First half-year 2023: Further increase in sales and sig­nif­i­cant rise in operating profit

Group

In the first half of 2023, demand for the products and services of Bucher Industries declined from an extremely high level in line with the general economic slowdown, although it remained good. The Group’s order intake declined in all divisions except Bucher Emhart Glass and Bucher Specials, which maintained the level of the prior year. Sales again rose significantly, despite negative currency effects, due to price increases and an expansion of production capacity. The increase in volume was also due to improvements in the supply chain and consequently in production efficiency. The order book decreased compared to the prior year. However, it remained high with a range of more than five months, which provides valuable visibility in an increasingly uncertain environment. The operating profit margin exceeded the prior year’s very good level. This was due to strong capacity utilisation and passing on price increases. It is encouraging that all of the divisions contributed to this margin increase. The Group’s profit for the period also increased significantly.

Another increase in return on net operating assets

The return on net operating assets (RONOA) was 30.2%, significantly above the long-term target of 20% and therefore far above the cost of capital of 8%. Average net operating assets rose compared to the prior-year period due to volume-related factors and projects that allow further growth. The main focus was on the construction projects of Bucher Hydraulics and Bucher Automation in Germany as well as Bucher Emhart Glass in Malaysia. The seasonal increase in net working capital, higher investments and payment of the dividend had a negative impact on free cash flow. Net liquidity was correspondingly lower and will increase again by the end of the year. The equity ratio grew to 59%.
 

Kuhn Group

Good sales development

Demand for agricultural machinery decreased in the first half of 2023 after two very strong financial years. Kuhn Group’s order intake declined significantly, especially in the seasonally weakest second quarter. This was due to high production costs for farmers, combined with lower prices for agricultural commodities and lower yield expectations in some areas due to the droughts in Europe and North America. In addition, interest rates and machinery prices remained high. This put pressure on farm incomes and discouraged new investments. Lower retail sales led to a rebuilding of inventories in the dealer network. Overall, the division achieved higher sales in the first half of the year than in the prior-year period, due to its continued strong order book and the improved production conditions. The expected start of a downturn in Brazil was more than offset by increases in Europe and North America. The shortage of skilled labour continues to be a problem, especially in North America. Thanks to good capacity utilisation, improved production efficiency and price increases, the operating profit margin exceeded the good result achieved in the prior-year period.
 

Bucher Municipal

Significant increase in sales thanks to improved delivery situation

In the first half of 2023, demand for municipal vehicles was characterised by a decline at a high level. Bucher Municipal’s order intake fell compared to the prior-year period, which included several large orders. Significantly fewer orders were recorded for sweepers and sewer cleaning vehicles. Demand for refuse collection vehicles clearly exceeded the prior year’s level, and demand for winter maintenance equipment as well as maintenance services and spare parts also developed positively. The situation in the supply chain eased, and sales significantly exceeded the prior-year period. The order book consequently decreased at a high level and still has a range of more than seven months. Preparations for the gradual introduction of a new ERP solution at all sites are progressing well. The operating profit margin recovered from the low prior-year period. This was due in part to improved production efficiency and strong growth in sweepers and maintenance services, as well as price increases.
 

Bucher Hydraulics

Downturn in the markets

The hydraulics markets declined at a high level during the first half of 2023. Bucher Hydraulics’ order intake did not escape this general trend and fell somewhat compared to the prior-year period. Demand in the agricultural machinery market segment remained at a high level, as did demand in the mobile electric drive technology business. The decrease in order intake was mainly due to China and North America. Demand varied in Europe but remained satisfactory overall. The division’s capacity utilisation remained very high. The very high order book at the end of 2022 fell somewhat in the first half of the year but remained high at the end of the reporting period. The shortages in staff and machine hours still caused delays in delivery for some products. Despite this, the division increased its sales. This was driven in particular by significant growth in Europe and India. The division’s operating profit margin rose compared to the prior-year period thanks to higher sales, its good cost structure and its ability to pass on some of the material price increases.
 

