Wacker Neuson improves earnings in Q3 2016 despite challenging environment

Wacker Neuson improves earnings in Q3 2016 despite challenging environment

Leading international light and compact equipment manufacturer, the Wacker Neuson Group, saw revenue and earnings for the third quarter of 2016 increase relative to the previous year. Viewed over a nine-month period, revenue remained at the prior-year level, balancing out the drop in earnings experienced during the first half of the year only partly.

Trends during the third quarter of 2016

Despite adverse market factors, including ongoing crises in many emerging markets and key industries such as the agricultural sector, the oil and gas industry and mining, Group revenue for the third quarter of 2016 rose 2 percent relative to the previous year to reach EUR 315.7 million (Q3/15: EUR 311.0 million). Adjusted to discount currency effects, this corresponds to an increase of 3 percent.

Revenue in the core market of Europe increased by 9.0 percent in the third quarter of the year. This was primarily driven by stable demand from the construction sector in German-speaking countries as well as in France, Denmark, Sweden and the Benelux countries. In contrast, revenue in the Americas decreased by 15 percent. In North America, demand for new equipment is being dampened by high inventory levels among dealers and rental chains plus large volumes of used equipment circulating on the market at low prices. Despite growth in China, the Group experienced falling demand in Australia and New Zealand. Revenue decreased by 23 percent in the Asia-Pacific region.

Earnings before interest and tax (EBIT) for the third quarter of 2016 increased 25 percent to EUR 19.3 million (Q3/15: EUR 15.5 million). The EBIT margin rose to 6.1 percent (Q3/15: 5.0 percent). At EUR 12 million, profit for the period was higher than in the previous year (Q3/15: EUR 8.5 million). Earnings per share rose 42 percent to EUR 0.17 (Q3/15: EUR 0.12). Here it should be noted that revenue and earnings for the prior-year period were quite low by comparison. Weak demand in the agricultural sector together with the oil and gas crisis plus unfavorable currency effects negatively impacted results in Q3 2015.

Trends during the first nine months of 2016

At the close of the first nine months of the year, Group revenue amounted to EUR 1,013.5 million and thus almost remained at the prior-year level (9M/15: EUR 1,017.4 million). A number of key factors impacted earnings for the first nine months of 2016, including a weak first quarter and a significant change in our regional and product mix. During this period, EBIT decreased by 14 percent relative to the previous year to reach EUR 70 million and the EBIT margin narrowed to 6.9 percent (9M/15: EUR 81.2 million; 8.0 percent). Profit for the period amounted to EUR 45.8 million (9M/15: EUR 53.7 million). This corresponds to earnings per share of EUR 0.65 (9M/15: EUR 0.77).

Despite economic headwinds, the Group remains committed to its strategic direction. “2016 is undoubtedly a year of transition for the Group, during which we have optimized processes and structures and also laid the foundation for future growth,” explains CEO Cem Peksaglam. “For example, we continued to expand our international footprint by establishing new production sites in Brazil and, in future, also China. We consolidated the different spare parts services at our compact equipment production facilities in Europe to create a central warehouse in Nuremberg and also merged our R&D center for light equipment from Munich with our production site in Reichertshofen. In addition to this, we launched our eCommerce platform. And at this year’s bauma fair in Munich, the world’s largest construction industry tradeshow, we again sent a strong signal to the industry with new models in our zero-emission product line. We are strengthening our organizational and execution capabilities so we can more effectively master growing global challenges over the coming years,” adds Peksaglam.

Improved cash flow

Cash flow from operating activities amounted to EUR 94.3 million in the first nine months of the year and was thus significantly higher than the prior-year figure (9M/15: EUR 52.8 million). Working capital fell 7 percent relative to the previous year. This was primarily due to the planned reduction of inventory by 13 percent. Free cash flow came to EUR 10.2 million (9M/15: EUR -28.4 million).

Revenue and earnings at lower end of forecast

“Levels of uncertainty and volatility remain high in our markets. Business in North and South America, which account for 21 percent of our Group revenue, developed below our expectations as did markets in Australia and Africa. However, we expect Europe to remain a robust sales region overall,” continues Peksaglam. The company expects revenue and earnings for fiscal 2016 to come in at the lower end of its published forecast (revenue of between EUR 1,375 million and EUR 1,425 million; EBIT margin between 6.5 and 7.5 percent). It has earmarked around EUR 120 million in total for investments for fiscal 2016 (2015: EUR 118 million). Free cash flow is expected to be positive.

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