The demand for recycled plastics is increasing rapidly worldwide: consumer awareness is growing, companies are setting themselves ever more ambitious sustainability targets and recycling requirements from international governments are also increasing. As a company with almost 30 years of experience in plastics processing and almost 25 years in the field of recycling, Krones has now taken the pioneering decision to pool its recycling expertise in the independent subsidiary Krones Recycling GmbH from July 2024.
A logical step, as Krones CEO Christoph Klenk explains: “The spin-off will enable Krones Recycling to develop faster and in line with market requirements. Because in line with our claim Solutions beyond tomorrow, this division makes a decisive contribution to protecting the environment by returning plastic waste to the value-added cycle.”
More flexibility, familiar all-in-one service
In addition, thanks to leaner processes and structures, the new company will be able to respond more quickly to changes in the constantly changing recycling market, says Michael Gotsche, Managing Director of Krones Recycling GmbH: “The newly founded company offers us the necessary flexibility and scope for action to be able to implement decisions in a customer-oriented, fast and optimised manner.”
For all its independence, however, the name Krones Recycling not only symbolises the focus on plant en-gineering in the field of recycling, it also reflects the close connection to the Krones Group. “We know that our clients appreciate Krones’ overall line expertise, which means they get everything from a single source. They can continue to rely on this in the future. The worldwide sales and service network is also available to us without restriction,” Gotsche continues.
Ambitious goals
A large number of plastics such as PET, PE, PP and PS are already being processed on Krones Recycling’s lines worldwide. “Our vision is to make a daily contribution to a global circular economy for all plastics by offering our customers sustainable and profitable recycling solutions,” says Michael Gotsche, describing the overarching business objective. There is also a clear marker in relation to Krones’ sustainability targets: at least 30 per cent of the plastics processed on Krones lines are to be returned to the cycle as a recycled resource.
Consequently, Krones Recycling will continue to conduct intensive research into new innovations at its in-house Recycling Technology Centre. There, tests on the recyclability of various plastics, including adhesives and colours, can also be carried out under real conditions on behalf of customers.
The challenges associated with manufacturing PET containers are varied and complex. Process windows are short, and even the daily changes in ambient temperature and humidity in the production hall require regular manual adjustments to various process parameters to ensure the required level of container quality. Added to this are the steadily increasing production speeds, where even the slightest deviations from ideal conditions can have a major impact on the production result. Meanwhile, demands on personnel are also evolving: Today, one operator is responsible for multiple machines and systems – and has less time for visual quality checks and manual process control on the stretch blow molder.
With Contiloop AI, Krones has developed an intelligent process control system for the Contiform stretch blow molder. The combination of AI-based software and newly developed hardware makes it possible to detect even the slightest variations in material distribution in the production of PET containers and to automatically adjust key stretch-blow-molding parameters in real time – and thus to ensure that bottle quality meets specifications.
Since its market launch, Contiloop AI has not only convinced customers around the world, but also this year’s jury of the AI Breakthrough Award, consisting of recognised experts from the fields of business, marketing, sales, analysis and science. The Krones solution received the MLOps Innovation Award, which recognises the most innovative AI product in the field of machine learning operations.
Training and optimising Contiloop AI
As part of an automated test run, various process settings are carried out and the resulting measurement results are forwarded to the Krones IIoT platform. There, the data flows into the Krones AI pipeline, which is used to train the future control algorithm, the AI agent. Once the training is complete, this AI agent is transferred to the machine’s Contiloop AI and is then available for production operation. The system thus learns to be able to adjust the stretch blow-moulding process precisely to the perfect bottle quality even under the new conditions.
About the AI Breakthrough Awards
Over 3,200 nominations from more than 20 countries – this year’s AI Breakthrough Awards once again showed that artificial intelligence is becoming increasingly important in industry. This year, AI companies and products with artificial intelligence were again honoured in 18 different categories such as AI platforms, robotics, business intelligence or AI hardware. When evaluating the submitted innovations, the AI Breakthrough jury focuses on innovation, performance, usability, functionality, value and impact.
Just a few years ago, Krones’ subsidiary Steinecker opened a technology center in Freising (GER) where customers can create and test recipes for beer and plant-based drinks. Now, the group is setting another important milestone in the evolution of beverages and processes. In early May, at the company’s headquarters in Neutraubling (GER), a fully-equipped R&D lab was officially inaugurated and dubbed the “Process Technology Center”.
The new Process Technology Center is designed to support Krones customers in their product development processes and meet the flavour demands of the global markets. It makes no difference whether the customer already has a finished recipe for a future product or is still at the start of the product development journey and would like to leverage Krones’ expertise for those first steps.
