Deutz registered a growth in 2018

Deutz saw a record growth in 2018

Frank Hiller, Chairman of the Board of Management of Deutz, said: «2018 was a very successful year for Deutz. We comfortably exceeded our revenue target and registered a sharp increase in profitability. Our E-Deutz strategy is already bearing fruit and is an important step on our path to becoming a leading global manufacturer of innovative drive systems. And our new three-pillar growth strategy for China means that we are now also strengthening our position in the world’s biggest engine market. For 2019, we expect a further increase in revenue and a further improvement in profitability towards our medium-term target of an Ebit margin before exceptional items of 7 to 8 per cent».

Double-digit in new orders and revenue

In 2018, the Deutz Group received orders worth € 1,952.6 million, which was an improvement of 25.4 per cent from the prior-year figure of € 1,556.5 million. All off-highway application segments as well as the service business registered increases. Orders on hand totalled € 438.9 million as at 31 December 2018, a rise of 62 per cent compared with the figure of € 270.9 million at the end of 2017. Deutz generated a revenue of € 1,778.8 million in 2018, which was 20.3 per cent higher than the figure of € 1,479.1 million achieved in 2017.

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All good also for operating profit

Operating profit more than doubled in 2018, to reach € 82 million (2017: € 39.7 million). This was mainly because of the higher volume of business and the resulting economies of scale as well as positive effects from the efficiency program. It was achieved in spite of several weeks of strike action at a supplier. Most of the negative effects resulting from this disruption, which occurred in the third quarter of 2018, were compensated for by reconfiguring production plans and initiating catch-up measures.

Deutz also withdrew from the Dalian joint venture last year. The negative impact on earnings attributable to the joint venture in the first half of 2018 was slightly outweighed, as had been anticipated, by the proceeds generated from the sale of the shares in the fourth quarter of 2018. The Ebit margin before exceptional items improved from 2.7 per cent in 2017 to 4.6 per cent last year. At the start of the year, Deutz expected a moderate increase in the Ebit margin before exceptional items. The improvement of 1.9 percentage points in the Ebit margin more than exceeded this initial forecast as well as the more specific forecast made in July 2018 of an Ebit margin of at least 4.5 per cent.

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Positive outlook for 2019

This year, Deutz’s engine business will benefit from persistently strong demand from customers. The start of 2019 saw a high level of orders on hand, which bodes very well for business in the first half of the year in particular.

For 2019 as a whole, Deutz expects revenue to increase to more than € 1.8 billion. The Ebit margin (before exceptional items) will probably improve to at least 5 per cent. This increase is likely to result mainly from the anticipated growth in revenue, but also from the various initiatives aimed at continuously increasing efficiency. The ongoing expansion of the service business will also help to improve overall profitability relative to 2018. Deutz is therefore expecting to take a further step towards its medium-term target (for 2022) of an Ebit margin before exceptional items of 7 to 8 per cent. The payment of the final instalment of the purchase consideration from the disposal of the Cologne-Deutz site could result in an exceptional item that would increase earnings by around € 50 million in 2019.