Source: Media Outreach
Measures under the Transform for Growth efficiency program defined and initiated – annual cost savings of around €100 million expected from 2022
Group guidance for 2020 remains under review; medium-term targets confirmed
Revenue target for China in 2022 raised to €800 million
DEUTZ Group: overview of key figures
Unit sales (units)
EBIT before exceptional items
EBIT margin before exceptional items (%)
The Other segment includes not only Torqeedo’s business with electric motors for boats but also Futavis GmbH, which was acquired in October 2019. Overall, the segment’s business performance was positive in the reporting period. Despite the coronavirus crisis, new orders rose by 4.8 percent year on year to €19.5 million. In the first half of 2020, unit sales more than doubled to a total of 16,244 electric motors. This was primarily thanks to the ramp-up of trolling engines and led to a 32.4 percent jump in revenue to €22.5 million. All regions contributed to this growth.
In the period under review, the Other segment’s operating loss improved by €4.6 million. This was mainly attributable to the deconsolidation of the joint venture DEUTZ AGCO Motores S.A., Haedo, Argentina, in the first half of 2019. As part of the deconsolidation, which was carried out for reasons of materiality, cumulative negative exchange differences were reclassified from equity to the income statement, which had a significant adverse impact on the segment’s earnings in the prior-year period.
Full-year guidance for 2020 remains under review
The progression and timeline of the coronavirus crisis going forward is very difficult to predict, as is its impact on the economy and thus on DEUTZ’s engine business. Consequently, it is still not possible to provide updated guidance for 2020 at the present time.
Fundamentally, it can be assumed that the remainder of 2020, particularly the third quarter, will continue to be heavily affected by the impact of the coronavirus crisis, although to a lesser extent than the second quarter.
It is now anticipated that the final installment of the purchase price for the Cologne-Deutz site, which had been expected as a positive exceptional item, will be paid in 2021 rather than this year. However, it is important to note that the amount and the date of this payment continue to depend on when the development plan for the site is formally approved and so cannot be precisely determined yet.
Medium-term targets confirmed
Despite the currently difficult situation, the Company reaffirms its current outlook for 2022, when it expects to generate revenue in excess of €2.0 billion and an EBIT margin before exceptional items in the range of 7 percent to 8 percent.
Growth is likely to be driven mainly by the continued internationalization and rapid expansion of the service business, but also by the expansion of the core business and the further development of the product portfolio. As a result, DEUTZ is also adhering to its revenue target for the service business, which it has brought forward to 2021 and envisages revenue of over €400 million.
In view of the restructuring of its business in China, DEUTZ raised its original revenue target for 2022 from around €500 million to around €800 million. This significant increase is due, in particular, to the fact that the planned volume for the joint venture already meets existing market demand and the intention is to gain further market share from competitors by implementing the China strategy.
Transform for Growth global efficiency program defined
At the start of the year, DEUTZ launched a Company-wide efficiency program, Transform for Growth, in order to further shore up its earnings performance in challenging conditions. The details of the underlying action plan were drawn up in the second quarter. The main areas of action are optimization of the global production network, automation and digitalization of production and administrative processes, and groupwide streamlining of the organizational structure.
By taking these measures, DEUTZ hopes to generate annual cost savings of around €100 million, with the full effect expected to be achieved from 2022 onward. As well as adjusting operating costs, a large part of the savings are to be achieved by reducing staff costs. This will involve a reduction in headcount of up to 1,000 across the Group, which will be implemented with the minimum possible social impact.
A total of 380 jobs have already been cut in the first half of this year, partly by reducing the number of temporary workers. Following on from this, DEUTZ is planning to launch a voluntary program encompassing a further 350 jobs at its sites in Germany. The remaining reduction in headcount is to be achieved by the end of 2022 as fixed-term contracts come to an end and through natural attrition.
“Our utmost objective is to avoid compulsory redundancies and find a socially responsible solution for our employees. We have therefore already entered into an ongoing dialog with the employee representatives to discuss the details of a voluntary program,” stressed DEUTZ CEO Hiller.
This investor news may contain certain forward-looking statements based on current assumptions and forecasts made by the DEUTZ management team. Various known and unknown risks, uncertainties, and other factors may lead to material differences between the actual results, the financial position, or the performance of the DEUTZ Group and the estimates and assessments set out here. These factors include those that DEUTZ has described in published reports, which are available at www.deutz.com. The Company does not undertake to update these forward-looking statements or to change them to reflect future events or developments.
– Published and distributed with permission of Media-Outreach.com.