Fiscal 2015 was another year of revenue growth for Wacker Neuson
The Munich-based international light and compact construction equipment manufacturer again reported growth in revenue for fiscal 2015, despite difficult market conditions. The company’s profit levels, however, were affected by crises in key industries and regions. The company has issued a cautious revenue and earnings forecast for 2016.
Revenue for 2015 climbs to EUR 1.38 billion
Despite difficult market conditions, the Wacker Neuson Group reported revenue of EUR 1.38 billion for 2015. This is a rise of 7 percent relative to the previous year (2014: EUR 1.28 billion). When adjusted to discount currency effects, revenue grew by 3 percent.
Business performance in 2015 mirrored the high levels of volatility that shaped various industries. During the first half of the year, revenue developed very positively, growing 14 percent relative to the previous year. However, the situation declined markedly in the second half of the year, with revenue just 0.7 percent 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. 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 ten-year low, making it impossible for companies to cost-effectively extract raw materials in this region,” explains Cem Peksaglam, CEO of Wacker Neuson SE.
The downturn in the agricultural equipment sector left its mark on the compact equipment segment. “During the first half of 2015, we were able to buck the trend and remain on a growth path. By the second half of the year, however, our agricultural business in Europe with wheel loaders, telescopic handlers and tele wheel loaders contracted sharply,” continues Peksaglam. This was mainly due to the drop in prices for milk and other agricultural products, which are currently at a six-year low and, as a result, are dampening willingness to invest amongst agricultural landholders.
Nevertheless, the compact equipment segment again proved to be the main growth driver in 2015, with revenue increasing by 15 percent. Revenue from light equipment was one percent below the prior-year figure. When adjusted to discount currency effects, it actually contracted by 9 percent. In the services segment, which includes the service and spare parts business, revenue grew by 4 percent. Compact equipment accounted overall for around 50 percent of Group revenue, light equipment for 30 percent and the services segment for 20 percent.
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 percent to EUR 103.6 million. The EBIT margin dropped to 7.5 percent (previous year: EUR 136.2 million; 10.6 percent). The Group managed to meet its forecast, which it had revised downwards in October (revenue: EUR 1.35 to 1.40 billion; EBIT margin: 7 to 8 percent).
At EUR 171.3 million, profit before interest, tax, depreciation and amortization (EBITDA) for the period under review fell by 12.7 percent relative to the previous year. The EBITDA margin was posted at 12.5 percent (2014: EUR 196.3 million; 15.3 percent). Profit for the period amounted to EUR 66.2 million (2014: EUR 91.5 million). Net earnings per share came to EUR 0.94 (2014: EUR 1.30).
The Group is focusing more than ever on strict cost controls, targeted cost optimization programs and process efficiency gains. “In the medium term, we expect to achieve annual cost savings in the double-digit million range as a result of procurement synergies, centralized logistics processes, a strong focus on lean management and standardization across all areas of the business,” highlights Peksaglam. “We will also be leveraging our aftermarket business to develop revenue and earnings potential,” he adds.
As in the previous year, management will propose a dividend in the amount of EUR 0.50 per share to shareholders at the Annual General Meeting, scheduled for May 31, 2016 in Munich. This figure corresponds to a total payout of EUR 35.1 million, which, in turn, represents a payout ratio of 53 percent. “This reflects our confidence in our earnings potential and in the success of our corporate strategy,” continues Peksaglam.
Cautious outlook for 2016
Despite cautious expectations for 2016, the Group 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,” elaborates 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.”
The Group expects revenue for 2016 to amount to between EUR 1.40 and EUR 1.45 billion (which corresponds to revenue growth of 2 to 5 percent relative to the previous year). The EBIT margin is expected to lie within a range of 7 to 8 percent (same as the previous year). Furthermore, the Group has earmarked around EUR 100 million for investments (2015: EUR 118 million).
The company will be showcasing a wealth of new products and innovations for customers and business partners in Munich this April at bauma, the world’s largest construction industry tradeshow. Highlights will include alternative drive technologies, including zero-emissions products such as the new electric track dumper from Wacker Neuson and the electric wheel loader from Kramer.
The Group aims to continue on its growth path by intensifying cross-selling activities across business segments, further expanding profitable lines of business and widening its international footprint.
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