EBITDA before restructuring measures (EUR 140 million) up by a substantial 26.2 percent in second quarter — Order intake (EUR 1,034 million) down 9.8 percent on previous year — Revenue (EUR 1,165 million) down 6.6 percent on previous year; service business more robust, share now up to 33 percent — ROCE up from 10.5 percent in the previous year to 14.8 percent — Free cash flow improves, reaching EUR 182 million in second quarter (previous year: EUR 9 million) — Net liquidity EUR 92 million as of reporting date (previous year: EUR -330 million) — Total workforce reduced by 1,141 employees — Outlook for financial year raised in part

GEA grew its EBITDA before restructuring measures by a substantial 26.2 percent to EUR 140.4 million (previous year: EUR 111.2 million) in the second quarter, even though revenue was lower due to the COVID-19 pandemic. The company also posted a marked year-on-year improvement in several other financial indicators, including ROCE, net working capital, net liquidity and cash flow.

“In a very challenging macroeconomic environment, GEA closed the quarter on a positive footing. In particular, the trend in earnings and ROCE underscores how successful the measures introduced last year to improve efficiency have been. After a very good first quarter, the decreases in order intake and revenue were expected given the negative effects of the COVID-19 pandemic. The second half of 2020 is set to remain challenging. GEA is well placed with its focus on stable end markets such as food, beverages and pharmaceuticals, and our efficiency measures are producing results. That is why we have raised our forecast for 2020 in part and remain confident that we will reach our medium-term financial targets,” said Stefan Klebert, CEO of GEA Group AG.

Order intake grew by 3.3 percent to EUR 2,411 million in the first six months of the year (previous year: EUR 2,333 million), while at EUR 2,258 million, revenue was down 2.0 percent on the figure for the same period of the previous year (EUR 2,305 million). EBITDA before restructuring measures grew by a substantial 32.0 percent to EUR 245.4 million in the first half year (previous year: EUR 185.9 million).

Largely as a result of the COVID-19 pandemic, order intake fell by 9.8 percent to EUR 1,034 million in the second quarter. While the Farm Technologies division more-or-less achieved its prior-year level, the Refrigeration Technologies division was hit particularly hard by the decline in business. Projects in the EUR 5 million – EUR 15 million range were disproportionately impacted by the slump in order intake, while projects below EUR 1 million in volume contracted at a slightly lower rate. Due to the pandemic, revenue of EUR 1,165 million was also 6.6 percent below the previous year's figure, which was a record figure for a second quarter. With the exception of the Separation & Flow Technologies division, all GEA divisions recorded declines in revenue. GEA’s Service business remained relatively unscathed by the developments and even managed to increase its share of overall revenue slightly from 31.6 percent in the previous year to 32.7 percent in the quarter under review.

Despite the fall in revenue, GEA achieved a marked year-on-year improvement in EBITDA before restructuring measures in the quarter under review. The positive trend was driven not only by substantial improvements in margins and the rapid implementation of various restructuring measures, but also by reduced travel expenses and lower special items compared to the previous year. After EUR 21.2 million in the prior-year quarter, special items came to EUR 8.9 million in the reporting quarter – EUR 7.3 million of which was in connection with COVID-19. Payroll expenses were also substantially lower due to a significant reduction in the number of employees: compared with June 30, 2019, the workforce contracted by 595 for a total of 18,298 employees. Including temporary staff and self-employed contractors working for GEA, the reduction amounted to 1,141 full-time equivalents. The Liquid & Powder Technologies division posted the biggest reduction in employee numbers at 325.

ROCE (return on capital employed) rose to 14.8 percent (previous year: 10.5 percent). Net working capital fell significantly, to EUR 630.2 million as of June 30, 2020. At 13.0 percent, the ratio of average working capital over the last 12 months to revenue was thus significantly lower than in the previous year (18.6 percent). Cash flow from operating activities since the start of the year amounted to EUR 220.7 million, EUR 227.8 million above the previous year level of EUR –7.2 million. Free cash flow stood at EUR 191.0 million compared to EUR –55.5 million a year earlier. Higher EBITDA coupled with a marked reduction in net working capital were the key drivers of these significant improvements. As of the reporting date, GEA’s net liquidity stood at EUR 92.0 million, after net debt of EUR 329.5 million a year earlier. It should be noted that, thus far in 2020, only half (EUR 75.8 million) of the 2019 dividend has been distributed, the remaining payment being due after the Annual General Meeting, which has been delayed and is now scheduled for November 26, 2020.