Krones itself will use the new technology center to more closely analyse the effects of various process parameters on different products. The results will then go into further developing and refining Krones machines and lines.
Expertise for process technology and water design
The technology center is divided into two sections: process technology and water design.
On the process technology side, various process and treatment steps can be realistically simulated on a pilot UHT system. That makes it possible, for example, to compare the thermal impact of indirect heating using a shell-and-tube heat exchanger versus direct heating. For this, customers can choose between two processes: steam injection and steam infusion. For other trials, the facility is also equipped with systems for mixing, flash pasteurisation, deaeration, homogenisation and filling. The results are then evaluated in-house, for example in Krones’ own microbiological and chemical testing labs.
Optimising the flavour profile of water
In the field of water design, customers can fine-tune the flavour of their water by adding just the right amounts of minerals and flavour compounds. The technological possibilities include deaeration, carbonation, electrodeionisation, ionisation, mineral dosing and filling.
A water sommelier provides support throughout the trials. Customers also have access to Krones’ extensive network of experts, with engineers in a variety of disciplines, including food and process engineering, to collaborate on transforming product ideas into real products.
On 20th of April 2023, Krones has signed an agreement to acquire 90 % of Ampco Pumps Company LLC. Based in Wisconsin, USA, Ampco Pumps is supplying sanitary pumps and applied products like mixing and blending equipment to the food, beverage, dairy processing, personal care and pharmaceuticals markets. The company has more than 70 year history in the pump market and is a key player for sanitary pumps in the US food and beverage market.
In the 2022 fiscal year, Ampco Pumps generated with a workforce of more than 130 employees revenue of approx. USD 50 million and a high EBITDA margin. The transaction will increase the profitability margin of the “Process Technology” segment as well as the group margin of Krones. Current Ampco management will remain and will continue to hold 10 % of the shares of Ampco. Krones has an option to buy the 10 % of the shares in the future.
The acquisition of Ampco Pumps is a major step in expanding the components business of Krones Processing. With Ampco Pumps and Evoguard Valve Technology Krones has now a broad portfolio of all key components for the processing technology market. In addition, the businesses of the two companies complement each other perfectly in regional terms.
The transaction is subject to approval under the relevant antitrust legislation. Krones expects the transaction to be completed (closing) within the first half of 2023. As of the closing date, Krones will consolidate the figures of Ampco Pumps in the “Process Technology” segment.
After record order intake in the first half of 2022, the strong demand for Krones products and services continued unabated in the third quarter. Order intake between July and September 2022, at EUR 1,493.3 million, exceeded the already good prior-year figure of EUR 1,148.3 million by 30.0 %. In total over the first three quarters of 2022, the contract value of orders increased by 44.1%, from EUR 3,192.6 million a year earlier to EUR 4,599.7 million. At EUR 3,449.0 million as of the end of September 2022, the order backlog at Krones was up 95.9 % on the previous year (EUR 1,760.9 million). Compared to the beginning of 2022, the increase is EUR 1.56 billion, or 82.2 %.
Krones held a course of stable revenue growth in the third quarter. Revenue from July to September was up 14.7 % to EUR 1,058.9 million. In the first nine months of 2022, revenue went up by 15.2 % year on year, from EUR 2,643.0 million to EUR 3,043.7 million. Thanks to its great flexibility, Krones managed well with the resource shortages and international supply chain problems during the reporting period. This enabled the company to deliver strong revenue growth.
Krones improves profitability as forecast
The company was able to maintain satisfactory but, due to material shortages, not full capacity utilisation in the first three quarters of 2022. Due to the extensive efficiency improvement measures and the initial effects of the price adjustments, profitability nevertheless improved as planned in the reporting period. Earnings before interest, taxes, depreciation and amortisation (EBITDA) climbed by 27.0 % in the first three quarters from EUR 212.6 million to EUR 270.1 million. The EBITDA margin rose to 8.9 % (previous year: 8.0 %). Earnings before taxes (EBT) went up by 49.2 % to EUR 176.6 million (previous year: EUR 118.4 million). The EBT margin consequently rose to 5.8 % (previous year: 4.5 %). On the bottom line, Krones generated consolidated net income of EUR 128.3 million in the first three quarters of 2022, an increase of 48.2 % (previous year: EUR 86.6 million). This corresponds to earnings per share of EUR 4.06 (previous year: EUR 2.74).
Krones’ EBITDA of EUR 95.0 million in the third quarter was 26.8 % higher than in the previous year (EUR 74.9 million). The EBITDA margin rose from 8.1 % to 9.0 %. EBT improved by 48.5 % to EUR 63.4 million (previous year: EUR 42.7 million). At EUR 45.1 million, consolidated net income in the third quarter was 51.9 % higher than in the previous year (EUR 29.7 million). This made for earnings per share of EUR 1.43 (previous year: EUR 0.94).
