Krones AG: Krones continues revenue growth in 2018 and significantly improves free cash flow

DGAP-News: Krones AG / Key word(s): Annual Results

21.03.2019 / 07:30
The issuer is solely responsible for the content of this announcement.


21 March 2019


Krones continues revenue growth in 2018 and significantly improves free cash flow

- Krones publishes its 2018 Annual Report and confirms its preliminary figures.

- Revenue increased by 4.4% to EUR3.85 billion. Order intake up 4.5% to EUR3.96 billion.

- EBT margin of 5.3% due to rising material and labour costs together with reorganisation 
  expenses.

- Krones improves free cash flow by EUR271 million to EUR121 million.

- The company plans to hold the dividend stable relative to the previous year with a
  dividend  of EUR1.70 per share for 2018.

- Executive Board targets 3% revenue growth for 2019. The EBT margin is expected to
   improve to around 6%.
 

Krones, the world's leading manufacturer of filling and packaging technology, continued to grow in 2018 despite difficult conditions. The company benefited as a full-service provider from its extensive product and service range and broad international footprint.
 

Krones achieves growth target for 2018 financial year

Revenue increased by 4.4% year-on-year, from EUR3,691.4 million to EUR3,854.0 million. The company thus achieved the revised target of 4% revenue growth announced in autumn 2018. Revenue grew operationally (i.e., adjusted for currency and acquisition effects) was around 5%. Krones increased revenue, in some cases significantly, in Europe, China and South America/Mexico. Revenue was down in the Asia/Pacific region, the Middle East/Africa and in North and Central America.

Despite the high prior-year figure, order intake increased by 4.5% in 2018, from EUR3,786.8 million to EUR3,957.3 million. Growth in order intake was above average in Western and Eastern Europe and in China. Krones had orders on hand totalling EUR1,261.1 million at the end of 2018. This once again exceeded the very high prior-year figure by 1.7%.

Krones continued to invest in the growth of its workforce in 2018, primarily for the expansion of its global footprint. The company employed 16,545 people worldwide at the end of 2018. This represents an increase of 1,246 employees on the previous year, about 400 of which related to acquisitions.


Profitability affected by one-off expenses, mainly for reorganisation

Krones' earnings were significantly impacted by higher material and labour costs in 2018. The 5.3% EBT margin includes approximately EUR42 million in one-off expenses, mainly for reorganisation.

Had these expenses not been incurred in 2018, the EBT margin would have been 6.4%. The costs related to establishing the production site in Hungary account for the largest share of this amount. In total, earnings before taxes (EBT) in 2018 were down by 21.1% or EUR54.5 million year-on-year to EUR204.3 million (EBT margin: 5.3%).

Earnings decreased in both segments. In the core segment, Machines and Lines for Product Filling and Decoration, EBT went down by 15.2% year-on-year, from EUR263.3 million to EUR223.3 million. Expenses for reorganisation reduced segment earnings here by around EUR25 million. In the Machines and Lines for Beverage Production/Process Technology segment, EBT deteriorated from -EUR4.5 million in the previous year to -EUR19.0 million. This mainly related to a total of around EUR17 million in one-off expenses.
 

Krones improves free cash flow by EUR271.4 million

Krones was able to significantly reduce working capital between October and December 2018. This had a positive impact on free cash flow, which improved in 2018 by a substantial EUR271.4 million compared with the prior year, to EUR120.7 million (previous year: -EUR150.7 million). The ratio of average working capital over the past four quarters to revenue developed slightly better than expected, holding stable at 27.3% in 2018. Net cash went up to EUR215.1 million at the 2018 reporting date (previous year: EUR157.4 million). Due to the increase in total assets, the company's equity ratio decreased slightly to 43.2% (previous year: 43.8%). Overall, Krones continues to possess a very robust financial and capital structure.

With the above figures, Krones has confirmed the preliminary figures published on 21 February 2019. No significant changes arose in the course of the auditing process.
 

Shareholders to receive stable dividend of EUR1.70 per share

At the Annual General Meeting on 5 June 2019, the Executive Board and Supervisory Board of Krones will be proposing a dividend of EUR1.70 per share for the 2018 financial year. The proposed dividend is stable relative to the previous year. The planned payout is 35.7% of consolidated net income.

Outlook

Based on the prevailing macroeconomic outlook and the current expected development of the markets relevant to Krones, the company expects consolidated revenue growth of 3% in 2019.

In order to achieve its medium-term corporate targets, Krones will continue in 2019 to work towards a global structure fit for the future challenges. The company does not expect any noticeable fall in material procurement prices in 2019; the same applies to labour costs. Krones' sales price increases on all bottling and packaging equipment and for process technology with effect from 1 May 2018 are likely to have a slight positive effect on earnings in the 2019 financial year. Overall, Krones expects an EBT margin of around 6% for 2019.

Above all due to the focus on increases in the sales price level, in the current economic and geopolitical climate, Krones sees the achievement of its targets for 2019 subject to greater uncertainties than in the past. For its third performance target, working capital to revenue, Krones expects a figure of 26%.

Krones has published the Annual Report 2018 online at https://www.krones.com/en/company/investor-relations/krones-group-annual-report-2018.php

 

Figures for 2018   2018 2017 Change
Revenue EUR million 3,854.0 3,691.4 + 4.4%
Order intake EUR million 3,957.3 3,786.8 + 4.5%
Orders on hand at 31 December EUR million 1,261.1 1,240.1 + 1.7%
         
EBITDA EUR million 305.9 340.2 - 10.1%
EBITDA margin % 7.9 9.2 -1.3 PP*
EBIT EUR million 203.2 245.5 - 17.2%
EBT EUR million 204.3 258.8 - 21.1%
EBT margin % 5.3 7.0 -1.7 PP*
Consolidated net income EUR million 150.6 187.1 - 19.5%
Earnings per share EUR 4.78 5.97 - 20.0%
Dividend per share EUR 1,70** 1.70 ± 0%
         
Capital expenditure for PP&E and intangible assets EUR million 179.1 133.5 + EUR45.6 million
Free cash flow EUR million 120.7 - 150.7 + EUR271.4 million
Net cash at 31 December*** EUR million 215.1 157.4 + EUR57.7 million
Working capital to revenue**** % 27.3 27.3 ± 0 PP*
ROCE % 12.8 16.6 - 3.8 PP*
         
Employees at 31 December        
Worldwide   16,545 15,299 + 1,246
Germany   10,887 10,366 + 521
Outside Germany   5,658 4,933 + 725

*Percentage points **As per proposal for the appropriation of earnings available for distribution ***Cash and cash equivalents less debt ****Average of last 4 quarters


Contact:
Olaf Scholz
Head of Investor Relations, Krones AG
Phone: +49 9401 70-1169
E-mail: olaf.scholz@krones.com



21.03.2019 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.

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