Deutz Expanding in Asia

While global sales have declined slightly, Deutz will expand its operations in Asia to increase its presence in the global marketplace.

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The current slowdown in the global economy that prompted international economic research institutes to cut their forecasts has also affected DEUTZ AG's business performance.

Unit sales rose from 46,461 engines in the first three months of 2012 to 47,392 engines in the second quarter of this year. At €344.1 million, revenue also posted a modest increase on the previous quarter (Q1 2012: €336.9 million). Operating profit came to €11.3 million in the second quarter, which was exactly €1.0 million higher than in the first three months of the year (Q1 2012: €10.3 million). These second-quarter earnings were reduced by a total of some €5 million owing to one-off items in connection with the replacement of the company's previous funding facility as well as impairment losses and higher start-up costs at joint ventures.

DEUTZ AG received orders worth €701.0 million in the first six months of 2012. This constituted a decrease of 12.1% compared with the corresponding period of last year (H1 2011: €797.1 million), during which customers had placed their orders early in response to the prevailing  economic situation and DEUTZ's excellent production capacity utilization. Unit sales of engines also declined. DEUTZ sold 93,853 engines in the first six months of 2012, which was 12.4% fewer than in the corresponding period of last year (H1 2011: 107,198 engines). Revenue in the first half of 2012 totalled €681.0 million, which was 6.0% below the impressive figure achieved   in the same period last year (H1 2011: €724.1 million). Revenue declined less significantly than unit sales owing to the greater complexity and value of the engines that meet the new Tier 4 Interim emissions standard, which account for an ever-growing proportion of the total engines sold.

DEUTZ generated an operating profit (EBIT) of €21.6 million in the first six months of this year, which represented a year-on-year decrease of €22.7 million (H1 2011: €44.3 million). The primary reasons for this fall in earnings were the downturn in business volumes resulting from the economic slowdown in Europe and China as well as one-off items. The production start-ups for the engines that meet the new exhaust emissions standard also failed to achieve the anticipated results during their start-up phases. Consequently, net income for the period fell by €21.8 million to €12.1 million (H1 2011: €33.9 million).

DEUTZ has responded to the weaker demand for its products by cutting its forecasts for this year. It now expects its revenue for 2012 as a whole to be within a range of €1.3 billion to €1.4 billion and its EBIT margin to be between 3.0 and 4.0%.

"In the first half of 2012 we were unable to build on our impressive start to the year. This was largely due to the macroeconomic situation, which is still afflicted by considerable uncertainty. Nonetheless, we are confident that DEUTZ is well positioned for the future and will continue to grow profitably over the medium to long term. Our new joint venture in Shandong is rapidly gaining momentum and should soon enable us to achieve our ambitious goals in Asia. Our plans to set up a joint venture in China with Volvo are also making good headway. In addition, we have opened new service centers in Moscow and Madrid in order to expand our service-related business," says Dr. Helmut Leube, the chairman of DEUTZ's Board of Management.