Germany: Krones recovers faster than expected and raises prices

Krones, the world leader in the manufacture of fully integrated packaging and bottling line systems as well as integrated brew house and processing systems, IT solutions and warehouse logistics systems, has faster recovered from the pandemic-related downturn than expected. As a consequence, the company raised its full-year guidance for 2021 and increased prices for its products by up to 6%.

Following a successful start to the 2021 financial year, Krones’ business continued to develop dynamically through the second quarter of 2021. Based on preliminary figures, order intake in the first six months of 2021 was around €2,045 million, some 40% higher than a year earlier.

From April to June 2021, the contract value of orders went up compared with the second quarter of 2020 by almost 60% to around EUR 975 million. It should be noted with regard to the revenue performance that revenue in the first quarter of 2020 was hardly affected by the pandemic. As a result, revenue in the first half of 2021 was up only slightly year on year, gaining about 1% to €1,720 million.

In the second quarter of 2021, on the other hand, revenue showed strong year-on-year growth to some €845 million, marking an increase of around 12% on the prior-year quarter. Despite rising costs, notably of materials and freight, Krones’ profitability improved significantly in the period January to June 2021. This was due most of all to structural measures that the company has launched and already implemented. Earnings before interest, taxes, depreciation and amortisation reached approximately €138 million in the first half of the year (previous year: €118.5 million). The EBITDA margin increased to 8.0% (previous year: 7.0%). The second-quarter EBITDA of €61 million (previous year: €29.0 million) includes a Covid-19 bonus for employees totalling around €5 million.

For the second half of the year, the company expects demand to stay strong and production capacity utilisation to remain stable. Based on the preliminary figures for the first half year and the good outlook for the third and fourth quarters of 2021, Krones is raising its full-year guidance for 2021. For the Krones Group, the Executive Board expects full-year revenue growth of 7% to 9% in 2021 (previously 2.5% to 3.5%). Krones anticipates an EBITDA margin of 7% to 8% (previously 6.5% to 7.5%). For the third performance target, working capital to revenue, the guidance remains unchanged at 26% to 27%. 

Since the start of the global Covid crisis, sales prices on Krones’ markets have declined and remain on a relatively low level. Krones is aiming to restore pre-crisis price levels. In addition, the company also has to compensate for the significant increased material costs. For this reason, Krones will increase prices for all bottling and packaging equipment and for process technology by 6% effective August 1, 2021. This measure will enable Krones to continue to provide its customers worldwide with innovative products and services meeting the highest quality standards. At the same time, Krones will further intensify the measures launched in 2019 and 2020, making the Krones solutions more competitive yet. Krones intends to benefit from the currently growing demand in order to strengthen its leading market position in the beverage and food industries.

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