KHD's first-quarter revenue down, order intake increases
KHD Humboldt Wedag reported a 15.4 per cent decline in revenue for 1Q15 to EUR50.7m compared to the first quarter of the previous year, while the order intake increased but was "still not entirely satisfactory," according to the German equipment supplier.
Order intake was EUR58.3m for the January-March 2015 period, higher than the level reached in the first quarter of the previous year (EUR25.3m). Several investment decisions were delayed until the second half of 2015 by individual customers in the capex segment, the company explained. Orders with an overall volume of EUR47.5m were placed in the capex business unit in the first quarter of 2015 (previous year: EUR13.3m). The spare parts and service business (Parts & Services segment) had an order intake of EUR10.9m versus EUR12m a year earlier.
As a result of an improved order intake volume, the order backlog as of 31 March 2015, at EUR203.1m, showed a slight increase of EUR3.9m over the amount recorded on 31 December 2014.
Projects in Russia and North America primarily contributed to revenue over the first three months of this year. The gross profit for the first quarter of 2015 was EUR3.7m (previous year: EUR7m) and as a result, the gross profit margin decreased from 11.6 to 7.3 per cent. "The margin decline reflects both the effects related to the execution of projects won in previous years against strong competition and under high margin pressure and special challenges in project execution that resulted in additional costs for certain large projects," KHD said in a statement.
Due to the low order backlog at the beginning of the year, the capex segment contributed just EUR37.5m to revenue in the first quarter of 2015 (previous year: EUR46.9m). The Parts & Services segment revenue totalled EUR13.2m (previous year: EUR13m). While the gross profit in the capex segment at EUR0.4m "was unsatisfactory" (previous year: EUR3.1m), the Parts & Services segment achieved a gross profit of EUR3.3m (previous year: EUR3.9m). This resulted in a gross profit margin in the Parts & Service segment of 25.3 per cent (previous year: 29.8 per cent). In contrast, the gross profit margin in the capex segment was just one per cent (previous year: 6.6 per cent).
While EBIT in the capex segment that amounted to EUR-7.7m (previous year: EUR-4.5m) was unsatisfactory, the Parts & Services segment achieved EBIT of EUR2.2m (previous year: EUR2.8 m).
Outlook
Due to the low order backlog at the beginning of the financial year, revenues in 2015 will remain significantly below the level of the previous year. The gross profit margin will also remain at an unsatisfactory level due to low margin projects currently in execution. Despite the cost optimisation measures introduced in recent years, significantly negative earnings (EBIT) are expected for the 2015 financial year.
As a consequence of the difficult economic and political environment, challenges in project execution and the resulting significantly negative EBIT, KHD expects a negative result before taxes for the 2015 financial year.
