Hermle in the financial press.
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Coronavirus pandemic hampers Hermle in first half of 2020
Incoming orders, turnover and earnings fall sharply
High flexibility secures solid two-digit gross margin on sales
A solid platform to achieve forecast and to hit the ground running after the crisis
Gosheim, 31 August 2020 – The impact of the Covid-19 pandemic during the first half year of 2020 was clearly felt at Maschinenfabrik Berthold Hermle AG. Due to the collapse in demand caused by the coronavirus, incoming orders at the Swabian machine tool manufacturer fell sharply during the first six months compared with the same period the previous year: by 45.5% to €119.4 million (previous year: €218.9 million). The company received new export orders to the value of €75.3 million (previous year: €129.7 million) and domestic orders amounting to €44.1 million (previous year: €89.2 million). On 30 June 2020, Hermle had a Group-wide order backlog of €57.8 million compared with €99.3 million at the end of 2019.
Hermle Group turnover plummeted by 30.6% to €160.9 million during the first six months of 2020 (previous year: €231.7 million). Of this, €98.0 million (previous year: €125.3 million) came from abroad and €62.9 million (previous year: €106.4 million) from domestic customers. The export ratio increased from 54.1% to 60.9%. At the height of the coronavirus crisis in April and May, the business for service and spare parts was also severely impaired along with the business for new machinery. Towards the end of the period under review, the technology leader in 5-axis machining centres reported a gradual recovery in this area in some countries.
The concept of the breathing company enables Hermle to implement far-reaching capacity adjustments and to react very flexibly to fluctuations in capacity utilisation up to a certain degree. Although revenue lost due to the coronavirus had a significant impact during the period under review, the financial position remained solid. From January to June 2020, operating profits in the Group were €29.8 million (previous year: €50.7 million) and earnings from ordinary activities amounted to €29.9 million (previous year: €50.6 million). This results in a gross margin on sales of 18.6% (previous year: 21.8%). After taxes, a net profit of €21.5 million was reported for the period (previous year: €37.3 million).
Likewise, the asset and financial position remained solid in the first half year: as per 30 June 2020, liquidity across the Hermle Group amounted to €130.5 million (31.12.2019: €107.5 million) and the equity ratio was 75.8% (31.12.2019: 72.3 %). Operating cash flow during the first six months of 2020 was €26.6 million (previous year: €42.5 million).
Investments in tangible and intangible assets during the period under review rose to €9.2 million (previous year: €4.5 million). These related primarily to two major construction projects that commenced in 2019. Due to space constraints at the company headquarters on the one hand, Hermle is constructing an additional production building at the second manufacturing site in Zimmern, which will probably be completed during the current year and will be used for sheet metal fabrication. On the other hand, the company is expanding capacities for the Technology and Training Centre as well as the spare parts warehouse at the US site in Franklin/Wisconsin. The two strategically important projects were already at such an advanced stage when the Covid-19 pandemic that it made sense to continue them in spite of the crisis. Other investment projects have or will largely come to a halt.
On 30 June 2020, Hermle employed 1,304 people throughout the Group compared with 1,319 at the end of 2019. Due to the downturn in demand caused by the coronavirus, vacancies that arose were only filled where absolutely necessary and flexitime accounts were largely reduced. The number of apprentices rose from 79 to 94 (this year compared with last year).
Since the start of the third quarter, the normalisation of the service and spare parts business at Hermle appears to be stabilising. In addition, the downward trajectory of demand for new machines may have levelled out in some sectors. Since the order backlog has significantly reduced in the meantime, the extended production breaks previously announced were implemented during the summer with a correspondingly higher impact on earnings. Since it remains unclear how the pandemic will develop, which countermeasures will be required and what impact these will have, it is still uncertain whether the current signs of a bottoming out of demand and a tentative revival in some sectors will stabilise. It is also likely that the pace of development will vary greatly depending on the industry. Whereas sectors such as medical technology may yet recover this year, the crisis affecting other consumers such as the aviation industry is likely to last much longer and will probably continue to impact Hermle in 2021.
For the full year 2020, Hermle still expects Group turnover to fall by around 50%, leading to a disproportionate reduction in operating profit. Since the overall trend during the first half of the year was slightly better than predicted in April, our forecast currently appears to be reliable, although significant risks, but also the opportunity for more favourable development remain. Irrespective of this, Hermle is confident that it can hit the ground running when the crisis passes. This view is backed up not only by very solid financial resources and high flexibility but also by the ongoing internationalisation and continuous automation and digitalisation of the product offering.
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