Leading light and compact equipment manufacturer the Wacker Neuson Group reported revenue of EUR 410.8 million for the first quarter of 2020. This corresponds to a drop of 5.6 percent relative to the prior-year period (Q1/19: EUR 435.4 million). “Following a successful start to 2020, business contracted sharply towards the end of the first quarter as a result of the coronavirus pandemic. Widespread uncertainty is negatively impacting investment activity among our customers and existing orders are being postponed to an extent,” explains Martin Lehner, CEO of the Wacker Neuson Group.

While the Group reported a double-digit decrease in revenue in the Americas and Asia-Pacific, the volume of business in Europe increased by 3.1 percent (Q1/20: EUR 326.4 million; Q1/19: EUR 316.7 million). This development was fueled by demand for compact equipment for the agricultural market, which was still strong at the start of the year: Revenue generated by Weidemann- and Kramer-branded wheel loaders and telescopic handlers was up 18.4 percent to reach EUR 87.7 million (Q1/19: EUR 74.1 million). The Group also reported clear double-digit gains with dumpers. Demand here was particularly dynamic for the innovative Dual View models. Overall, positive trends in the DACH region, driven in part by flexible rental and sales solutions through direct sales channels, provided sufficient momentum to compensate for the significant downturn in revenue triggered by the effects of the COVID-19 pandemic in Southern Europe and countries such as Poland, France and the UK.

Revenue for the Americas decreased 27.0 percent to EUR 76.9 million (Q1/19: EUR 105.3 million). This was attributable to a decline in dealer investment activity and the postponement of orders by key accounts, including rental companies.

In Asia-Pacific, revenue fell 44.0 percent to EUR 7.5 million (Q1/19: EUR 13.4 million). The rapid spread of the COVID-19 virus brought the Group's Chinese production plant to a standstill for several weeks. After gradually coming back on stream in March, the facility has been able to almost fully resume manufacturing activities.

EBIT margin only slightly below the previous year due to strict cost control measures

Profit before interest and tax (EBIT) for the period under review amounted to EUR 28.9 million (Q1/19: EUR 31.0 million). At 7.0 percent, the EBIT margin was only slightly below the previous year (Q1/19: 7.1 percent). The Group benefited from higher productivity levels at its production plants relative to the previous year coupled with strict cost control measures across all areas of the company. Countering this positive trend, however, the Group also recognized the first expenses under its program to cut costs and increase efficiency, which it announced in January. Excluding restructuring costs, EBIT amounted to EUR 30.8 million, which corresponds to an adjusted margin of 7.5 percent. Profit for the period came to EUR 5.9 million, which is markedly lower than the prior-year value (Q1/19: EUR 20.8 million). This was primarily attributable to negative valuation effects related to internal Group loans. The sharp decline in the value of several currencies that are heavily dependent on commodity market trends had a particular impact here. In the prior-year period, valuation effects were mainly positive.

Drop in net working capital, free cash flow slightly positive

Due to the decrease in net working capital, free cash flow in the first quarter was slightly positive at EUR 4.3 million (Q1/19: EUR -142.3 million). Key drivers here included a fall in trade receivables and a rise in trade payables. Bucking this trend, inventory levels were slightly higher than those reported at the close of 2019 as a result of revenue falling clearly short of the Group's internal plans. In light of the impact of the COVID-19 pandemic, the Executive Board cut back sharply on production programs and brought forward vacation-related shutdowns at several production plants, which were originally planned for the summer. The Group remains committed to its goal of reducing inventory to around EUR 500 million by the close of the year

Guidance withdrawn, Executive Board and Supervisory Board propose suspension of dividend payout

Given that it is not possible at present to predict the further impact of the COVID-19 pandemic, the Executive Board withdrew its guidance for fiscal 2020 on April 21. “It is currently not feasible to foresee how the pandemic will affect customer demand moving forward, the robustness of global supply chains or our Group's production output. Looking ahead to the coming months, however, we expect the economic effects to have a much bigger impact on our business than in the first quarter,” explains Martin Lehner. In April, the volume of business was well below the prior-year level with revenue and order intake revealing clear double-digit losses.

To respond with agility to the current level of demand, the Group has adopted various short-time work models. The Executive Board has also implemented numerous initiatives to cut costs and secure liquidity. These include re-evaluation of all planned investments, as well as a joint decision taken by the Executive Board and the Supervisory Board to propose suspending the dividend payout at the Annual General Meeting.

Key indicators for the Wacker Neuson Group

The Wacker Neuson Group's complete first-quarter report for 2020 is available at the following link.