The macroeconomic impact of the coronavirus crisis apparently affects Deutz’s medium-term targets. We had already talked about the quite difficult first half of 2020 for the global engine manufacturer. Now, the company has stated that the medium-term targets for revenue (2 billion euro) and EBIT margin before exceptional items (7 to 8 percent) expected to be achieved in 2022 will be possibly achieved in 2023/2024.
In fact, over the months ahead, customers are expected to remain reluctant to invest and demand will therefore recover more slowly than originally anticipated.
Deutz CEO, Frank Hiller, about Deutz’s medium-term targets
«There were encouraging signs of recovery in our business performance in the third quarter, and we expect to see an improvement in our main sales markets over the coming months. Nonetheless, we must be in no doubt that the effects of the coronavirus crisis will continue to be felt in the medium term. From a current perspective, it will be a long time before we see a return to pre-crisis levels, both in our Company and in the wider economy», Deutz CEO, Frank Hiller, said. «Although coronavirus means that we will not reach our medium-term targets until 2023/2024, we are still looking to the future with optimism. By launching our efficiency program, which should generate cost savings of around €100 million per annum from 2022, we have taken important steps to ensure our long-term success in the market».
The E-Deutz strategy and the outlook for China
Deutz has also adjusted the target set in 2018 for 2022 as part of the E-Deutz strategy, whereby electric drive systems are to account for between 5 percent and 10 percent of consolidated revenue.
Regardless of the updated medium-term planning, the company reaffirms its intention to increase revenue from the profitable service business to around 400 million euro in 2021. It also confirms its 2022 revenue target for China (here, a recent update that appeared on our website), which was raised this year from around 500 million euro to approximately 800 million euro.