Wacker Neuson posts 61.3% EBIT fall in Q3 2015
The German equipment manufacturer posted third-quarter profit and revenue falls, despite achieving record revenues for the first nine months of 2015
Wacker Neuson’s earnings before interest and tax (EBIT) for Q3 2015 saw a year-on-year fall of 61.3%.
The German equipment manufacturer achieved a profit of $16.62 (EUR15.5m) during the third quarter of this year, compared to the $43m (EUR40.1m) figure achieved in Q3 2014. The firm’s Q3 2015 revenue saw a 1.6% year-on-year decline, falling to $333.47m (EUR311m) from the $339.05m (EUR316.2m) figure achieved in Q3 2014.
Despite the negative third-quarter results, Wacker Neuson achieved record revenues of $1.15bn (EUR1.017bn) during the first nine months of 2015. Cem Peksaglam, CEO of Wacker Neuson, cited low raw material prices and challenging currency conditions as drivers behind the company’s recent EBIT and revenue dips.
“Bolstered above all by strong performance over the first six months of the year, this is a good figure in light of the difficult conditions that are affecting the construction equipment industry as a whole,” he said. “Raw material prices are extremely low at present, making it almost impossible for companies to extract oil and gas profitably in North America.
“This has brought the industry more or less to a standstill. Difficult market conditions in South America compounded the situation here. In addition, declining demand in the European agricultural equipment sector, together with disappointing levels of demand in markets such as France, Russia, and Australia, had an unexpectedly strong impact on our business,” added Peksaglam.
At $114.95 (EUR107.2m), revenue from Wacker Neuson’s light equipment segment increased 1.2% compared with the previous year. When adjusted to account for currency effects, however, this figure was lower than last year’s result.
Revenue from the compact equipment segment amounted to $146.25 (EUR136.4m), a decrease of 5.4% compared to Q3 2014. Revenue from the firm’s services segment, which includes its spare parts business, increased by 4.3% compared to the same period of last year.
Wacker Neuson’s 61.3% year-on-year profit decline for Q3 2015 corresponds to an EBIT margin of 5% (Q3 2014: 12.7%). The manufacturer pointed out that the third quarter of 2014 was an “unusually strong period for revenue and earnings”, adding that major orders, an advantageous regional and product mix, and favourable currency gains positively influenced the group’s performance during this period. In contrast, Wacker Neuson stated that currency gains declined markedly during the third quarter of 2015.
Commenting on the reasons behind the EBIT decline, Peksaglam said: “The strong US dollar made exports from our two production sites in the US more expensive. This had a negative effect on our profit levels. Profitability in South America, especially in Brazil, developed unfavourably under the pressure of the escalating local crises. The sharp depreciation in local currencies in recent months had a clear impact on revenue and earnings.”
The group has adjusted its forecast for 2015 in reaction to the latest financial results. Wacker Neuson expects revenue to amount to between $1.54bn (EUR1.35bn) and $1.5bn (EUR1.4bn) during the current year (2014: $1.37bn (EUR1.28bn)), and its EBIT margin to range between 7% and 8% (2014: 10.6%).
The manufacturer has implemented measures to reduce its inventory. It plans to announce its forecast for the coming year in March 2016, following the publication of its 2015 results.