Cautious outlook for 2016 from Wacker Neuson

Munich, Germany-based international light and compact construction equipment manufacturer Wacker Neuson reported revenue growth in 2015, but issued a cautious forecast for this year after a weak fourth quarter and start to 2016.

The company reported 2015 revenues of €1.38 billion, up 7% year-on-year, fuelled by a strong first half that was tempered by a markedly weaker second half. However, profit before interest and tax (EBIT) decreased 24% to €104 million.

Wacker Neuson said earnings were negatively impacted by the situation in crisis-hit emerging markets and industries as well as by increasing pressure on prices and margins.

It said the continued slump in the raw materials industry had also negatively impacted key sales markets for the Group in Brazil, Chile, Russia, South Africa, Canada, the US and Australia, according to Wacker Neuson.

CEO Cem Peksaglam said, “The oil and gas industry is currently facing an existential crisis and many companies have already been forced to cease operations. This is an important sector for us in North America.

“The crisis has been largely triggered by the squeeze on oil prices, which dropped to a ten-year low, making it impossible for companies to cost-effectively extract raw materials in this region.”

Nevertheless, the company said its compact equipment segment – which accounts for around half of total revenues ­– again proved to be the main growth driver in 2015, with revenues increasing 15%.

It said revenues from light equipment (representing 30% of the total) were down 1% year-on-year, while revenues in its service and spare parts business (accounting for 20% of the total) grew 4%.

Cost savings

Wacker Neuson said it was focussing more than ever on strict cost controls.

Mr Peksaglam said, “In the medium term, we expect to achieve annual cost savings in the double-digit million range as a result of procurement synergies, centralized logistics processes, a strong focus on lean management and standardisation across all areas of the business. We will also be leveraging our aftermarket business to develop revenue and earnings potential.

“Unfortunately, the weak growth in Q4 2015 continued into the first weeks of 2016. The agricultural and energy sectors are still distressed and we do not expect this situation to improve permanently in the coming months.

He said that, in North America, the company did not expect to see any significant growth impetus until the second half of the year at the earliest due to the oil and gas crisis.

"In Europe, the picture for 2016 is more positive for us, at least in the construction sector. Current order intake for compact equipment is promising here," he added.

Wacker Neuson forecast revenues for 2016 of between €1.40 billion and €1.45 billion, up between 2% and 5% compared to 2015. It said the EBIT margin was expected to be stable year-on-year within a range of 7% to 8%.

The company added that it had earmarked around €100 million for investments in 2016, compared to 2015’s figure of €118 million.