Krones’ net cash at EUR 440.9 million as of the end of September 2022
Krones significantly improved working capital and free cash flow in the first three quarters of 2022. The ratio of average working capital for the past four quarters to revenue came to 20.5 % (previous year: 26.2 %). The decrease reflects the strong revenue growth and rising advance payments from customers due to the large order intake. Free cash flow in the first nine months of 2022 amounted to EUR 132.3 million, an increase of EUR 24.8 million on the already high prior-year figure (EUR 107.5 million). Krones’ net cash – cash and cash equivalents less bank debt – amounted to EUR 440.9 million at the end of September 2022 (previous year: EUR 283.4 million). In addition, Krones had available just under EUR 1 billion in free lines of credit as of 30 September 2022. Krones improved ROCE (return on capital employed) to 12.4 % in the first three quarters of 2022 (previous year: 10.1 %).
Krones has raised its growth guidance for revenue in the full year 2022
Krones faced many challenges in the first three quarters of 2022 that continue to apply. Uncertainties and risks include material shortages and problems in global supply chains, rising material and energy procurement prices, geopolitical risks in Europe and other parts of the world, and also strong inflation in many countries. It is also uncertain how the Covid-19 pandemic and the war in Ukraine will continue to play out and whether industry can be supplied with sufficient energy.
Krones has managed well with all challenges so far and remains fundamentally optimistic. Due to the continued very strong demand for Krones products and services, as well as good management of scarce resources, the company expects to maintain satisfactory production capacity utilisation in the fourth quarter of 2022. On 19 October, on the basis of current planning, Krones therefore raised its guidance for revenue growth in the full year 2022 to between 10 % and 12 % (previously 5 % to 8 %).
The guidance for the other two financial targets remains unchanged. This means the company continues to expect an EBITDA margin of 8 % to 9 % and ROCE of 10 % to 12 % in 2022. The Executive Board is confident of reaching the upper end of the target range for both figures.
These forecasts are subject to the reservation that the war in Ukraine does not further escalate, the coronavirus situation does not worsen and there are no significant energy shortages.
All over the world, Steinecker has for more than 145 years now been known as a strong brand synonymous with brewing technology. By combining technology from Steinecker with its own portfolio, Krones has meanwhile positioned itself on the market as a one-stop supplier in the brewing and beverage industry for over 25 years.
Krones wants to be there for its clients as a partner they can rely on whenever they need help and to this end locate areas of untapped optimisation potential on a continuous basis. In order to see this aspiration rigorously through to achievement, it is necessary to review the relevant processes and render them more efficient and customer-responsive. As part of this thrust, Krones has now decided to focus even more meaningfully in future on plant and equipment construction in process technology.
Beginning in April 2021, the newly founded Steinecker GmbH will therefore offer all of the solutions and equipment required in a brewery, from raw materials reception right through to the finished product. The company’s portfolio will be supplemented by appropriate after-sales and service concepts. Dirk Hämling will take over as Managing Director. He has since last summer been in charge of the Breweries Business Line at Freising. Dirk Hämling has spent more than 20 years gaining valuable international experience and during that time held various managerial positions at plant and machinery manufacturers whose focus is on process technology.
Marrying strengths to strengths
The Krones facility in Freising near Munich will in future be Steinecker GmbH’s headquarters – and the roughly 450-head-strong team working there, comprising experienced brewery and beverage experts, engineers, technologists, project managers, and automation and production experts, will continue to look after their brewery clients’ projects all over the world, just as they have done before. The entire project planning and processing team, the engineering, production and erection/installation departments, plus the product development operation, will be represented at this facility. One major focus will first and foremost be on a sustainable, energy-efficient, CO2-neutral brewing process. The company’s own experimental brewing facility, the Steinecker BrewCenter, is the perfect supplement here, offering a basis for developing innovations and upgrades of products used in the brewing process.
The company’s portfolio will be expanded to include two additional modules: Steinecker will also combine at one location all automation-related products and services and integrate control solutions like its own Botec F1 process control system – providing this service not only for breweries but also for clients in the dairy and beverage sectors. Furthermore, the company will offer appropriate after-sales and service concepts, precisely tailored to the requirements of process-technology systems.
Above and beyond this, Steinecker will continue to benefit from its can-do alliance with Krones, utilising the group’s strong, international production, sales and service network with its over 100 sites located all over the world. When a beverage company will in future opt for a turnkey solution from the House of Krones, the entire kit, comprising not only process-technology systems but also filling technology or utility solutions, will come from a single source as before.
