Shares of Deutz Group (DEUZF.PK,DEZBF.PK) declined around 9 percent in the early morning trading on Frankfurt's Xetra after the German engine manufacturer said Tuesday that its third-quarter new orders declined from last year, and was below expectations. The company added that it will not meet its previous earnings forecast for the year, due to an unexpected charge in its Compact Engines segment.
In its statement, Deutz noted that significant costs will be incurred over the coming years in connection with warranties and goodwill for engines from the Compact Engines segment, primarily relating to engines manufactured in 2011.
In the third quarter, there was an unexpected charge against earnings of 20.4 million euros resulting from the recognition of provisions for warranty costs, net of limited insurance claims.
After taking the recognition of provisions into account, operating profit or EBIT was 2.7 million euros and the EBIT margin was 0.6 percent.
Excluding the unexpected charge, EBIT increased 35.1 percent to 23.1 million euros from last year's 17.1 million euros, and EBIT margin improved to 5.4 percent from 4.5 percent a year ago.
Quarterly revenue amounted to 424.6 million euros, an increase of 11.4 percent from the previous year's 381.0 million euros.
Meanwhile, new orders in the third quarter declined to 330.0 million euros from 360.1 million euros a year ago. The company said the new orders fell below expectations as a result of the general economic slowdown.
In the Compact Engines segment, the EBIT margin came to negative 0.2 percent including the charges, while adjusted EBIT margin was 5.3 percent, higher than last year's 2.3 percent. Revenue grew to 368.3 million euros from 315.1 million euros a year ago, while new orders totaled 270.4 million euros, down from last year's 303.1 million euros.
In the Customised Solutions segment, EBIT margin dropped to 7.5 percent from 14.9 percent last year, and revenue declined to 56.3 million euros from 65.9 million euros. New orders increased from last year.
Looking ahead, Deutz said it expects to generate revenue of around 1.5 billion euros in the current financial year, an increase of around 3 percent from last year. The company further said it will not be able to achieve previous forecast for EBIT, primarily as a result of the unexpected charges.
Deutz will provide a new earnings outlook when it publishes third quarter financial results on November 6.
The company further said it is currently examining whether it has any further insurance claims.
In Germany, Deutz shares were losing 0.32 euros or 8.65 percent, and trading at 3.40 euros.
For comments and feedback contact: editorial@rttnews.com
Business News