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Sales down but Deutz keeps profit level in first half 2015

German engine maker Deutz has reported new order sales were down just over 10% in the first half of this year, to €670.7 million. Unit sales also fell, around 21% down on the first half of last year, to 78,120 engines. Sales of 41,213 engines in the second quarter of 2015 were 11.7% higher than in the previous quarter but were 24.5% lower than in prior-year quarter (Q2 2014: 54,622 engines). Revenue was in line with forecasts, falling by 11% year on year to €670.2 million compared with €753.4 million
August 11, 2015 Read time: 3 mins
Deutz chief financial officer Margarete Haase
Margarete Haase
German engine maker 201 Deutz has reported new order sales were down just over 10% in the first half of this year, to €670.7 million.

Unit sales also fell, around 21% down on the first half of last year, to 78,120 engines. Sales of 41,213 engines in the second quarter of 2015 were 11.7% higher than in the previous quarter but were 24.5% lower than in prior-year quarter (Q2 2014: 54,622 engines).

Revenue was in line with forecasts, falling by 11% year on year to €670.2 million compared with €753.4 million in the first half of 2014. “This decline was attributable to the changes to emissions standards for engines under 130kW that came into force in the European Union on 1 October 2014 and to the resulting effects from the advance production of engines.”

The Americas and Asia-Pacific regions achieved revenue growth, whereas the region  Europe, Middle East and Africa saw a decline. In the second quarter of 2015, revenue stood at €352.1 million, which was a 10.7% increase on the previous quarter but a 14.3% decrease on the same period in 2014.

Despite the fall in revenue, operating profit remained level with the comparable prior-year period, at €20.1 million. Net income for the half-year period amounted to €16.7 million, a significant improvement of €14 million on the first half of the previous year’s €2.7 million for the same period.

Deutz also said the higher level of free cash flow was “encouraging”, having risen by €17.3 million to €26.2 million in the first half of 2015.

"We are extremely pleased with the recovery in the Deutz share price,” said chief financial officer Margarete Haase. “The price of our shares rose by 28.5% in the first six months of 2015, outperforming all benchmark indices."
 
Deutz reconfirmed that it is adjusting its production capacity in China to reflect the new, lower level of market demand and is focusing on its existing Deutz Dalian joint venture.

Since 2007 Deutz has been operating the joint venture with the First Automotive Works Group, a major automobile manufacturer in China. The joint venture produces 3 to 8-litre diesel engines mainly for the Chinese market.

But Deutz is looking to exit from its Chinese Joint Venture business Weifang Weichai Deutz Diesel Engine Company, set up in 1998 in the northeast city of Weifang. It manufactures engines for engineering machinery, agricultural machinery, heavy duty trucks, ships, generating sets, stationary power units.Deutz said it has reached an agreement with its partner Weichai Power on the sale of its shares in the business, but the transaction is pending approval from the relevant authorities in China.

Deutz said it expects 2015 to be a “year of transition” and the company continues to forecast that revenue will decline by around 10% compared with 2014.

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