O-I Glass, Inc. and Germany’s Krones AG signed a strategic collaboration agreement that aims to elevate glass by innovating together and to jointly create solutions for the growing glass market.
“For O-I, glass is the preferred packaging solution in a world that increasingly values health, premium products and the environment. Not only does it maintain the integrity of the products and protects the environment, as customers and consumers intend, but it also offers magnificent opportunities for establishing brands and implementing sustainable solutions,” explains Andres Lopez, President and CEO at O-I. “This agreement is the first step that O-I and Krones are taking together in order to offer clients completely integrated, end-to-end solutions in the future.”
Focus areas include improvements in glass filling and packaging line speed and efficiency; enhanced agility and flexibility of responding to market trends; development of innovative and sustainable glass systems; and advancements in digital solutions such as direct-to-glass digital printing technology.
“In production facilities all over the world, the products of O-I and Krones are already encountering each other. So it was absolutely logical to improve still further the compatibility of Krones’ complete lines and the glass containers from O-I,” adds Christoph Klenk, CEO of Krones AG.
With this agreement, the two companies are combining O-I’s specialized knowledge of glass with Krones’ leading competence in manufacturing machines and filling lines for the food and beverage industries.
Following long years of contract-bottling, the smoothie and juice producer innocent has decided to build the very first bottling plant of its own. Krones won the order for four complete PET bottling lines and the corresponding IT landscape. The paramount consideration for “the blender”, as innocent has christened its greenfield project, was sustainability: the aim is to build an entirely CO2-neutral factory. “But we’re also keen to reduce water consumption to a minimum, since we want to treat and re-use as much of it as possible,” explains Sam Woollett, Engineering and Facilities Lead. Each of the four identical PET lines handles up to 32,000 containers an hour. The new plant has been tasked with filling about 400 million bottles of chilled drinks a year. In all, innocent has invested approximately 250 million US-dollars in this project.
Four complete PET bottling lines from Krones
The Contipure AseptBloc DA blow-moulder/filler block consists of a Contiform 3 Pro stretch blow-moulding machine and a Modulfill Asept aseptic filler. For the Contipure D preform sterilisation module, innocent naturally enough opted for a particularly sustainable version. This ensures a reduced total cost of ownership (TCO), thanks to lower consumption of hydrogen peroxide, steam and energy, plus shorter preparation times. All containers after being filled are fitted with a tamper-evident seal and – depending on the format involved – dressed in a wrap-around or pressure-sensitive label. What’s more, the modularised Topmodul labeller is block-synchronised directly with the Variopac Pro FS packer.
Syskron is digitalising all the factory’s processes
As the group’s digitalisation specialist, the Krones subsidiary Syskron has developed a turnkey MES concept for innocent that through appropriate interfaces also integrates the ERP system, the process control and warehouse management systems in the new plant. This concept includes various solutions from the SitePilot IT family brand, not least the Planning production planning system, the Line Management order and administration system, plus Line Diagnostics for production data acquisition and analysis. From the category of Share2Act services, innocent will in future be using Connect: this enables all information, such as shift schedules, to be made available to all staff in digital form.
Chief Blender Andy Joynson explained that innocent is “aiming to build the earth’s favourite little healthy drinks factory, the blender. It’s location in the Port of Rotterdam is no accident: We will minimise the distance between the place where the fruits arrive from overseas and the actual production facility. This enables us to reduce the company’s CO2 footprint by about ten per cent. We are delighted that we will be able to bottle our healthy drinks in our own plant, but more pleased that we will ensure that the production operation and the buildings comply with our sustainable standards.”
Krones is pleased to announce it has successfully completed the process of validating its Contipure AseptBloc DN system, and gained its approval from the US Food and Drug Administration (FDA).
The Contipure AseptBloc DN is part of the standard aseptic equipment portfolio from Krones, and consists in a bloc configuration system with both aseptic filling and blowmolding of PET containers. Decontamination of primary packaging materials, consisting in preforms and closures, is performed with gaseous hydrogen peroxide (H2O2).
The system, already 3-A Certified, is now FDA approved for the filling of sterile low acid foods that can be stored and distributed at ambient temperature conditions. To gain the approval, the necessary validation activities were performed on the equipment by Krones, a third party process authority, and Krones’ major food and beverage partner and customer in the Midwest. All the required validation documentation, including multiple primary packaging material sizes and closures, was then satisfactorily received from the FDA.
Contipure AseptBloc DN is automatically cleaned and sterilized in less than two-and-a-half hours, providing its users the most line availability in the aseptic technology market. The system can also run continuous production without need of cleaning and sterilization cycles for over a week. All the sterile surfaces of the equipment are also sterilized with gaseous hydrogen peroxide, eliminating the need of hazardous chemicals and massive water consumption.