Despite its very good liquidity situation – with net liquidity as outlined and unutilized cash credit lines of currently more than EUR 650 million – GEA took the precaution of expanding its current financing arrangements because it believes the COVID-19 pandemic continues to pose risks to the broader economy. In this context, GEA recently arranged to increase its existing credit line with the European Investment Bank (EIB), which the company uses to finance R&D and innovation expenses, by EUR 100 million to EUR 250 million. Additionally, on August 6, the company signed a contract with a consortium of four banks for an additional cash credit line of EUR 200 million. Furthermore, GEA is also preparing to potentially participate in a Commercial Paper Program (CP) if required.

“These credit arrangements show we are taking timely action to broaden our solid financial basis and underscore that, even in a challenging macroeconomic environment, we remain committed to, and are investing in, trend-setting innovations. We are expanding our range of financing instruments with the option of issuing short-term, negotiable bearer bonds if required, thus emphasizing our capital market capabilities,” said Marcus A. Ketter, CFO of the GEA Group AG.

Thanks to its solid performance, GEA was able to raise in part its outlook for the 2020 financial year. The Group still expects revenue for 2020 to be slightly lower (previous year: EUR 4,880 million). As regards EBITDA before restructuring measures, the Group now expects to come in at minimum the upper end of the previous range of EUR 430 to 480 million (previous year: EUR 479 million). GEA anticipates that ROCE will now be within a corridor of 12.0 to14.0 percent rather than the former one of 9.0 to11.0 percent (previous year: 10.6 percent).

IFRS Key Figures of GEA

(EUR million) Q2 2020 Q2 2019 Change in % Q1-Q2 2020 Q1-Q2 2019 Change in %
Results of operations
Order intake 1,034.1 1,146.8 –9.8 2,410.8 2,333.1 3.3
Book-to-bill ratio 0.89 0.92 1.07 1.01
Order backlog 2,478.1 2,419.8 2.4 2,478.1 2,419.8 2.4
Revenue 1,164.5 1,247.3 –6.6 2,258.4 2,304.6 –2.0
EBITDA before restructuring measures 140.4 111.2 26.2 245.4 185.9 32.0
as % of revenue 12.1 8.9 10.9 8.1
EBITDA 132.2 101.1 30.8 229.0 170.3 34.5
EBIT before restructuring measures 93.4 57.5 62.5 149.8 84.5 77.2
as % of revenue 8.0 4.6 6.6 3.7
EBIT 71.2 38.2 86.1 119.4 59.9 99.2
EBT1 66.4 34.6 92.0 108.0 60.2 79.4
Profit for the period1 45.2 25.4 78.1 75.1 55.6 35.0
ROCE in %2 14.8 10.5 14.8 10.5
Financial position
Cash flow from operating activities 197.4 31.8 >100 220.7 –7.2
Cash flow from investing activities –15.5 –23.2 33.3 –29.6 –48.4 38.7
Free cash flow 181.9 8.6 >100 191.0 –55.5
Net assets
Net working capital (reporting date) 630.2 906.4 –30.5 630.2 906.4 –30.5
as % of revenue (LTM) 13.0 18.6 13.0 18.6
Capital employed (reporting date) 2,039.6 2,703.6 –24.6 2,039.6 2,703.6 –24.6
Equity 2,054.2 2,317.9 –11.4 2,054.2 2,317.9 –11.4
Equity ratio in % 36.1 38.8 36.1 38.8
Leverage3 –0.2x 0.8x –0.2x 0.8x
Net liquidity (+)/Net debt (-) 92.0 –329.5 92.0 –329.5
GEA Shares
Earnings per share (EUR)1 0.25 0.14 78.1 0.42 0.31 35.0
Market capitalization (EUR billion; reporting date) 5.1 4.5 14.6 5.1 4.5 14.6
Employees (FTE; reporting date) 18,298 18,892 –3.1 18,298 18,892 –3.1
Total workforce (FTE; reporting date) 19,602 20,743 –5.5 19,602 20,743 –5.5

1) 2019 incl. Interest income of EUR 32.7 million (of which EUR 7.0 million in the second quarter) due to adjustment of interest calculation method used to measure provisions for long-term liabilities (see page 36 of half-yearly financial report 2019).
2) Capital employed excluding goodwill from the acquisition of the former GEA AG by former Metallgesellschaft AG in 1999 (average of the last 4 quarters).
3) Total net debt/cons. EBITDA based on frozen GAAP (covenant concept).

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