Bucher Emhart Glass

Utilisation remains exceptionally high

Demand for glass containers remained very high in the first half of 2023, not least due to environmental considerations. Order intake remained on a par with the prior year’s level. Despite a slight easing in recent months, global capacity for glass container manufacturing remained tight, and this prompted customers of Bucher Emhart Glass to modernise and expand their existing plant. New production facilities were also planned, especially in South America. Energy-efficiency considerations and the shortage of skilled labour are also relevant. Both of these factors are encouraging plant operators to equip their glass container forming plant with innovative technologies from Bucher Emhart Glass. Capacity utilisation remained very good. Sales again increased significantly. The order book remained at the prior year’s high level. The operating profit margin exceeded the prior year’s already very high level. This was driven by the high capacity utilisation, the favourable product mix and positive currency effects. The encouraging business result in China also contributed to this. In view of the structural improvements in the market and the division’s very positive financial development in recent years, the long-term operating profit margin target for Bucher Emhart Glass over a business cycle was raised from 10% to 12%.
 

Bucher Specials

Varied developments

Bucher Specials’ markets presented a mixed picture in the first half of 2023 but remained at a good level overall. Bucher Vaslin’s order intake remained at the prior year’s high level, although the markets were less dynamic. Sales grew significantly once again. Bucher Unipektin recorded a positive result for the first half of the year. This was mainly due to its good order book at the beginning of the year and its consolidation of the Polish company since the end of 2022. Order intake and sales increased significantly. For Bucher Landtechnik, the market was down overall. Farmers’ willingness to invest remained low in the first half of the year. This was due to the high investment volumes in recent years and the uncertainty caused by significantly increased prices for machinery at a time of mounting pressure on farm income. As of 1 July, Jetter was renamed Bucher Automation in order to benefit from the strong Bucher brand. The positive trend from the prior year remained intact in this business unit. This continued to be driven by the dynamic development at Bucher Emhart Glass and cooperation with Bucher Hydraulics. Overall, Bucher Specials’ increase in order intake was on a par with the prior-year period. Its sales and operating profit margin showed encouraging growth over the prior year.
 

Outlook for 2023

The Group expects demand to normalise further in the second half of the year, starting from a good level in an increasingly uncertain environment. Thanks to the high order book, capacity utilisation will also remain good in the second half of the year, although weaker than in the strong prior-year period. The procurement challenges are likely to persist. Increased personnel and other operating costs will increase pressure on margins in the second half of the year, which will also be weaker due to seasonal factors. Negative currency translation effects should be offset by price increases of a similar size. Thanks to the strong first half, Kuhn Group expects its sales and operating profit margin to be in line with 2022, despite the downturn in Brazil and the current challenges facing its supply chain. Thanks to the division’s exceptionally strong order book, Bucher Municipal expects sales to grow slightly, with electrical products contributing to this growth. The operating profit margin is likely to recover as a result of an improved supply chain and production efficiency. Total annual sales for Bucher Hydraulics will be on a par with those of 2022. The good operating profit margin achieved in the prior year should be achieved again, despite a significant increase in personnel costs. Bucher Emhart Glass anticipates a slight increase in sales and operating profit margin compared to 2022’s very high levels. Bucher Specials expects its sales to increase, partly as a result of its consolidation of Bucher Unipektin’s Polish company since the end of 2022, and its operating profit margin to be in line with 2022. The Group expects sales in the range of 2022 as well as a slightly higher operating profit margin. Accordingly, the Group’s profit for the year should be slightly higher than the prior-year period’s high level.

The interim report as well as the investor relations handout on the results for the first half of 2023 are available on bucherindustries.com under “Media dossiers”.

The video conference on the interim results will be held on 27 July 2023 at 10 am CEST. The link to the conference is available on bucherindustries.com under “Events”.