The state-of-the-art system from Krones also includes additional benefits such zero product waste at beginning of the production cycle, precise equipment high speed motion guaranteed by the integration of servo drives, and the best-in-class blowmoulding and filling expertise from Krones.
• 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.
The difficult economic conditions and uncertainties such as the unresolved trade conflict between China and the USA increasingly affected Krones’ business in the first half of 2019. After strong growth in the first quarter (by 10.3 %), revenue from April to June increased by 0.7 % year-on-year. In total, the company’s revenue from January to June 2019 improved by 5.5 %, from €1,790.8 million in the previous year to €1,889.3 million. Adjusted for acquisitions and currency effects, growth was 1.8 %.
The slowdown in the economy and the uncertain economic outlook are also affecting investment confidence among Krones’ customers. The company experienced weak demand in parts of its portfolio between April and June 2019. However, Krones was largely able to compensate for this due to its broad product range. Order intake from January to June 2019 increased by 1.2 %, from € 2,014.8 million to € 2,038.6 million. Adjusted for acquisition effects, the contract value of orders increased by 0.4 % in the first six months of 2019.
High costs and unfavourable product mix impact profitability
Earnings before taxes (EBT) decreased year-on-year in the first half of 2019, from € 112.7 million to € 47.9 million. The EBT margin dropped from 6.3 % to 2.5 %. Krones’ profitability was impacted by high material and labour costs. The product mix also had an adverse effect on earnings. In the second quarter of 2019 in particular, revenue was lower than expected on products with a large proportion of own value added, such as machines and lines in plastics technology. That led to capacity underutilisation in this area. Another major reason for the lower earnings is that revenue in parts of the high-margin after-sales business was above 2018 but below budget in the first half of 2019. Krones generated consolidated net income of € 33.3 million from January to June 2019 (previous year: € 76.9 million). This corresponds to earnings per share of € 1.06 (previous year: € 2.45).
Krones has improved the ratio of average working capital to sales over the past four quarters. The ratio decreased from 28.8 % in the previous year to 26.0 %. Free cash flow went down to – € 259.4 million (previous year: – € 56.2 million). Krones having a negative free cash flow in the first half year is a seasonal effect and is nothing out of the ordinary for the company’s business.
Krones expects better earnings in second half year
The Executive Board has taken further action to offset the negative impacts on earnings. This includes among others a recruitment freeze and measures to reduce material costs. We are progressing well with the expansion of our global footprint. The new plant in Hungary, for example, is fully on schedule and on budget. Krones will start producing there in the course of this year and will generate positive earnings contributions from the Hungarian plant from 2020 as planned.
Krones expects, in line with previous year, that especially in Q4 the production capacity utilisation will increase as well as the high-margin life-cycle services (LCS) business. Therefore Krones expects better earnings in the second half of 2019 than in the first six months.
In total, the company expects growth of 3 % in 2019. The EBT margin is expected to be around 3 %. For its third performance target, working capital to revenue, Krones expects a figure of 26 %.
Krones working on structural measures and adheres to mid-term targets
The strategic measures launched to date, such as the price rises and expansion of our global footprint so far, are not enough for the earnings targets to be attained on a long term basis. The Executive Board is therefore currently working on further structural changes for a sustained increase in profitability. These changes focus on reducing complexity, rapid response to market needs and shaping an even more customer-centric business organisation.
Krones is maintaining its mid-term targets. Depending on the overall economic situation and developments in the company’s markets, the Executive Board expects average annual revenue growth of 3 % to 5 % excluding acquisition effects, an EBT margin of 6 % to 8 % and working capital at 22 % to 24 % of revenue.
Krones has published the complete Interim Report for the first half of 2019 online at www.krones.com
CFO Michael Andersen leaves the Executive Board of Krones AG with immediate effect by mutual agreement.
Krones AG would like to thank Michael Andersen for his strong commitment over the past three and a half years. The operative CFO functions will be temporarily executed by CEO Christoph Klenk until a successor has been found.
Based on the actual available figures Krones, the world’s leading manufacturer of filling and packaging technology, adjusts its earnings outlook for the fiscal year 2019. The uncertain macroeconomic developments, like the unsolved trade conflict between China and USA, as well as the discussion about the sustainability of PET-Packaging, negatively influence the customers of Krones and their willingness to invest. Nevertheless, the revenue growth of Krones in the first six month of 2019 were still satisfactory. However, the earnings before tax (EBT) for this period will be significantly below the expectations of Krones.
