Titled “Focus on strengths”, Krones' 2020 Annual Report report highlights Krones’ medium and long-term growth opportunities.
Financial year 2020 was heavily affected by the Covid-19 pandemic. Revenue fell 16.1% year-on-year, from €3,958.9 million to €3,322.7 million. Order intake was down 19.0%, from €4,083.5 million in the previous year to €3,307.0 million. On a positive note, after a weak first half year in 2020, the contract value of orders picked up significantly in the third and especially the fourth quarter.
Profitability in both segments affected by corona and one-off effects
Earnings before interest, taxes, depreciation and amortisation (EBITDA) went down from €227.3 million in the previous year to €133.2 million in 2020. The EBITDA margin was 4.0% (previous year: 5.7%). It should be noted that EBITDA was impacted in 2020 by around €72 million in expenses for personnel-related measures. Excluding these expenses for capacity adjustment, the EBITDA margin was 6.2% (previous year: 6.6%).
Earnings before taxes (EBT) fell from €41.7 million in the previous year to –€36.6 million in 2020. In addition to approximately €72 million in expenses for capacity adjustment, EBT was additionally reduced by goodwill impairments and remeasurements in the amount of approximately €8 million. Excluding the one-off effects totalling around €80 million, the EBT margin was 1.3%. Krones’ consolidated net income came to –€79.7 million in 2020 (previous year: €9.2 million).
The effects of the corona crisis and one-off effects impacted profitability in both segments. In the core segment, Machines and Lines for Product Filling and Decoration, on the basis of 14.3% lower segment revenue (€2,797.3 million), EBITDA went down from €218.5 million in the previous year to €171.5 million. This corresponds to an EBITDA margin of 6.1% (previous year: 6.7%).
The Machines and Lines for Beverage Production/Process Technology segment was affected by the difficult situation faced by international breweries due to corona. At €525.4 million, revenue was 24.2% lower than in the previous year. EBITDA came to –€38.3 million (previous year: €8.8 million).
Krones retains very robust financial and capital structure
Krones generated free cash flow of €221.3 million in 2020 (previous year: €–94.4 million). Net cash and cash equivalents, meaning cash and cash equivalents less bank debt, increased to €184.9 million (previous year: €38.1 million). Including undrawn credit lines, Krones has liquidity reserves of around €1.2 billion. As of the end of 2020, the equity ratio was 39.4% (previous year: 41.3%). The very solid financial and capital structure provides a good basis for exploiting the medium and long-term growth opportunities in the market following the corona-related downturn.
With the above figures, Krones has confirmed the preliminary figures published on 25 February 2021. No significant changes arose in the course of the auditing activities.
For 2020, Krones will pay the statutory minimum dividend and distribute €0.06 per share
Krones’ long-term dividend policy is to pay out 25% to 30% of consolidated net income to shareholders. Due to the negative consolidated net income, the Executive Board and Supervisory Board will propose to the Annual General Meeting on 17 May 2021 that only the statutory minimum dividend of 4% of the share capital be distributed for the 2020 financial year. This corresponds to €0.06 per share.
Krones cautiously optimistic for financial year 2021
For financial year 2021, due to ongoing uncertainty about the path of the Covid-19 pandemic, Krones is forecasting revenue growth of 2.5% to 3.5%. Based on the slight recovery in revenue and the savings from the structural measures, the Executive Board expects profitability to be better than in 2020. Krones anticipates an EBITDA margin of 6.5% to 7.5% in 2021. The third target, the working capital to revenue ratio, is expected to improve to between 26% and 27%.
The guidance for 2021 is subject to the assumption that there will be no severe impacts from the Covid-19 pandemic such as harmful virus mutations or vaccination difficulties. This would hit the economy and hence also Krones harder than currently expected and could lead to negative revenue and earnings effects.
Stability at the top: Supervisory Board renews appointment of Executive Board members
At its meeting yesterday, the Supervisory Board extended the appointment of Christoph Klenk as Executive Board member and CEO of Krones AG by five years until 31 December 2026. The Supervisory Board likewise extended the Executive Board appointments of Markus Tischer (International Operations and Services) and Ralf Goldbrunner (Bottling and Packaging Equipment) to 31 December 2026. With market conditions still challenging, this stability and continuity in management is a key success factor.
Krones Non-financial Report 2020: https://www.krones.com/media/downloads/KRONES_NFB2020_e.pdf