Orders on hand rose to around €830m at the end of September, while revenue increased by 19% to almost €1.4bn, and adjusted EBIT margin improved to 4.7%.
The company says the war in Ukraine did not have a material adverse effect on business performance but, as for other companies, the impact of the war on energy and raw material prices and on the global flow of goods around the world is very tangible for Deutz.
“Exceptionally high price increases across the board, combined with disruptions to supply chains, are taking their toll on the economy as a whole,” says CEO Sebastian Schulte. "Nonetheless, we raised our adjusted EBIT margin by 2.1 percentage points to 4.7%. This is proof positive that the performance initiatives that we have launched and our greater focus on maintaining cost discipline are increasingly paying off. This uptrend is encouraging but offers no room for complacency because we still have a long way to go before we achieve our targeted profitability level."
Deutz defined a range of measures under its Powering Progress strategy programme that are aimed at facilitating the Company’s transition to alternative drive systems and new business models and boosting its commercial performance.
These include passing on higher costs to customers in the short term through multiple rounds of price rises. This will increasingly mitigate the impact of these higher costs.
Looking to the future, Schulte adds: “Our orders on hand stood at the very high level of approximately €830m at the end of September. That provides a stable starting position for the coming months. Market demand remains particularly strong for engines with a capacity of less than four liters. At the same time, our book-to-bill ratio of 0.95 in the third quarter indicates that market growth is gradually slowing down. However, we have set a course that will make Deutz more resilient in periods of economic weakness.”
Deutz says that, given the considerable geopolitical uncertainties, the guidance for 2022 published in its 2021 annual report has been under review. Based on its business performance in the first to third quarter, the is now forecasting unit sales of between 175,000 and 185,000 engines for 2022. This should result in an increase in revenue to between €1.75bn and €1.85bn. The adjusted EBIT margin is likely to be in a range of 4.5% to 5.0%.
Despite this encouraging earnings guidance, Deutz says free cash flow is expected to be a negative amount in the low- to mid-double-digit millions of euros. It adds that the main reasons for this are the build-up of inventories in order to safeguard production and delays in the supply chain.
