16.03.2016

Lower profits on record revenues at Wacker Neuson

Wacker Neuson, the small equipment and telehandler manufacturer achieved record revenues of €1.37 billion in 2015, a rise of just over seven percent,
most of it in the first half, when revenues increased 14 percent.

In spite of the improving revenues – three percent without the currency gains – margins came under pressure thanks to pricing issues, causing operating profits to fall around 12.5 percent. Pre-tax profits dropped 25 percent to €97.5 million as a result of the lower margins and higher depreciation charges.

Chief executive Cem Peksaglam said: “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 downturn in the agricultural equipment sector left its mark on the compact equipment segment. During the first half 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”..

“Nevertheless, the compact equipment segment again proved to be the main growth driver, 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 four percent”.

“The group is focusing more than ever on strict cost controls, targeted cost optimisation 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, centralised logistics processes, a strong focus on lean management and standardisation across all areas of the business. We will also be leveraging our aftermarket business to develop revenue and earnings potential.”

“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.”

Vertikal Comment

The current statements do not really explain why a such a good year in revenue terms has translated into such a poor year profit wise. Certainly if you take out the currency factors, revenues seems to have fallen in the second half, but the fact is the exchange benefits were there and will have helped increase margins on equipment that was sold into North America, for example.

In spite if this it is still a perfectly reasonable performance, even though it might be less than last year. The slip back does seem to have spurred the company on to look at benefits of bringing its businesses closer together, which you have to think might have been on the cards sooner. The company still has enormous potential in increase sales if its telehandlers, which users tell us are exceptional in terms of performance and reliability.

Expect the company to step up revenues again and this time translate into a more positive growth comparison, if only because the comparator will be the above numbers.