Germany-based off-road engine manufacturer Deutz has postponed its medium-term financial targets from 2022 to 2023/2024.
The company says it was previously aiming for an increase in revenue to €2bn, along with an EBIT margin before exceptional items of 7% to 8% for 2022, however at the present time it believes that these targets will not be reached until 2023/2024.
Deutz adds that this is due in particular to the macroeconomic impact of the coronavirus crisis, which has caused its engine business to contract sharply this year. Over the months ahead, it adds that customers are expected to remain reluctant to invest and demand will therefore recover more slowly than originally anticipated.
“There were encouraging signs of recovery in our business performance in the third quarter, and we expect to see an improvement in our main sales markets over the coming months,” says Deutz CEO Frank Hiller. “Nonetheless, we must be in no doubt that the effects of the coronavirus crisis will continue to be felt in the medium term. From a current perspective, it will be a long time before we see a return to pre-crisis levels, both in our company and in the wider economy.
“Although coronavirus means that we will not reach our medium-term targets until 2023/2024, we are still looking to the future with optimism. By launching our efficiency programme, which should generate cost savings of around €100m per annum from 2022, we have taken important steps to ensure our long-term success in the market.”
Hiller added that, despite the current situation, Deutz is continuing to implement its strategic growth initiatives as planned, and that this will enable it to emerge stronger from the crisis.
In connection with the updates to its medium-term planning, the company has also adjusted the target set in 2018 for 2022 as part of the E-Deutz strategy, whereby electric drive systems are to account for between 5% and 10% of consolidated revenue. Deutz now aims to achieve this target in 2023/2024, although it anticipates almost reaching the 5% threshold in 2022.
Despite the updated medium-term planning, the company has reaffirmed its intention to increase revenue from the profitable service business to around €400m in 2021. It has also confirmed its 2022 revenue target for China, which was raised this year from around €500m to approximately €800m.
Looking ahead to the 2021 financial year, the manufacturer says it is still very difficult to make predictions about business due to the ongoing uncertainty about how the coronavirus crisis will continue to unfold. It adds, however, that the main key figures are expected to improve significantly year on year.
Deutz is aiming to lower its break-even point to around 130,000 engines in 2021 as a result of initiatives such as the cost-cutting measures put in place as part of the global efficiency programme. It states that this should allow it to break even in terms of operating profit (EBIT before exceptional items) next year.
The company says firmer guidance for 2021 will be provided when the full-year results for 2020 are published on March 18 next year.
