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• Despite difficult overall economic conditions, consolidated revenue increased in 2019 by 2.7 % to €3.96 billion.
• Order intake, at €4.08 billion, was up 3.2 % year-on-year.
• Profitability affected by high personnel costs and one-time expenses for restructuring and impairments. The EBT margin is 1.1 % (prior year 5.3 %). Without one-off effects, the EBT margin would be 2.8 %, in line with the guidance of around 3 %.
• Krones is making good progress in implementing structural measures for a sustained improvement in earnings.

Krones, the world’s leading manufacturer of filling and packaging technology, achieved its 3 % growth target in 2019 despite the difficult overall economic environment. Revenue increased by 2.7 % year-on-year, from €3,854.0 million to €3,958.9 million.

The company’s order intake improved by 3.2 %, from €3,957.3 million in the previous year to €4,083.5 million in 2019. Krones benefited from a strong year-end. The contract value of orders was up 10.7 % year-on-year in the fourth quarter of 2019. At the end of 2019, the company had orders on hand totalling €1,385.7 million. This exceeded the already high prior-year order backlog of €1,261.1 million by 9.9 %.

High costs, product mix and structural measures hit profitability

Krones’ earnings were hit in 2019 by high cost increases, especially for labour. The product mix also had a negative impact on profitability. In the first half year, the company had poor production capacity utilisation in plastics technology due to temporarily weak demand. Consolidated earnings before taxes (EBT) decreased from €204.3 million in the previous year to €41.7 million in 2019. The EBT margin dropped from 5.3 % to 1.1 %. It should be noted in this connection that Krones recognised provisions and impairments totalling around €70 million in the fourth quarter of 2019 for measures to cut personnel expenses and streamline the portfolio. About €30 million of this relates to expenses and provisions for the job reductions in 2020. Impairment losses totalling around €20 million were incurred for certain direct printing technologies that Krones is partly not pursuing further. A further amount of approximately €20 million relates to goodwill impairments. Without these expenses the EBT-margin would be 2.8 %. As a result Krones is in line with the revised margin target of around 3 % published in July 2019.

Mainly because of the new IFRS 16 accounting standard and the impairment losses, Krones’ depreciation and amortisation rose substantially in 2019 to €183.3 million (previous year: €102.7 million). EBITDA, which is unaffected by this, decreased less sharply than EBT in 2019, falling from €305.9 million to €227.3 million. The EBITDA margin was 5.7 % (previous year: 7.9 %).

High working capital reduces free cash flow

Free cash flow went down in the full year 2019 to a negative €94.4 million (previous year: positive €120.7 million). The reduction in free cash flow was mainly due to higher working capital at year-end. However the average working capital over the past four quarters as a percentage of revenue decreased from 27.3 % in the previous year to 26.9 % and was slightly above the 26 % targeted for 2019. Net cash and cash equivalents, meaning cash and cash equivalents less bank debt, came to €38.1 million at the end of the reporting period (previous year: €215.1 million). The equity ratio was 41.3 % (previous year: 43.2 %). Overall, Krones continues to possess a robust financial and capital structure.  All stated figures are preliminary and are subject to change in the course of auditing by the independent auditors.

Krones making good progress with structural measures

Krones publishes its Annual Report for 2019 and outlook for 2020 on 19 March 2020. On the same day, the company will also provide further details of structural measures to secure sustained improvements in Krones’ efficiency and profitability. Krones is making good progress with implementation of the measures, which include a reduction in the workforce. The Executive Board is confident that the measures will already have a positive impact on earnings in 2020.

Rolf Stangl, CEO of SIG, said: “In 2018 we successfully continued our growth strategy and achieved core revenue growth of 6.4 % at constant currencies, slightly exceeding our target range of 4 – 6 %. We saw growth across our global footprint and are reaping the rewards of our steady expansion into markets outside Europe, where growth in aseptic carton packaging is being driven by mega-trends including demographics, rising disposable income and urbanisation. The Asia Pacific region in particular delivered a strong performance during the year, with robust growth in the liquid dairy segment and growing demand for premium products.

“Our broad international presence continues to provide us with promising growth opportunities. These opportunities come with exposure to currency fluctuations, which in 2018 dampened growth in adjusted EBITDA. At constant currencies, adjusted EBITDA increased by 8 %. The adjusted EBITDA margin increased to 27.5 %, reflecting a positive business mix and ongoing cost efficiency measures. We achieved a significant increase in adjusted free cash flow, while continuing to expand our filler base in growth markets. The cash generative nature of our business underpins our intended mid-term dividend payout ratio of 50 – 60 % of adjusted net income. For 2018, we are proposing a Swiss franc dividend payout in 2019 equivalent to around €100m.”

2018 Annual Report

SIG has published its 2018 Annual Report, which includes the Group’s operating and financial results accompanied by SIG’s audited consolidated and statutory annual financial statements, the Compensation Report outlining the compensation policies of the Group and the Corporate Governance Report. All publications are available for download at https://investor.sig.biz/en-gb/home/.