Krones posts first loss in nine years as equipment demand slumps

By Guy Montague-Jones

- Last updated on GMT

Related tags: Krones, Free cash flow, Economics

Krones has fallen into the red for the first time in nine years as demand in the packaging machinery market slumped worldwide by more than 25 per cent.

The beverage filling and packaging technology giant said 2009 was probably the most difficult year in its 59 year history.

Consolidated sales for the full year were down 22 per cent on 2008 to €1,865m as the global economic crisis ate into demand. With the exception of China, Krones said all its markets were affected by a significant decline, particularly North and South America, Eastern Europe and Russia.

Profitability

Demand began to shrink so quickly in the fourth quarter of 2008 that Krones was unable to adjust its operations in time to avoid a net loss on its income sheet for 2009.

Although the company launched a “Conversion” ​programme at the end of 2008 to cut costs and adapt to the new market reality, it posted a consolidated loss of €34.5m in 2009 compared to a net profit of €106.5m for the previous year.

Despite reporting its first loss in nine years, Krones said its financial position is “rock solid”​ as it upped its free cash flow by 5 per cent to €83m and had no debts with banks to report at the end of 2009. In addition, net cash amounted to more than €135m compared to €107m in the preceding year.

Outlook

Looking ahead, Krones said it is cautiously optimistic for 2010. The company anticipates a turnaround in the overall trend for the first half of the year, with sales expected to increase between 5 and 15 per cent for the full business year.

As Krones continues to its “Conversion”​ programme to cope with more volatile markets, the company also expects a return to profitability.

The early signs of recovery have already begun to take root. In the fourth quarter of 2009 Krones said there was a discernable turnaround in its clients ordering patterns with bookings up 10 per cent on the weakened final quarter of 2008.

Although Krones is optimistic about its prospects and the long-term trends in its sector, such as the “exploding multiplicity of new containers and packaging forms,”​ the company warned that the economic road ahead remains uncertain. It said: “Future developments in the global economy overall are anybody’s guess, with prognoses ranging from optimistic to critical.”

Related topics: Manufacturers

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