Financial and capital structure

Kro­nes, man­u­fac­tur­er of fill­ing and pack­ag­ing tech­nol­o­gy, released its annu­al report for the finan­cial year 2017 today. The com­pa­ny con­tin­ued its sta­ble, prof­itable growth and intends to give share­hold­ers an appro­pri­ate share in its success.

Revenue grew 8.8%

The firms rev­enue increased 8.8% year-on-year to €3,691.4 mil­lion. Adjust­ed for acqui­si­tions, rev­enue was up 7.2%. The firms broad inter­na­tion­al diver­si­fi­ca­tion and com­pre­hen­sive port­fo­lio of prod­ucts and ser­vices served the com­pa­ny well in 2017. The high­est per­cent­age rev­enue growth came in the South America/Mexico, Asia-Pacif­ic, and West­ern Europe sales regions.
Order intake improved by 10.0% year-on-year to €3,786.8 mil­lion in 2017. Adjust­ed for acqui­si­tions, the increase was 7.1%. While order intake in the Asia-Pacif­ic and North Amer­i­ca regions rose more than that, order­ing activ­i­ty was some­what slow­er in Chi­na and the Mid­dle East/Africa. At the end of 2017, the com­pa­ny had orders on hand totalling €1,240.1 mil­lion, which is up 8.3% year-on-year. The com­fort­able orders back­log pro­vides a good basis for con­tin­ued rev­enue growth.

EBT margin stable at 7.0%

As fore­cast, the firms fur­ther increased earn­ings before tax­es (EBT) in 2017. It should be borne in mind that the expense for the drink­tec trade fair result­ed in a charge against EBT in the mid-sin­gle-dig­it mil­lions of euros. Nev­er­the­less, EBT improved 8.9% over 2016 to €258.8 mil­lion. The EBT mar­gin remained sta­ble at 7.0%, as in the year-ear­li­er peri­od. Thus, the com­pa­ny met its EBT mar­gin tar­get for 2017. As expect­ed, mar­ket prices pro­vid­ed no sup­port. The com­pa­ny was able to off­set increased costs with increased effi­cien­cy. Expand­ing our glob­al foot­print and gen­er­al cost-cut­ting mea­sures helped here. Net income increased 10.7% year-on-year in 2017 to €187.1 mil­lion. Earn­ings per share rose from €5.40 in the pre­vi­ous year to €5.97.
Earn­ings before tax­es (EBT) devel­oped best in the machines and lines for prod­uct fill­ing and dec­o­ra­tion seg­ment in 2017. The company’s core seg­ment increased EBT 11.9% year-on-year to €257.0 mil­lion. The EBT mar­gin improved from 8.2% to 8.7%, more than the 8% forecast.
By con­trast, earn­ings in the machines and lines for bev­er­age production/process tech­nol­o­gy seg­ment fell short of expec­ta­tions. After totalling €1.5 mil­lion in the pre­vi­ous year, EBT slipped into the red,
to -€4.5 mil­lion in 2017. The com­pa­ny is con­fi­dent that the seg­ment will be prof­itable again in 2018 as it expands its glob­al foot­print and ful­ly inte­grates the acqui­si­tions. Prof­itabil­i­ty in the company’s small­est seg­ment, machines and lines for the com­pact class, was with­in the fore­cast range. EBT declined slight­ly, from €6.4 mil­lion to €6.3 mil­lion. The EBT mar­gin was 5.1% (pre­vi­ous year: 5.2%). As of 2018, the firms com­pact class offer­ings are now part of the core seg­ment, machines and lines for prod­uct fill­ing and dec­o­ra­tion. Thus, the com­pa­ny will report on only two seg­ments going forward.

Shareholders to receive a dividend of €1.70 per share for 2017

The firm wish­es to give its share­hold­ers an appro­pri­ate share in the company’s suc­cess in 2017. As a mat­ter of pol­i­cy, the com­pa­ny pays out 25% to 30% of con­sol­i­dat­ed net income to share­hold­ers. The Exec­u­tive Board and the Super­vi­so­ry Board will pro­pose to the annu­al gen­er­al meet­ing on 13 June 2018 that a div­i­dend of €1.70 per share be paid out for the 2017 finan­cial year (pre­vi­ous year: €1.55). That is an increase of 9.7%. The planned pay­out for 2017 cor­re­sponds to 28.7% of con­sol­i­dat­ed net income.

Robust financial and capital structure

The ratio of aver­age work­ing cap­i­tal for the past four quar­ters to rev­enue was up from 26.7% in the pre­vi­ous year to 27.3% in 2017. The tar­get for 2017 was 27%. The com­pa­ny is not sat­is­fied with the devel­op­ment of free cash flow, which decreased to -€150.7 mil­lion in 2017 (2016: +€49 mil­lion). Net cash and cash equiv­a­lents (cash and cash equiv­a­lents less lia­bil­i­ties to banks) decreased to €157.4 mil­lion (pre­vi­ous year: €369 mil­lion). The com­pa­ny’s equi­ty ratio improved to 43.8% (pre­vi­ous year: 39.9%). Over­all, the com­pa­ny con­tin­ues to pos­sess a very robust finan­cial and cap­i­tal structure.
With the fig­ures not­ed above, Kro­nes con­firms the pre­lim­i­nary fig­ures released on 22 Feb­ru­ary 2018. The finan­cial audit did not give rise to any mate­r­i­al changes.

Outlook

Based on the cur­rent macro­eco­nom­ic prospects and devel­op­ments in the mar­kets rel­e­vant to Kro­nes, the com­pa­ny expects con­sol­i­dat­ed rev­enue to grow by 6% in 2018. Prof­itabil­i­ty is expect­ed to remain sta­ble despite invest­ment in dig­i­tal­i­sa­tion and start-up costs asso­ci­at­ed with expand­ing the company’s glob­al foot­print, in par­tic­u­lar for the new site in Hun­gary. The com­pa­ny expects the report­ed EBT mar­gin to be 7.0% in 2018. The company’s third finan­cial per­for­mance tar­get, work­ing cap­i­tal to rev­enue, is expect­ed to improve to 26%.