German equipment and cement industry services specialists KHD Humboldt Wedag reported a slight increase in first-half revenue compared to the same period of last year but saw a low order intake due to poor market conditions.
In a statement released today, the company said its performance in the first six months to the end of June 2014 “continued to be affected by weak market conditions and unsatisfactory margin quality in the order backlog.” Positive earnings contribution from the Parts & Services segment was not able to fully offset the “disappointing” results of the Capex segment, the statement added.
Consolidated firstl half revenues inched ahead to EUR114.8m compared to EUR111.5m in 1H13. Revenues came in largely from projects that were taken in recent years under strong margin pressure. The affected KHD’s gross profit, which came in at EUR16m compared to EUR17.6m in 1H13, bringing gross profit margins to 13.9 per cent (previous year 15.8 per cent).
EBIT with a slightly negative at EUR-0.9m (previous year: EUR3.1m) during the reporting period. This corresponds to a EBIT margin of -0.8 per cent. Positive EBIT in the Parts & Services division of EUR6.3m was offset by negative EBIT in the Capex segment of EUR-7.2m.
Although KHD’s order intake of EUR52m was also up on the previous year (EUR40.4m), it remained well below expectations. In the Capex segment, a significant new order in Russia could not be booked due to continuing uncertainties related to the crisis in Ukraine. Therefore, new orders in the Capex segment amounted to a low EUR24.6m. the Parts & Services segment contributed to EUR27m to 1H14 order intake. As a result, the low order intake and the ongoing of execution of existing projects, KHD’s order backlog as of 30 June 2014 was EUR276.5m – significantly lower than the same period of last year.
“Despite the weak market and margin situation, we are investing in the expansion of our business model,” said KHD CEO Jouni Salo. “We have strengthened our service business and once again intensified research and development activities.”
For the 2014 financial year, the group expects total order intake to be slightly lower than the EUR172.4m achieved last year and revenue is forecast to decline by up to 10 per cent. The Group’s EBIT margin is also expected to be slightly negative. Profit before tax should be positively affected through the course of the year, due to the conclusion of lending agreements to AVIC with attractive interest rates, KHD added.