Increased costs and unfavorable product mix burden the profitability
The profitability of Krones is influenced by high costs, in particular the material cost ratio remains on high level. Krones expected, that the weaker economic outlook in other important industries in 2019 would have resulted in a small easing in the increasing of material costs. Also, the additional measures, which are implemented by Krones to reduce the material costs materialize with a delay. Furthermore, the product mix has an unfavorable effect on the earnings for the period January till June 2019. Especially in the second quarter 2019 the sales of products with a high own value added, like machines and lines for the plastic technology, were lower than expected. In the plastic technology Krones offers extensive products and services for the packaging and filling of beverages in plastic containers like PET-bottles. However, the current discussion about the PET-packaging solution will open opportunities for Krones for innovative solutions.
Another important reason for the actual earnings development is the sales growth of the high-margin after sales business (LCS), which were in the first 6 month of 2019 below expectations. This results from the demand of the customer of Krones for some parts of the LCS product and service offering, which were negatively influenced by the macroeconomic uncertainties. In the second half year this LCS business is expected to recover.
Outlook
Krones still expects an unchanged growth target of 3 % in 2019. The EBT margin is planned around 3 % (prior target: around 6 %). For its third target, working capital to revenue, Krones expects an unchanged figure of 26 %.
The board has taken measures in order to counteract the earnings decline. This includes among others a hiring freeze and measures to reduce the material costs. The current global footprint is on track. For example, the new plant in Hungary is according to budget and time schedule. During the second quarter of 2019, Krones will increase its production in Hungary with a positive margin contribution in 2020.
By its global footprint Krones will not only use competitive cost advantages, but also take advantage of regional market opportunities. The closer Krones is to its customers, the better the company can understood customer needs and local requirements.
The strategic measures that Krones has introduced so far, like the price increase and the development of the global footprint are however not sufficient to reach the ambitious targets. Hence, the board is working in additional structural changes in order to strengthen its earning level in the long run. Focus areas are reduction of complexity, an agile reaction to market needs as well as a corporate structure, which serves the customer even better.
Krones keeps its mid term targets. Depending on the macro economic environment and development of Krones markets, the board envisages a year-on-year revenue growth of 3 to 5 % without acquisition effects, an EBT margin of 6 to 8 % and a working capital to revenue ratio of 22 to 24 %.
Krones will publish the interim report as of June 30th of 2019 by 25th of July 2019.
Within the Krones Group, the planning and implementation of intralogistical solutions had hitherto been handled both in System Logistics S.p.A. in Fiorano (Italy), and in Syskron GmbH in Germany (Wackersdorf). Effective 1 July 2019, the Intralogistics Division of Syskron GmbH has been incorporated into System Logistics GmbH, headquartered in Wackersdorf, as a wholly owned subsidiary of the Krones Group.
With this streamlining of its market presence, Krones is uniting its entire intralogistics portfolio under the family brand of “System Logistics” and offering clients worldwide holistic solutions for intralogistical applications. This synergising of corporate capabilities will additionally ensure even closer networking for intralogistical projects.
The newly founded company employs around 100 people, and possesses in-house engineering, design, IT, automation and project management capabilities, plus its own after-sales service operation.
System Logistics GmbH will still be headquartered in Wackersdorf. The German/Austrian/Swiss market, as the single biggest market for automated warehousing systems in Europe, plus clients from the Netherlands, the Czech Republic and Slovakia, will be handled from there in future.
Krones, the world’s leading manufacturer of filling and packaging technology, continued to grow in 2018 despite difficult conditions. The company benefited as a full-service provider from its extensive product and service range and broad international footprint.
Krones achieves growth target for 2018 financial year
Revenue increased by 4.4 % year-on-year, from €3,691.4 million to €3,854.0 million. The company thus achieved the revised target of 4 % revenue growth announced in autumn 2018. Revenue grew operationally (i.e., adjusted for currency and acquisition effects) was around 5 %. Krones increased revenue, in some cases significantly, in Europe, China and South America/Mexico. Revenue was down in the Asia/Pacific region, the Middle East/Africa and in North and Central America.
Despite the high prior-year figure, order intake increased by 4.5 % in 2018, from €3,786.8 million to €3,957.3 million. Growth in order intake was above average in Western and Eastern Europe and in China. Krones had orders on hand totalling €1,261.1 million at the end of 2018. This once again exceeded the very high prior-year figure by 1.7 %.
Krones continued to invest in the growth of its workforce in 2018, primarily for the expansion of its global footprint. The company employed 16,545 people worldwide at the end of 2018. This represents an increase of 1,246 employees on the previous year, about 400 of which related to acquisitions.
Profitability affected by one-off expenses, mainly for reorganisation
Krones’ earnings were significantly impacted by higher material and labour costs in 2018. The 5.3 % EBT margin includes approximately €42 million in one-off expenses, mainly for reorganisation.
