March 2, 2020 / 7:43 PM / a month ago

UPDATE 1-Engine maker Deutz warns full-year revenue to drop by double-digit amount

* Deutz says revenue to fall by double digit amount in 2020

* Deutz says operating profit to take a hit this year

* Coronavirus may hit supply chain (Adds detail on earnings)

FRANKFURT, March 2 (Reuters) - German diesel engine manufacturer Deutz AG on Monday said it will step up efficiency measures in 2020 to counter a double-digit fall in revenue and operating profit this year, and warned the coronavirus may impact its supply chain.

Deutz said it expects a fall in revenue in 2020 to be in the low double-digit percentage range and its operating margin to drop in the mid double-digit percentage range, relative to the prior year figure.

“The main reason for this is the downturn in key customer industries as a result of economic conditions. This led to a low level of orders on hand at the end of 2019, a situation that is continuing this year,” Deutz said.

Deutz makes engines used in construction and agricultural machinery, material handling, stationary plants as well as rail vehicles.

Deutz’s warning comes after Grammer, a German auto supplier specialised in seats and vehicle interiors, also on Monday warned that sales in the first quarter of 2020 will be significantly below the year-earlier period.

“In order to counter the forecast impact on earnings, we have launched an efficiency program,” Chief Executive Frank Hiller said in a statement.

“This is a global program to strengthen competitiveness by reducing complexity and increasing efficiency along the whole value chain.”

Growth is expected to drop off particularly noticeably in the first half of 2020 following a weak start, Deutz said, adding that it could no longer exclude the possibility of its business and its supply chain being affected by the outbreak of coronavirus.

“The outbreak of coronavirus is taking a significant toll on international transport, travel, industrial logistics chains, and production capacity, both in China and globally,” Deutz said. “Due to the globalized nature of its logistics routes, however, Deutz can no longer exclude the possibility of its business and its supply chain being affected.”

In pre-released earnings, the company said revenue in 2019 amounted to 1.84 billion euros and its earnings before interest and taxes (EBIT) margin before exceptional items amounted to 4.3%.

Deutz expects to achieve its medium-term targets for 2022, and hoped to achieve a revenue target of approximately 400 million euros by 2021.

The complete financial results for 2019 will be published on March 18, 2020. (Reporting by Edward Taylor Editing by Chizu Nomiyama, William Maclean)

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