Business News
Demand for Material Handling Equipment Stabilizes at Low Level
Thursday 13. August 2009 - Business Trend Determined by Persistent Market ; Weakness/Earnings Dampened by One-off ; Expenses/Jungheinrich Expands Market Position
The world economy continued its steep downward trend in the second quarter of 2009, albeit losing some speed. The trend of the sector of most relevance to Jungheinrich remained clouded by this development: Demand for material handling equipment stagnated at a very low level. The markets poor constitution thus continued to determine the Jungheinrich Groups business trend. Substantial one-off expenses dampened earnings in the second quarter of 2009. The company gained market share the world over.
Following the collapse of the global market for material handling equipment by about 50 per cent in the first quarter this year, demand in the second quarter of 2009 remained 49 per cent lower year on year. All regions contributed to this decline. Asia experienced the smallest decrease, contracting by 40 per cent. China posted a below-average drop of 26 per cent. Europes market shrank by 53 per cent. Eastern Europe accounted for a substantial proportion, recording a 78 per cent decline in demand, while Western Europe saw a 46 per cent decrease. The North American market continued to shrink, reporting a drop of 47 per cent.
The value of the Jungheinrich Groups incoming orders including all business areas was down 27 per cent in the first half, dropping to 819 million euros (prior year: 1,120 million euros).
In the second quarter of 2009, net sales fell by some 24 per cent to 417 million euros (prior year: 547 million euros). In the first half of the year, the Group thus saw net sales decline by some 20 per cent to 830 million euros (prior year: 1,038 million euros). All business areas contributed to this. New truck business accounted for the single-largest decrease, posting a drop of 31 per cent, followed by the short-term hire and used equipment business, which recorded a decline of only 7 per cent. After-sales services, which have less cyclical exposure, benefited from the steady rise in market penetration, experiencing a decrease of just 5 per cent. The foreign ratio declined to 71 per cent (prior year: 74 per cent) owing to the strong decrease in foreign sales.
In particular, the continued drop in demand in new truck business and low plant capacity utilization had an adverse effect on the Jungheinrich Groups earnings trend. Despite the stabilizing effect of the after-sales services business and intensified measures to improve earnings, in sum, the second quarter of 2009 closed with negative earnings before interest and taxes (EBIT) of 12.0 million euros (prior year: positive 33.9 million euros) due to one-off expenses of the same order (approx. 12 million euros). They primarily resulted from impairment losses recognized for capitalized development costs and investments. The corresponding return on sales fell to -2.9 per cent (prior year: +6.2 per cent). By the middle of the year, earnings before interest and taxes had dropped to minus 14.8 million euros (prior year: positive 63.5 million euros) due to negative one-off effects. By the mid-year point, the comparable return on sales had fallen to -1.8 per cent (prior year: +6.1 per cent).
In the second quarter of 2009, net income (loss) decreased to minus 12.0 million euros (prior year: positive 23.2 million euros). The company closed the first half of the year with minus 15.6 million euros in net income (loss) (prior year: positive 41.3 million euros). As a result, earnings per share declined to minus 0.46 euros (prior year: positive 1.21 euros) on the back of 34.0 million shares.
In consequence, under the caveat of the continued uncertainty surrounding market assessments, Jungheinrich believes the worldwide market for material handling equipment is likely to shrink by approximately 40 per cent (previous forecast: 30 per cent) to about 520 thousand trucks in fiscal 2009 (prior year: 872 thousand units). In light of the persistently negative market and business trends, the company adjusted its incoming order and net sales forecast. They are expected to come in between 1.6 billion and 1.7 billion euros, respectively (previous prognosis: 1.7 billion euros each) (prior year: 2.1 billion euros each). “We will significantly step up the measures we have taken so far to counter the effects of the crisis. This will dampen our earnings by a high double-digit million euro figure. We are confident of being able to return to generating profits commensurate to the economic situation from 2010 onwards,” says Hans-Georg Frey, Chairman of the Board of Management.
Jungheinrich ranks among the worlds leading companies in the material handling equipment, warehousing and material flow engineering sectors. The company is a logistics service provider with manufacturing operations, which offers its customers a comprehensive range of forklift trucks, shelving systems, services and consulting covering the entire field of intralogistics. Jungheinrich shares are traded on all German stock exchanges.