Wacker Neuson is reporting record first quarter revenues with strong sales growth in the company’s Europe and Americas markets with gains in both the construction and agricultural sectors.
First quarter revenues climbed to €338.5 million ($378.5 million), up 7 percent from 1Q 2016. Profit however fell 18 percent to €9.3 million ($10.4 million).
With this quarter in the books, Wacker Neuson is forecasting growth between 3 and 7 percent for fiscal year 2017 with total sales landing somewhere between €1.4 billion and €1.45 billion ($1.56 billion to $1.62 billion).
“The year has got off to a very promising start for our Group,” Wacker Neuson CEO Cem Peksaglam said in a statement accompanying the company’s earnings report. “The investment mood among many national and international customers in most of our target industries was very positive. This pushed our revenue to a new record high for a first quarter.”
Here’s how Peksaglam explained the drop in profit in a letter to shareholders:
This decrease is not attributable to our operating activities. Instead, it is the result of one-off effects linked to a change in the evaluation method for inventories as part of the elimination of intercompany profit in the prior-year quarter as well as higher one-off expenses for the Executive Board in the first quarter of 2017. Our adjusted profit figures clearly show that our operational profitability increased in recent months. When adjusted for the two one-off effects, EBIT for Q1 2017 rose 28 percent relative to the previous year. The adjusted EBIT margin for the first three months of the year amounted to 4.8 percent and was thus higher than the adjusted figure of 4.0 percent for the rst quarter of 2016.
Each of the company’s three segments saw gains in revenue during the quarter. Light/compaction equipment rose 7 percent to €98.4 million ($110 million); compact equipment, the company’s largest segment, rose 7 percent to €176.4 million ($197 million); and services, which includes repairs and spare parts, rose 8 percent to €68.7 million ($77 million).
In Europe, which accounts for 73 percent of the company’s revenue, sales rose 9 percent to €248 million ($277 million).
“Business developed strongly in Europe, in particular in Germany and France. We also reported high double-digit growth from our business with key accounts in Europe,” Peksaglam says. “In addition, after experiencing significant downturns in recent years, the agricultural sector has started to recover, which is reflected in high order intake for our Weidemann and Kramer brands.”
Sales in North and South America grew 13 percent to €80.9 million ($90.5 million) due to stronger demand from the construction industry. Peksaglam says demand from the oil and gas industries in this region remains weak.
“Moving beyond persistent problems with the start-up of our skid-steer loader production, these machines were now once again able to contribute to growth in the region during the first quarter,” Peksaglam says.
And though the company’s Asia-Pacific region accounts for only 3 percent of its total revenue, sales in the region plummeted 45 percent compared to 1Q 2016. Wacker Neuson attributes the decline to “a one-off effect in the first quarter of 2016 linked to dealers in China stocking up on compact equipment, which almost doubled revenue for the country at that time.” The company notes that “business in Australia and New Zealand developed positively for the first time in a long period, with the two countries posting high double-digit revenue growth for the first quarter of 2017.”
Looking forward, Peksaglam says “We expect the projected positive trend in our business to continue throughout 2017. Our optimism is strengthened by the current healthy order situation, positive trends in our core markets of Europe and the US, a more upbeat investment mood in the agricultural sector, growing business momentum in South America and a gradual recovery in markets dependent on the price of raw materials such as Australia.”