GEA Confirms Guidance for 2019 and Introduces Measures to Improve Earnings in Business Area Solutions
Düsseldorf-based engineering group GEA posted order intake of around EUR 1.2 billion for the first quarter of 2019, a rise of 7.6 percent. With a slight increase of 1.7 percent to around EUR 1.1 billion, revenue was slightly up on the previous year.
North and Central Europe, Asia Pacific and North America being the principal motors of growth. Apart from the Compression product group and the Dairy application center, all areas recorded growth. Service business in the Business Area Equipment posted above-average growth, leading to a rise in profit margins in this area. In contrast, a decline in the gross margin, higher selling expenses, and risk provisioning adversely affected the result of the Business Area Solutions. At EUR 74.6 million, group EBITDA before restructuring measures was around EUR 2.8 percent below the figure - adjusted for IFRS 16 - for the same quarter of the previous year. The return on capital employed (ROCE) was 12 percent in the first quarter. Both indicators, ROCE and EBITDA before restructuring measures, were in line with expectations. In order to create more transparency and comparability, GEA revised its management system for the current fiscal year. Therefore, as of this quarter, GEA has been applying the customary market indicators of EBITDA before restructuring measures, and ROCE.
"GEA made a solid start to 2019. The Business Area Equipment managed to increase earnings in the first quarter, thanks largely to higher revenues and a disproportionate increase in service business. As announced in March, we have now drawn up further measures to counter the decline in earnings in the Business Area Solutions in the short term, this following the personnel changes already introduced there," said Stefan Klebert, CEO of GEA Group Aktiengesellschaft.
They include measures to address the issue of overcapacity in the short term - notably in the field of dairy processing - and the fixing of selective underperforming businesses. According to initial estimates, between 200 and 250 full time equivalents will be affected by the cuts at various locations around the world.
"These measures are the result of analyses conducted in recent weeks, and aim solely to optimize the operative business side of the Business Area Solutions. The provisions set aside for the planned restructuring will amount to between EUR 30 and 45 million and will probably be posted in the second quarter of the year. All in all, we can confirm our forecast for the 2019 financial year," said Stefan Klebert.
At the same time, GEA is working on plans to restructure the future organization of the group, which is to be communicated on June 24.
Source: GEA Group Aktiengesellschaft