Krones Q1 performance hit by rising raw material costs
half of 2004, but the return on sales has been hit by the steep
increases in raw material prices.
Packaging firm Krones reported some improvements for the first half of 2004, with order bookings rising by 18.2 per cent to €784.9 million, up from €663.9 m in the same period last year.
The results from the company, which is the world's largest producer of beverage bottling/canning lines and packaging machinery, suggests that the healthy trend in the global business cycle is now showing up among export-driven German companies.
Krones' exports account for around 80 per cent of its turnover. Particularly high growth was reported in the regions of North America, Asia/Pacific and in the former CIS nations.
Sales improved by eight per cent to reach €775.1 million (January to June 2003: €717.5 m) while earnings before interest and taxes showed a modest rise of 9.3 per cent to €58.7 million (January to June 2003: €53.7 m).
The increase in earnings after taxes, however, did not keep pace with the growth in sales. During the first half of 2004, net income showed a modest rise of 1.7 per cent to reach €35.0 million (January to June 2003: €34.4 m).
Return on sales was hit primarily by the steep increases in the price of raw materials, and higher wage costs as well. Krones claims that due to the continuing price war, these cost hikes could not be passed on to the customers.
To ensure that its competitive position in the international market is maintained and indeed strengthened, Krones will inevitably have to start considering whether to relocate some production operations to facilities abroad or introduce longer and more flexible working hours.
In the group, which on 30 June 2004, was employing 8,724 people, capital expenditure during the first half of this year, at €13.5 million, was 44 per cent less than in the preceding year's equivalent period (€24.3 m).
However, with sales up once again, and orders on hand amounting on 30 June 2004, to €629.2 million, 12.3 per cent above last year's like-for-like figure, Krones claims that the group will still be able to maintain its front-ranking position on the world market in 2004.
Sales for 2004 as a whole are projected to continue within the bandwidth of between five and ten per cent the company has projected for the years ahead. After sales of €1.435 billion in the preceding year, the company anticipates a figure exceeding €1.55 billion for 2004 as a whole.
And following a net income of €60.3 million in 2003, Krones regards further improvement in earnings as achievable, though as a percentage it will not keep pace with the growth in sales.
German-based Krones Group develops and manufactures machines and complete lines for bottling, canning and packaging processes in the beverage, food and chemical industries. It operates plants in Neutraubling, Nittenau, Flensburg, Freising and Rosenheim.
Besides Krones, the group also includes the production subsidiaries Steinecker (brewing technology), Sander Hansen (pasteurisers), Syskron (process automation) and Kosme (machines for the lower output range), plus more than 40 companies abroad.