Had these expenses not been incurred in 2018, the EBT margin would have been 6.4 %. The costs related to establishing the production site in Hungary account for the largest share of this amount. In total, earnings before taxes (EBT) in 2018 were down by 21.1 % or €54.5 million year-on-year to €204.3 million (EBT margin: 5.3 %).
Earnings decreased in both segments. In the core segment, Machines and Lines for Product Filling and Decoration, EBT went down by 15.2 % year-on-year, from €263.3 million to €223.3 million. Expenses for reorganisation reduced segment earnings here by around €25 million. In the Machines and Lines for Beverage Production/Process Technology segment, EBT deteriorated from –€4.5 million in the previous year to –€19.0 million. This mainly related to a total of around €17 million in one-off expenses.
Krones improves free cash flow by €271.4 million
Krones was able to significantly reduce working capital between October and December 2018. This had a positive impact on free cash flow, which improved in 2018 by a substantial €271.4 million compared with the prior year, to €120.7 million (previous year: –€150.7 million). The ratio of average working capital over the past four quarters to revenue developed slightly better than expected, holding stable at 27.3 % in 2018. Net cash went up to €215.1 million at the 2018 reporting date (previous year: €157.4 million). Due to the increase in total assets, the company’s equity ratio decreased slightly to 43.2 % (previous year: 43.8 %). Overall, Krones continues to possess a very robust financial and capital structure.
With the above figures, Krones has confirmed the preliminary figures published on 21 February 2019. No significant changes arose in the course of the auditing process.
Shareholders to receive stable dividend of €1.70 per share
At the Annual General Meeting on 5 June 2019, the Executive Board and Supervisory Board of Krones will be proposing a dividend of €1.70 per share for the 2018 financial year. The proposed dividend is stable relative to the previous year. The planned payout is 35.7 % of consolidated net income.
Outlook
Based on the prevailing macroeconomic outlook and the current expected development of the markets relevant to Krones, the company expects consolidated revenue growth of 3 % in 2019.
In order to achieve its medium-term corporate targets, Krones will continue in 2019 to work towards a global structure fit for the future challenges. The company does not expect any noticeable fall in material procurement prices in 2019; the same applies to labour costs. Krones’ sales price increases on all bottling and packaging equipment and for process technology with effect from 1 May 2018 are likely to have a slight positive effect on earnings in the 2019 financial year. Overall, Krones expects an EBT margin of around 6 % for 2019.
Above all due to the focus on increases in the sales price level, in the current economic and geopolitical climate, Krones sees the achievement of its targets for 2019 subject to greater uncertainties than in the past. For its third performance target, working capital to revenue, Krones expects a figure of 26 %.
Krones has published the Annual Report 2018 online at https://www.krones.com/en/company/investor-relations/krones-group-annual-report-2018.php
Acquisition of W.M. Sprinkman Corporation
Krones, the world’s leading manufacturer of filling and packaging technology, has completed the acquisition of W.M. Sprinkman Corporation, Wisconsin, US. Founded in 1929, Sprinkman provides engineered food and beverage processing equipment, specializing in the dairy and brewing industries. Employing over 125 employees at its Waukesha and Elroy, Wisconsin locations, the company serves customers ranging from start-up microbreweries to large multi-national food and beverage producers. Sprinkman generates approximately $35 millions in revenues.
By acquiring Sprinkman, Krones and its other recent acquisitions enhance the capabilities of the “House of Krones” product portfolio in North America, ranging from process technology solutions and bottling and packaging equipment to intralogistics, IT solutions, plastics recycling, and entire lifecycle service support – thereby supporting the entire production supply chain for customers. Sprinkman’s headquarter and management will remain in Waukesha, Wis., with a production facility in Elroy, Wis.
Two merge into one: by purchasing the remaining shares, Krones has taken over Till GmbH in its entirety. Under the name of Dekron, the group’s subsidiary is now synergising the entire technology portfolio for digital decoration technology.
The Krones product portfolio themed around digital decoration of containers had previously been split between two companies: firstly, Krones AG itself, and secondly Till GmbH, in which Krones had owned a majority shareholding of 51 per cent since 2014. After the jointly developed DecoType machine portfolio had been successfully premiered for the market at the drinktec 2017, it was now time for the next logical step: to compress the knowledge and the technologies of both firms in a single responsively accomplished innovation-driven unit.
For this purpose, in early March 2018 Krones purchased the remaining shares in Till GmbH, and here synergised all the business operations relating to digital decoration technology. In order to publicly affirm its significantly enhanced role, the subsidiary has since April been operating under the name of Dekron. This coinage combining “Decoration” and “Krones” underlines both the company’s technological specialisation and its one-hundred-per-cent affiliation with the Krones Group.
