GEA Group Aktiengesellschaft is standing by its business outlook for 2019, despite various special effects having a negative impact on earnings in the second quarter of the year.
Order intake fell by around 17 percent to EUR 1,147 million in the second quarter of 2019 (previous year: EUR 1,383 million), primarily as a result of customers electing to defer mid- and large-scale orders. This should, however, be seen in the light of record prior-year quarter with a growth of 11 percent on the back of several major orders. In the wake of a strong first quarter, order intake for the first six months of the year totaled EUR 2,333 million (previous year: EUR 2,486 million), a 6 percent decline compared with the previous year s figure. In contrast, GEA attained new all-time highs in revenue for both the quarter (EUR 1,247 million) and the first six months (EUR 2,305 million), after EUR 1,227 million and EUR 2,266 million respectively in the previous year. It was particularly gratifying that both Business Areas - Equipment and Solutions - made a positive contribution again here with strong sales. Revenue growth in the second quarter resulted primarily from the regions of Asia Pacific, North and Central Europe, and Latin America - each recording high single-digit increases. The second quarter saw, notably, the beverages segment perpetuate its impressive form of the start of the year with a growth of about 24 percent, while dairy processing also posted year-on-year growth again. GEA also managed to increase revenue from its high-margin service business in the months April to June, posting marked growth of more than 7 percent to EUR 394 million. The share of total revenue rose to around 32 percent (previous year: 30 percent).
As expected, EBITDA before restructuring measures (EUR 111 million) was down on the previous year (EUR 142 million; including a proforma IFRS 16 effect of EUR 16 million). The corresponding margin of 8.9 percent was around 270 basis points below the value of the previous year. Positive non-recurring effects in the prior-year quarter and negative effects in the quarter under review hit GEA s earnings result to the tune of EUR 30 million. Without these special effects, earnings would have been a mere 20 basis points below the respective prior-year figure. In the first half of the year, EBITDA before restructuring measures amounted to EUR 185.9 million after EUR 218.6 million (including the pro forma IFRS 16 effect of EUR 32 million) in the prior-year period. The measures introduced in the Business Area Solutions are set to have a positive effect on earnings in this segment as early as the second half of 2019.
"After the record prior-year quarter, delays in placing mid- and large-scale orders on the part of customers left their mark on order intake last quarter, although basic business remained sound. With this situation in mind, and - thanks to a well-filled project pipeline - we generally expect order intake to recover over the remainder of the financial year," explained Stefan Klebert, CEO of GEA Group Aktiengesellschaft. "And we stand by the outlook for 2019 issued in March of this year: although revenue increased again last quarter, the trend in order intake mentioned above confirms our prediction that we are looking at a moderate fall in revenue for 2019 compared with the figure for the previous year. Even including the special effects, which were an additional burden on earnings, we still believe that EBITDA before restructuring measures will be within the predicted corridor of between EUR 450 and EUR 490 million in the 2019 financial year. The same goes for ROCE, which will also remain within the forecasted range of between 8.5 and 10.5 percent."
In addition to various efficiency drives that aim to bolster earnings especially in the Business Area Solutions, the company launched a global optimization project in August to counter a further rise in net working capital, where higher inventories in particular have had a negative impact.
"We re making great progress with our plans to create a new divisional structure and are on schedule. In the meantime, we ve succeeded in filling all the important managerial positions in the divisions and country organizations with highly experienced GEA staff and, in some cases, with excellent managers from outside the company. We intend to provide more details on the five new divisions and on the areas of production and procurement at our Capital Markets Day at the end of September," said Stefan Klebert.