11.11.2019

Higher revenues lower profits at Wacker Neuson

Light equipment and telehandler manufacturer Wacker Neuson has reported higher third quarter revenues, but lower profit levels.

Total revenues for the nine months to the end of September were €1.42 billion, 14 percent higher than this time last year.
European sales were almost 13 percent higher at €1.03 billion, thanks to ”above average growth in England, France, Germany, Austria, the Czech Republic, Spain and Italy” Sales in the Americas were 15 percent higher at €344.4 million, while Asia Pacific came in almost 25 percent higher at €43.6 million. The sales growth included higher telehandler and agricultural deliveries. Pre-tax profit however fell 31 percent to €115.8 million, however much of this is down to a €54.8 million one off real estate profit last year, without that profits improved three percent. The low level due to lower productivity in some plants, ands higher sales and service costs.

In the third quarter sales were 12 percent higher than in the same quarter last year at €467.2 million, with Europe 10 percent higher at €337.6 million, the Americas up 18 percent to €114.9 million possibly helped by currency gains, while Asia Pacific revenues were €14.7 million an increase of almost 32 percent. Pre-tax profits for the quarter were eight percent lower at €36 million, due to higher expenditure on sales & service and R&D as well as higher interest costs.

The three man executive board of Martin Lehner, Wilfried Trepels and Alexander Greschner said: “We published our preliminary figures for the third quarter of 2019 around three weeks ago. Whereas revenue developed positively relative to the previous year with an increase of roughly 12 percent, profitability decreased significantly with the EBIT margin for the third quarter at 8.6 percent. This was 1.5 percentage points below the level last year. This was attributable to an unfavourable product and customer mix, lower productivity levels at our plants in line with inventory streamlining plans and initial difficulties in rolling out new processes in the USA.”

“As a result, we have adjusted our guidance for the full year. Whereas revenue is set at the upper end of the projected range of between €1,775 and €1,850, we now expect the EBIT margin to amount to between 8.3 and 8.8 percent instead of our previous guidance of between 9.5 and 10.2 percent. The net working capital expressed as a percentage of revenue is projected at a significantly higher level than the prior year.”

“Looking back at the fiscal year thus far, we do not, however, want to lose sight of the company’s positive achievements. In both the third quarter and first half of the year, all three regions under review reported double-digit growth rates despite the uncertain market environment. The fact that we are making double-digit gains in markets such as England, with its challenging current climate, shows that we are able to win customers with our innovative drive and customer centric service. We will continue to tackle any problems we identify with confidence and - as always - do our utmost to secure the long-term success of the Wacker Neuson group.”

Vertikal Comment

Certainly this a positive report in terms of sales growth, but the question regarding the falling profitability is whether this relates to temporary growing pains and a long terms shift towards larger, lower margin equipment or if is a sign that the company is struggling to make the shift from a regional, relatively niche, manufacturer to a global player with a wider product range?

The one factor in Wacker Neuson’s favour is that it generally it builds a first class product at a reasonable price and in addition to this it tends to take a longer term view than many publicly quoted companies.

Time will tell of course.