Germany: Negative outlook puts pressure on GEA

GEA Group, one of the largest suppliers for the food and beverage processing industry, has published a profit warning for the current financial year. The company adjusted its outlook for the operating cash flow driver margin to a corridor of 6.5 to 7.0 percent from previously 8.5 percent. Despite the good volume development in 2018, GEA is less confident about the development of its business in 2019. “The deteriorating macroeconomic environment combined with further increases in material and personnel costs will have a negative impact,” said the company in an ad-hoc press release.

GEA has been suffering from weak demand from the dairy industry for quite some time. The end of the dairy's super cycle caused investment in the industry to collapse. GEA Group, which has a strong focus on this area, is especially hard hit. Investors have long been hoping for a turnaround. Several activist investors, including Paul Singer and his hedge fund Elliott Management Corporation and Belgian billionaire and entrepreneur Albert Frère became last year investors in GEA Group and urging now for a transformation of the business to a more decentralized structure.

Long-serving CEO Jürg Oleas (60) has decided to leave the company after completion of the fiscal year in April 2019. He will be succeeded by Stefan Klebert (53), who held various positions in the German engineering and processing industry before. (inside.beer, 19.9.2018)

Earlier this year GEA already announced to put under scrutiny all parts of the company in order to fight weak results.The company said at that time that “the group expects the challenging market environment to continue, in particular in the dairy processing and beverage industries.” The food and beverages sector is of major strategic importance to GEA and accounts for around 70 percent of the business. (inside.beer, 13.1.2018)

Analysts do not believe that the company is already on the path of recovery and fear further negative surprises in the coming quarters. They believe that GEA could miss the expectations again.

The stock price of GEA, which is listed on the German MDAX index and included in the STOXX Europe 600 Index, collapsed today by nearly 8 percent but could recover a smaller part of the loss later in the course of the day.

GEA is one of the largest suppliers for the food processing industry and a wide range of other industries that generated consolidated revenues of approximately EUR 4.6 billion in 2017. As of December 31, 2017, the company employed almost 18,000 people worldwide. The international technology group focuses on process technology, components and sustainable energy solutions for sophisticated production processes in various end-user markets.

 

Newsletter

Please subscribe here for your free weekly newsletter!