Internal continuity
The firm will continue to be headquartered at Till’s facility in Kelkheim near Frankfurt – not least in order to retain in the company the smoothly functioning team of employees with all their valuable knowledge and experience. To put the group’s new member in optimum shape for the tasks ahead, Krones will be purposefully upgrading its infrastructure and its human resources. This applies to both the facility in Kelkheim and to the planned second facility, which is scheduled for inauguration before the end of 2018 – close to Krones’ headquarters in Neutraubling. It will constitute the new domain of some Krones staff who as specialists for digital decoration technology will be joining Dekron GmbH. For the existing clients of Till and Krones, this means: they will be able to count on their familiar contact persons at the same facility in the future as well.
Krones has also prioritised continuity in Dekron’s top management: it is composed of Sven Kerpe and Friederike Kalusche. The latter had already occupied this post in Till GmbH, and had been involved in building up the company right from the start. Her colleague Sven Kerpe was previously part of the Bottling Technology team at Krones, responsible for digital decoration technology. Dr. Christian Compera, Head of Bottling Technology, is gratified by this step, and says: “We have in recent years invested massively in developing a product portfolio for digital decoration. Now we are optimally equipped to join with our clients in successfully progressing the marketing of digitally decorated containers.“
Krones, the world’s leading manufacturer of filling and packaging technology, released its annual report for the financial year 2017 today. The company continued its stable, profitable growth and intends to give shareholders an appropriate share in its success.
Krones’ revenue grew 8.8 %
Krones’ revenue increased 8.8 % year-on-year to €3,691.4 million. Adjusted for acquisitions, revenue was up 7.2 %. Krones’ broad international diversification and comprehensive portfolio of products and services served the company well in 2017. The highest percentage revenue growth came in the South America/Mexico, Asia-Pacific, and Western Europe sales regions.
Order intake improved by 10.0 % year-on-year to €3,786.8 million in 2017. Adjusted for acquisitions, the increase was 7.1 %. While order intake in the Asia-Pacific and North America regions rose more than that, ordering activity was somewhat slower in China and the Middle East/Africa. At the end of 2017, Krones had orders on hand totalling €1,240.1 million, which is up 8.3 % year-on-year. The comfortable orders backlog provides a good basis for continued revenue growth. …
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Krones, the world’s leading manufacturer of filling and packaging technology, continued its stable growth in the first half of 2017. Overall, revenue improved 13.8 % year-on-year to €1,775.2 million. Adjusted for acquisitions, revenue was up 10.2 %. The increase was partly due to a relatively low baseline of sales in the first half of 2016. The strongest revenue growth came in the North and Central America, Asia-Pacific, and South America/Mexico regions in the period from January to June 2017.
Order intake at Krones increased 11.0 % in the first half of 2017 to €1,779.3 million. Adjusted for acquisitions, order intake was up 4.7 % year-on-year. Orders growth in Western Europe and Latin America was higher than overall orders growth. Order intake in China was lower. In the Asia-Pacific, North America, and Middle East/Africa sales regions, order intake was stable. At €1,148.8 million, orders on hand at Krones at the end of June 2017 were up 1.1 % over the year-earlier period.
EBT margin is 6.8 % after six months
Krones improved earnings before taxes (EBT) by 12.8 % to €121.0 million in the period from January to June 2017 despite a highly competitive market situation. As expected, market prices provided no support. By contrast, the Value strategy programme, with which Krones is increasing efficiency throughout the company, had a positive impact. At 6.8 %, the EBT margin for the first six months of 2017 was nearly unchanged year-on-year (previous year: 6.9 %). After taxes, net income was up 10.8 % to €82.4 million. Earnings per share increased from €2.37 in the previous year to €2.64.
The ratio of average working capital for the past four quarters to revenue came to 26.3 %, after 25.5 % in the year-earlier period. However, the ratio is an improvement over the first quarter of 2017 (26.8 %).
The return on capital employed (ROCE) increased to 16.3 % (previous year: 15.6 %). In the period from January to June 2017, the company generated operating free cash flow of -€126.7 million (previous year: -€155.5 million), which is an improvement of around €30 million.
Krones forecast for 2017 is unchanged
The company’s revenue growth target (excluding acquisitions) for the year 2017 as a whole remains 4 %. Profitability should be stable this year. Krones expects the EBT margin to be around 7.0 % for the year 2017. For its third financial performance target, working capital to revenue, the company is forecasting 27 % for the current financial year.
Krones has published the complete half-yearly report online at https://www.krones.com/en/company/investor-relations/reports.php.
