GEA Group Reports Mixed Second Quarter Results
Source: DairyNews.today
GEA Group, a global leader in process technology and systems for various industries, has released its financial results for the second quarter of 2024, highlighting a complex picture of modest growth, improved profitability, and strategic adjustments in a challenging market environment.
The company's order intake for Q2 2024 declined by 6.7% to EUR 1,289.4 million, compared to EUR 1,381.4 million in the same period last year. On an organic basis, this represents a 3.5% decrease. Despite growth in the Separation & Flow Technologies and Heating & Refrigeration Technologies divisions, these gains were insufficient to offset declines in other areas. The Beverage, Dairy Processing, and Food sectors showed positive momentum, but overall order intake remained under pressure.
Reported revenue for the quarter saw a slight decrease of 1.4% to EUR 1,323.3 million, down from EUR 1,342.2 million in Q2 2023. However, on an organic basis, revenue grew by 1.6%. Currency translation effects negatively impacted the topline by approximately 3%. Notably, the service business, which benefits from above-average profitability, increased its contribution to 38.9% of total revenue, up from 35.5% in the previous year.
Profitability and Financial Metrics
GEA Group demonstrated strong profitability improvements in Q2 2024. EBITDA before restructuring expenses rose by 4.7% to EUR 200.6 million, compared to EUR 191.5 million in the same quarter of 2023. The corresponding EBITDA margin improved significantly, reaching 15.2%, up from 14.3% in the previous year. All divisions, except for Farm Technologies, contributed to the margin expansion.
Return on Capital Employed (ROCE) remained robust at 32.3%, though slightly down from 33.8% in Q2 2023. The slight decline was attributed to an increase in capital employed that outpaced EBIT growth before restructuring expenses.
Net working capital as a percentage of revenue was stable at 9.1%, within the target range of 8.0 to 10.0 percent, reflecting effective management of operational efficiencies.
In response to the strong operating performance in the first half of 2024, GEA's Executive Board raised its outlook for the EBITDA margin and ROCE for the full financial year. The revised outlook now targets an EBITDA margin before restructuring expenses of 14.9 to 15.2 percent, up from the previous range of 14.5 to 14.8 percent. Similarly, the ROCE outlook has been increased to a range of 32.0 to 35.0 percent, from the earlier 29.0 to 34.0 percent. The company maintained its organic revenue growth forecast at 2.0 to 4.0 percent.
In addition to its financial performance, GEA has been recognized for its sustainability efforts. TIME Magazine and Statista have ranked GEA as one of the world’s most sustainable companies, placing 33rd globally and 3rd in Germany. This recognition underscores GEA’s commitment to sustainability, which has become an integral part of its corporate strategy.
Moreover, GEA's financial standing has been bolstered by recent upgrades from major credit rating agencies. In May 2024, Fitch affirmed GEA’s BBB credit rating and raised the outlook from stable to positive. In June 2024, Moody’s upgraded GEA’s long-term rating from Baa2 to Baa1, with an outlook adjustment from positive to stable. These ratings reflect the company’s improved financial and business profile, further solidifying its position in the market.
For the first half of 2024, GEA reported a 10.4% decline in order intake to EUR 2,654.4 million, compared to EUR 2,962.1 million in H1 2023, with a 6.8% decline in organic terms. Despite this, the company achieved organic revenue growth of 2.2%, with total revenue slightly down by 1.9% to EUR 2,564.5 million. EBITDA before restructuring expenses increased by 4.9% to EUR 381.1 million, driving a notable improvement in the EBITDA margin to 14.9%. Profit for the period also rose by 5.5% to EUR 189.3 million.
As GEA navigates the second half of 2024, the company remains focused on sustaining its profitability and capitalizing on growth opportunities in its core and emerging markets.
Reported revenue for the quarter saw a slight decrease of 1.4% to EUR 1,323.3 million, down from EUR 1,342.2 million in Q2 2023. However, on an organic basis, revenue grew by 1.6%. Currency translation effects negatively impacted the topline by approximately 3%. Notably, the service business, which benefits from above-average profitability, increased its contribution to 38.9% of total revenue, up from 35.5% in the previous year.
Profitability and Financial Metrics
GEA Group demonstrated strong profitability improvements in Q2 2024. EBITDA before restructuring expenses rose by 4.7% to EUR 200.6 million, compared to EUR 191.5 million in the same quarter of 2023. The corresponding EBITDA margin improved significantly, reaching 15.2%, up from 14.3% in the previous year. All divisions, except for Farm Technologies, contributed to the margin expansion.
Return on Capital Employed (ROCE) remained robust at 32.3%, though slightly down from 33.8% in Q2 2023. The slight decline was attributed to an increase in capital employed that outpaced EBIT growth before restructuring expenses.
Net working capital as a percentage of revenue was stable at 9.1%, within the target range of 8.0 to 10.0 percent, reflecting effective management of operational efficiencies.
In response to the strong operating performance in the first half of 2024, GEA's Executive Board raised its outlook for the EBITDA margin and ROCE for the full financial year. The revised outlook now targets an EBITDA margin before restructuring expenses of 14.9 to 15.2 percent, up from the previous range of 14.5 to 14.8 percent. Similarly, the ROCE outlook has been increased to a range of 32.0 to 35.0 percent, from the earlier 29.0 to 34.0 percent. The company maintained its organic revenue growth forecast at 2.0 to 4.0 percent.
In addition to its financial performance, GEA has been recognized for its sustainability efforts. TIME Magazine and Statista have ranked GEA as one of the world’s most sustainable companies, placing 33rd globally and 3rd in Germany. This recognition underscores GEA’s commitment to sustainability, which has become an integral part of its corporate strategy.
Moreover, GEA's financial standing has been bolstered by recent upgrades from major credit rating agencies. In May 2024, Fitch affirmed GEA’s BBB credit rating and raised the outlook from stable to positive. In June 2024, Moody’s upgraded GEA’s long-term rating from Baa2 to Baa1, with an outlook adjustment from positive to stable. These ratings reflect the company’s improved financial and business profile, further solidifying its position in the market.
For the first half of 2024, GEA reported a 10.4% decline in order intake to EUR 2,654.4 million, compared to EUR 2,962.1 million in H1 2023, with a 6.8% decline in organic terms. Despite this, the company achieved organic revenue growth of 2.2%, with total revenue slightly down by 1.9% to EUR 2,564.5 million. EBITDA before restructuring expenses increased by 4.9% to EUR 381.1 million, driving a notable improvement in the EBITDA margin to 14.9%. Profit for the period also rose by 5.5% to EUR 189.3 million.
As GEA navigates the second half of 2024, the company remains focused on sustaining its profitability and capitalizing on growth opportunities in its core and emerging markets.
