Deutz sets on a chase to close the gap
Deutz AG, the German manufacturer of internal combustion engines and powertrain systems, has made a strong comeback in the second quarter of the year. The company, which is primarily known for its focus on industrial, agricultural, and construction machinery markets, has seen a significant increase in orders and sales, growing by double-digit rates.
The growth was particularly noticeable in the Solutions segment, which includes the energy business and new technologies. This segment saw a substantial increase in revenue, reaching 83.7 million euros, a rise of almost 7% compared to the previous year. Despite an EBIT loss of 10.2 million euros in the Solutions segment, the company's overall performance has been impressive.
The comeback can be attributed, in part, to recent acquisitions. Blue Star Power Systems, acquired last year, generated double-digit revenue growth in the Solutions segment. However, details about the specific acquisitions or potential future M&A activities, especially in the defense sector, have not been widely reported.
Deutz's CEO, Sebastian Schulte, stated that the company's transformation into a more broadly positioned, more resilient company is paying off. The company is creating conditions for further growth through acquisitions, as confirmed by the CFO, Oliver Neu.
The company's financial health also supports its expansion plans. Net debt increased by a third to 259 million euros by June 30, but remains moderate at 1.5 times the operating result before depreciation (EBITDA), offering "room for further M&A activities."
Deutz has also implemented a cost reduction program named "Future Fit" to permanently reduce its cost base by more than 50 million euros by the end of 2026. More than half of the cost reduction is expected to be achieved in the current financial year. The program has incurred one-off expenses of 25 million euros recognized in the first quarter.
Despite the overall positive performance, the company's classic business showed some weakness, with sales in the Engines & Services segment decreasing by about 10% in the first six months compared to the previous year. However, the increase in average selling prices in the Solutions segment has offset some of these losses, contributing to the overall revenue growth.
The interim report of Deutz shows an increase in orders and sales, offering a promising outlook for the rest of the year. Deutz has confirmed its forecast for the full year, with group revenue expected to be between 2.1 and 2.3 billion euros. The company is well on its way to achieving its growth targets, thanks to its strategic acquisitions, cost reduction initiatives, and resilient performance in key segments.
The growth in Deutz AG's revenue, attributed partially to recent acquisitions like Blue Star Power Systems, has been witnessed predominantly in the Solutions segment, which encompasses the energy business and new technologies. This segment's revenue remarkably rose by nearly 7%, reaching 83.7 million euros. The company's financial health, with net debt moderately increasing to 259 million euros, offers potential for further mergers and acquisitions (M&A) activities.
