Business News
Demand for material handling equipment displays lateral movement
Thursday 12. November 2009 - Jungheinrich Business Trend Stabilizing/Earnings Remain Hampered
The world economy found its way out of the recession over the course of the third quarter of 2009 and confirmed the positive signs of an economic turnaround. The sector of key relevance to Jungheinrich displayed lateral movement at a low level. Therefore, the market’s weak constitution continued to determine the Jungheinrich Group’s business trend. In reaction to this, the company continued to implement adjustment measures at its domestic production sites and its sales companies at home and abroad.
Global demand for material handling equipment in the third quarter of 2009 experienced a marginal resurgence compared to the preceding quarters, remaining just 35 per cent down year on year. Nevertheless, the world market had decreased in size by a cumulative 45 per cent after nine months. Asia experienced the smallest decrease, recording a decline of 32 per cent. China posted a drop of 11 per cent. Europes market volume contracted by 51 per cent. Eastern Europe accounted for a substantial proportion, recording a 77 per cent reduction in demand, with Western Europe contributing 44 per cent. North America displayed persistently weak development, down 44 per cent.
The value of the Jungheinrich Group’s incoming orders, encompassing all business areas, declined by 23 per cent to 408 million euros in the third quarter of 2009 (prior year: 531 million euros). Cumulative incoming orders after nine months were down 26 per cent to 1,227 million euros (prior year: 1,651 million euros).
Net sales in the third quarter of 2009 declined by 25 per cent to 402 million euros (prior year: 538 million euros). After nine months, the Group had recorded a 22 per cent drop in net sales to 1,232 million euros (prior year: 1,576 million euros). All of the business areas contributed to this. New truck business accounted for the single-largest decrease, falling by 34 per cent, followed by the short-term hire and used equipment business, which was down 9 per cent. After-sales services, which have less cyclical exposure, benefited from the steady rise in market penetration, shedding a mere 5 per cent. The foreign ratio declined to 72 per cent (prior year: 74 per cent) owing to the stronger decrease in foreign sales.
The Jungheinrich Group’s earnings were adversely affected above all by the sustained massive decline in demand in new truck business and the resulting low utilization of capacity at its plants. Despite the positive influence of the after-sales services business, which was largely stable, and additional measures taken to improve earnings, overall, earnings before interest and taxes (EBIT) in the third quarter of 2009 amounted to a negative 4.1 million euros (prior year: positive 29.7 million euros). The corresponding return on sales fell to a negative 1.0 per cent (prior year: positive 5.5 per cent). After nine months, earnings before interest and taxes dropped to a negative 18.9 million euros (prior year: positive 93.2 million euros). The comparable return on sales was down to a negative 1.5 per cent (prior year: positive 5.9 per cent).
Net income decreased to a negative 5.2 million euros in the third quarter of 2009 (prior year: positive 19.6 million euros). The company closed the nine-month period with negative 20.8 million euros in net income (prior year: positive 60.9 million euros). Earnings per share declined to a negative 0.61 euros (prior year: positive 1.79 euros).
The global economy’s emergent recovery has not yet directly resulted in a tangible upward movement in the material handling equipment sector’s economic development. Therefore, Jungheinrich furthermore expects demand on the world market in the 2009 financial year to shrink by approximately 40 per cent to about 520 thousand trucks (prior year: 872 thousand units). Accordingly, the company has substantiated its estimates for fiscal 2009, forecasting incoming orders at slightly more than 1.6 billion euros and net sales in excess of 1.65 billion euros (prior year: 2.1 billion euros each).
In light of the persistently weak demand in new truck business and the negative effects it has on plant capacity utilization, operating income will have deteriorated considerably by the end of the year. In addition, the package of structural and capacity-adjustment measures as well as the replacement of the existing dealer sales network in North America and other additional burdens will result in substantial one-off expenses. In sum, this is expected to cause 2009 earnings to total between a negative 75 million and a negative 90 million euros. “Thanks to the adjustment measures we have taken in production and sales, the company’s robust financing, and the hard work we have done to reduce costs, we have set the stage for emerging from the economic crisis stronger than before and returning to generating profits in 2010,” says Hans-Georg Frey, Chairman of the Board of Management.