months of 2015

First publishedon www.AggBusiness.com

Deutz, the German construction equipment diesel engine manufacturer, saw its new orders for the first nine months of 2015 reach €932.9 million - down 13.4% on the €1.076.8 billion reported a year earlier.

Third quarter 2015 new orders came to €262.2 million, 20.5% less year-on-year, and 25% less than in the previous quarter (Q3 2014: €330.0 million; Q2 2015: €349.7 million). Unit sales fell by 30.9%, from 155,099 engines in the prior-year period to 107,236 engines in the first nine months of this year.

Third-quarter unit sales totalled 29,116 engines, 48% below the Q3 2014 total, when 56,020 engines were sold, 29.4% fewer than in the previous quarter (Q2 2015: 41,213 engines).

Deutz’s revenue for the nine-month period under review was €938.8 million, a decrease of 20.3% compared with the figure of €1.177.9 billion for the corresponding period of 2014. This decline in revenue was, Deutz says, due partly to the changes to emissions standards for engines under 130kW that came into force in the European Union on 1 October 2014, and the resulting effects from the advance production of engines.

Furthermore, Deutz says the current reluctance of end customers to invest is subduing business across all regions, which means that the inventories of a number of our European customers are being used up more slowly. In the third quarter of 2015, revenue stood at €268.6 million, which was a 36.7% reduction on the third quarter of 2014 and a 23.7% decrease on Q2 2015.

Operating profit (EBIT before one-off items) for Deutz fell to €10.6 million in the first nine months of the year (Q1-Q3 2014: €22.8 million). This decline, says Deutz, is mainly attributable to the smaller volume of business.

The EBIT margin (before one-off items) was therefore 1.1%. By contrast, net income rose to €7.3 million (Q1-Q3 2014: €3.4 million).

"Our current expectation is that this market weakness will continue throughout the fourth quarter of 2015 and feature strongly well into the first quarter of 2016. We are responding by putting a stop on spending and by extending short-time working, particularly in Cologne," explained Dr Margarete Haase, Deutz's chief financial officer. The programme to optimise its network of German sites, which Deutz began last year, is said to be being implemented on schedule and will continue to proceed as planned. This, says the company, will substantially increase its efficiency.

"We are well positioned with our products and processes. As soon as the market starts to recover, Deutz will be able to reap the rewards," said Dr Helmut Leube, chairman of the Deutz board of management.

The forecast for the current year had already been adjusted on 15 September 2015 because of the current very low level of new orders and the small volume of business. Deutz now expects revenue to decline by around 20% year on year. In terms of operating profit (EBIT), the company will just about break even. Previously, Deutz had anticipated a drop in revenue of approximately 10% and an EBIT margin of roughly 3%.

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