Munich-based construction equipment manufacturer Wacker Neuson reported growth in revenue for fiscal 2015, despite difficult market conditions.
However, a company statement said profit dipped due to crises in key industries and regions, leading to “a cautious revenue and earnings forecast for 2016”.
Group revenue was €1.38 billion for 2015, up 7% on €1.28 billion for 2014. When adjusted to discount currency effects, revenue grew by 3%.
During the first half of the year, revenue grew 14% on the same period 2014. But “the situation declined markedly in the second half of the year, with revenue just 0.7% higher than the prior-year level”.
The continued slump in the raw materials industry negatively impacted key sales markets for the Group in Brazil, Chile, Russia, South Africa, Canada, the US and Australia. “The oil and gas industry is currently facing an existential crisis and many companies have already been forced to cease operations,” said Cem Peksaglam, chief executive of Wacker Neuson.
“This is an important sector for us in North America. The crisis has been largely triggered by the squeeze on oil prices, which dropped to a 10-year low, making it impossible for companies to cost-effectively extract raw materials in this region.”
The downturn in the agricultural equipment sector left its mark on the compact equipment segment. Nevertheless, the compact equipment segment again proved to be the main growth driver in 2015, with revenue increasing by 15%.
Revenue from light equipment was 1% below the prior-year figure. When adjusted to discount currency effects, it actually contracted by 9%.
In the services segment, which includes the service and spare parts business, revenue grew by 4%.
Compact equipment accounted overall for around half of group revenue, light equipment for 305 and the services segment for 20%.
Earnings were negatively impacted by the situation in crisis-hit emerging markets and industries as well as by increasing pressure on prices and margins. Profit before interest and tax (EBIT) decreased by 24% to €103.6 million.
The EBIT margin dropped to 7.5% (previous year: €136.2 million; 10.6%). However, the group managed to meet its forecast, which it had revised downwards in October (revenue: €1.35 billion to €1.40 billion; EBIT margin between 7% and 8%).
At €171.3 million, profit before interest, tax, depreciation and amortisation (EBITDA) for the period under review fell by 12.7% relative to 2014. The EBITDA margin was posted at 12.5% (2014: €196.3 million; 15.3%). Profit for the period amounted to €66.2 million (2014: €91.5 million).
“In the medium term, we expect to achieve annual cost savings in the double-digit million range as a result of procurement synergies, centralised logistics processes, a strong focus on lean management and standardisation across all areas of the business,” said Peksaglam.
But the group has earmarked around €100 million for investments in 2016, down from €118 million in 2015.
Despite cautious expectations for 2016, the group said it aims to remain on its expansion path. “Unfortunately, the weak growth in Q4 2015 continued into the first weeks of 2016. The agricultural and energy sectors are still distressed and we do not expect this situation to improve permanently in the coming months,” said Peksaglam.
“In North America, we do not expect to see any significant growth impetus until the second half of the year at the earliest due to the oil and gas crisis, which is having a negative impact on the light and compact construction equipment business. In Europe, the picture for 2016 is more positive for us, at least in the construction sector. Current order intake for compact equipment is promising here.”
Revenue for 2016 is expected to be between €1.40 billion and €1.45 billion - between 2% and 5% on 2014. EBIT margin is expected to be between of 7% and 8%, same as the previous year.
Revenue and earnings
However, a company statement said profit dipped due to crises in key industries and regions, leading to “a cautious revenue and earnings forecast for 2016”.
Group revenue was €1.38 billion for 2015, up 7% on €1.28 billion for 2014. When adjusted to discount currency effects, revenue grew by 3%.
During the first half of the year, revenue grew 14% on the same period 2014. But “the situation declined markedly in the second half of the year, with revenue just 0.7% higher than the prior-year level”.
The continued slump in the raw materials industry negatively impacted key sales markets for the Group in Brazil, Chile, Russia, South Africa, Canada, the US and Australia. “The oil and gas industry is currently facing an existential crisis and many companies have already been forced to cease operations,” said Cem Peksaglam, chief executive of Wacker Neuson.
“This is an important sector for us in North America. The crisis has been largely triggered by the squeeze on oil prices, which dropped to a 10-year low, making it impossible for companies to cost-effectively extract raw materials in this region.”
The downturn in the agricultural equipment sector left its mark on the compact equipment segment. Nevertheless, the compact equipment segment again proved to be the main growth driver in 2015, with revenue increasing by 15%.
Revenue from light equipment was 1% below the prior-year figure. When adjusted to discount currency effects, it actually contracted by 9%.
In the services segment, which includes the service and spare parts business, revenue grew by 4%.
Compact equipment accounted overall for around half of group revenue, light equipment for 305 and the services segment for 20%.
Earnings were negatively impacted by the situation in crisis-hit emerging markets and industries as well as by increasing pressure on prices and margins. Profit before interest and tax (EBIT) decreased by 24% to €103.6 million.
The EBIT margin dropped to 7.5% (previous year: €136.2 million; 10.6%). However, the group managed to meet its forecast, which it had revised downwards in October (revenue: €1.35 billion to €1.40 billion; EBIT margin between 7% and 8%).
At €171.3 million, profit before interest, tax, depreciation and amortisation (EBITDA) for the period under review fell by 12.7% relative to 2014. The EBITDA margin was posted at 12.5% (2014: €196.3 million; 15.3%). Profit for the period amounted to €66.2 million (2014: €91.5 million).
“In the medium term, we expect to achieve annual cost savings in the double-digit million range as a result of procurement synergies, centralised logistics processes, a strong focus on lean management and standardisation across all areas of the business,” said Peksaglam.
But the group has earmarked around €100 million for investments in 2016, down from €118 million in 2015.
Despite cautious expectations for 2016, the group said it aims to remain on its expansion path. “Unfortunately, the weak growth in Q4 2015 continued into the first weeks of 2016. The agricultural and energy sectors are still distressed and we do not expect this situation to improve permanently in the coming months,” said Peksaglam.
“In North America, we do not expect to see any significant growth impetus until the second half of the year at the earliest due to the oil and gas crisis, which is having a negative impact on the light and compact construction equipment business. In Europe, the picture for 2016 is more positive for us, at least in the construction sector. Current order intake for compact equipment is promising here.”
Revenue for 2016 is expected to be between €1.40 billion and €1.45 billion - between 2% and 5% on 2014. EBIT margin is expected to be between of 7% and 8%, same as the previous year.
Revenue and earnings
| € million | FY2015 | FY2014 | Changes | Q42015 | Q42014 | Changes |
|---|---|---|---|---|---|---|
| Revenue | 1.375 | 1.284 | 7.1% | 358 | 348 | 2.8% |
| EBIT | 104 | 136 | -23.9% | 22 | 33 | -31.4% |
| EBIT margin as a % | 7.5 | 10.6 | -3.1 PP | 6.3 | 9.4 | -3.1 PP |
| Total profit/loss for the period (after minority interests) | 66.2 | 91.5 | -27.7% | 12.4 | 22.5 | -44.9% |
