German compact equipment manufacturer Wacker Neuson took a significant hit from the Covid-19 pandemic in the first quarter of 2020, and expects worse to come.
The group’s revenues fell by 5.6% to €410.8 million, compared to the equivalent quarter in the previous year, and profits slipped by 71% to €5.9 million.
Martin Lehner, CEO of Wacker Neuson, said, “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.”
Large drops in activity in the Americas and Asia-Pacific were partly offset by an overall increase in the volume of business in Europe in the first quarter.
A 27% decline in revenues in the Americas, to €76.9 million, was attributed to a decline in dealer investment activity and postponement of orders by key accounts, including rental companies.
Asia-Pacific revenues dropped by 44% to €7.5 million. The company’s Chinese production plant was brought to a standstill for several weeks, due to the Covid-19 outbreak, but gradually came back on stream in March and has now almost fully resumed manufacturing activities.
Meanwhile, a small but welcome increase by 3.1% in European revenues to €326.4 million was primarily fuelled by demand for compact equipment for the agricultural market, which was still strong at the start of the year. Wacker Neuson also highlighted strong demand for its new Dual View dumper.
Within Europe, overall positive trends in the DACH region (Germany, Austria and Switzerland), driven in part by flexible rental and sales solutions through direct sales channels, provided sufficient momentum to compensate for the significant downturn in revenue seen in Southern Europe and countries such as Poland, France and the UK.
The EBIT (earnings before interest and taxes) margin fell by just 0.1% to 7% due to strict cost control measures. The company also benefitted from higher productivity levels at its production plants relative to the previous year.
However, these positive effects were countered by the first expenses under the group’s programme to cut costs and increase efficiency, announced in January.
In response to the Covid-19 pandemic, the group has cut back sharply on production programmes and brought forward vacation-related shutdowns at several production plants, which were originally planned for the summer.
Given the difficulty of predicting how the crisis will develop going forwards, Wacker Neuson has withdrawn its guidance for the full year.
Lehner said, “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.”
In April, the volume of business was said to be significantly below the prior-year level, with revenue and order intake revealing clear double-digit losses.
Due to the suppressed level of demand, Wacker Neuson has adopted various short-time work models for staff and implemented initiatives to cut costs and secure liquidity. These include the re-evaluation of all planned investments.