Krones, the leading manufacturer of filling and packaging technology, slightly exceeded its most recently outlook according to the preliminary figures for 2020.
Due to the Covid-19 pandemic, revenue fell 16.1% year-on-year, from €3,958.9 million to €3,322.7 million. This is a slightly smaller revenue shortfall than the 17% decrease forecast in early November 2020.
The uncertain general economic situation in 2020 burdened investment confidence among Krones’ customers. This affected the company’s order intake, primarily in the first half of the year. The contract value of orders increased significantly in the third and especially in the fourth quarter. Over the full year 2020, order intake was down 19.0% year-on-year, from €4,083.5 million to €3,307.1 million. At the end of 2020, Krones had an order backlog of €1.21 billion (previous year: €1.39 billion).
Profitability affected by corona and one-off effects
The lower order intake meant that Krones could not make optimum use of its production capacity. This impacted profitability in 2020. Savings resulting from the structural measures adopted by the company in the second half of 2019 had a positive effect on earnings. In total, 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% in 2020 (previous year: 6.6%). This slightly exceeded the Executive Board’s outlook of 5.5% to 6.0%.
Earnings before taxes (EBT) fell from €41.7 million in the previous year to –€36.6 million in 2020. In addition to the expenses for capacity adjustment, EBT was additionally reduced by goodwill impairments and value adjustments 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). This corresponds to earnings per share of –€2.52 (previous year: €0.30).
Free cash flow of €221.3 million significantly higher than in previous year
Free cash flow developed positively in 2020. Krones improved free cash flow by €315.7 million year-on-year to €221.3 million. In addition to reduced capital expenditure, this also reflected lower working capital. However, due to the significant revenue shortfall, the working capital to revenue ratio increased to 28.3% (previous year: 26.9%). The equity ratio was 39.4% (previous year: 41.3%). Overall, Krones continues to possess a very robust financial and capital structure.
All stated figures are preliminary and are subject to change in the course of auditing by the independent auditors. Krones publishes its Annual Report for 2020 on 25 March 2021.
Krones provides outlook for the 2021 financial year
For the 2021 financial year, due to ongoing uncertainty about the path of the Covid-19 pandemic, Krones is forecasting low 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 key figure of the outlook, the working capital to revenue ratio, is expected to improve to between 26% and 27%.
The outlook 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.