Krones provides guidance for full-year 2020

Krones anticipates higher revenue in the fourth quarter

Photo - Krones

The preliminary figures for the third quarter of 2020 show that the economic consequences of the Covid-19 pandemic are having a significant impact on Krones’ business. A low order intake due to corona, especially in the second quarter, resulted in poor production capacity utilization between July and September. Revenue in the third quarter of 2020 fell 25.0% year-on-year to EUR 750.4 million. The executive board anticipates that revenue will be higher in the fourth quarter than in the third quarter. Revenue in the first nine months of 2020 went down by 15.3% to EUR 2,449.0 million (previous year – EUR 2,889.7 million).

According to the company’s press statement, many general economic uncertainties are also affecting investment confidence among Krones’ customers. On the positive side, order intake picked up significantly in the third quarter compared with the second quarter. Krones received EUR 843.6 million in new orders between July and September. This was 8.2% down on a year earlier but about 37% or EUR 227.4 million more than in the second quarter of 2020. Order intake in the first nine months of 2020 was down 22.2% overall, from EUR 2,957.9 million to EUR 2,300.9 million.

Limiting the decrease in earnings with cost savings

Structural measures adopted by Krones had a positive impact on earnings in the first three quarters of 2020. Material and labor costs, in particular, were significantly lower than in the previous year. Due to the revenue shortfall, earnings before interest, taxes, depreciation, and amortization (EBITDA) for the first nine months were down 10.3% year-on-year to EUR 147.3 million. As a result of systematic cost savings, the EBITDA margin improved to 6.0% (previous year – 5.7%). Earnings before taxes (EBT) fell more sharply than EBITDA, from EUR 61.4 million to EUR 26.7 million. This was mainly due to goodwill impairments of EUR 13.6 million recognized by Krones in the second quarter of 2020. Consolidated net income in the first nine months of 2020 was EUR 17.4 million (previous year – EUR 40.3 million).

In the third quarter of 2020, EBITDA went down to EUR 28.8 million due to the sharp drop in revenue (previous year – EUR 47.4 million). Lower material and labor costs prevented an even more massive drop in earnings. The EBITDA margin was 3.8% (previous year – 4.7%). EBT fell from EUR 13.5 million in the previous year to – EUR 5.1 million. Consolidated net income came to – EUR 4.1 million (previous year – EUR 7.0 million).

Free cash flow significantly higher than in the previous year

Krones said it has substantially improved cash flow from operating activities and free cash flow in the first three quarters. This was mainly because the company built up significantly less working capital than in the previous year and, as planned, incurred lower capital expenditure. In total, over the first three quarters, free cash flow increased by EUR 236.1 million year-on-year to –EUR 58.4 million. Mainly because of the lower revenue, average working capital over the past four quarters as a percentage of revenue fell to 28.3% in the first nine months of 2020 (previous year – 25.8%).

Krones provides guidance for full-year 2020

Global uncertainties due to the Covid-19 pandemic meant that it has not previously been possible for Krones to provide reliable forecasts for the 2020 financial year. Based on the preliminary figures for the first three quarters of 2020 and the current economic environment, the company is now providing guidance for 2020 at the group level for the main financial performance indicators.

For the Krones Group in the full year 2020, the Executive Board expects revenue of about EUR 3.3 billion (2019 – EUR 3,959 million), representing a decrease of approximately 17% and an EBITDA margin of 5.5% to 6.0% (2019: 5.7%). This guidance does not include any one-off expenditure for impairments and structural measures for capacity adjustment.

If further countries and regions impose lockdowns, partial lockdowns, or travel restrictions, this could negatively impact the completion of orders and order intake and consequently have a negative influence on Krones’ financial performance.

Krones publishes its quarterly statement for the third quarter of 2020 online on 12 November 2020.

The Covid-19 pandemic led to the country-wide lockdown on 25 March 2020. It will be two years tomorrow as I write this. What have we learned in this time? Maybe the meaning of resilience since small companies like us have had to rely on our resources and the forbearance of our employees as we have struggled to produce our trade platforms.

The print and packaging industries have been fortunate, although the commercial printing industry is still to recover. We have learned more about the digital transformation that affects commercial printing and packaging. Ultimately digital will help print grow in a country where we are still far behind in our paper and print consumption and where digital is a leapfrog technology that will only increase the demand for print in the foreseeable future.

Web analytics show that we now have readership in North America and Europe amongst the 90 countries where our five platforms reach. Our traffic which more than doubled in 2020, has at times gone up by another 50% in 2021. And advertising which had fallen to pieces in 2020 and 2021, has started its return since January 2022.

As the economy approaches real growth with unevenness and shortages a given, we are looking forward to the PrintPack India exhibition in Greater Noida. We are again appointed to produce the Show Daily on all five days of the show from 26 to 30 May 2022.

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