KRONES: The price increases that have been implemented are bearing fruit

The market leader for filling systems has established itself in the emerging countries

Krones AG is one of the world’s leading manufacturers of machines and systems for filling and packaging technology. Accordingly, the assets are used in breweries, beverage manufacturers and companies in the food, chemical, pharmaceutical and cosmetics industries. Krones’ products are well-known in the relevant industries around the world, which is why around 90% of total sales are generated abroad. The regional distribution of sales is broadly diversified. In fiscal 2021, around 48% of sales were generated in emerging markets and 52% in developed markets. The machine builder was founded in 1951 and the family is still the majority owner with 52%.

The service business enables an all-round carefree package for the customer

Krones organizes its business in two segments: The “Machines and lines for product filling and decoration” division (84% share of sales) provides capital goods with which products can be filled, labeled, packaged and transported. In addition, the company manufactures machines and systems that enable the production and recycling of PET containers. The “Machines and Plants for Beverage Production and Process Technology” division (share of sales: 16%) develops equipment with which beer, soft drinks, fruit juices as well as milk and milk-mix drinks can be produced and treated. In addition to these two divisions, the services are also an important part of the business model. Krones supplies customers from the beverage and liquid food industry with all the machines and systems they need. In addition, they also take care of logistics, among other things, and offer digitization options to enable efficient production for customers. In summary, it can be said that Krones delivers complete factories and passes on their experience in the form of service and advice.

The brewing power plant called Brewnomic stands for an energetically self-sufficient brewery

Krones’ in-house test brewery has developed technology that breweries can use to supply themselves with energy independently. Every brewing process produces valuable residues such as malt dust and yeast, which can be fermented into biogas. This methane from biogas is then converted into electricity and heat in a combined heat and power plant and can thus supply entire breweries, including all the necessary ancillary plants, with energy. In principle, even a surplus of heat and electricity can be generated and passed on to external consumers. The independent subsidiary Steinecker has actually developed a beer-brewing power plant.

Krones is holding its own in the current difficult market environment

Demand for Krones’ products and services is increasing rapidly despite the difficult macroeconomic environment. Accordingly, incoming orders in the first half of 2022 rose by 52% to EUR 3.1 billion. The order backlog has almost doubled compared to the same period of the previous year and amounts to around EUR 3 billion. In the same period, sales increased by 15% to EUR 1.98 billion. Despite rising raw material, logistics and wage costs, the company managed to increase its EBITDA in Q2-2022 by 44% to EUR 88.1 million compared to the same quarter of the previous year thanks to the savings measures and the recently implemented price increases. The EBITDA margin also improved from 7.2% to 8.8%. Analysts at FactSet are forecasting full-year 2022 revenue of €3.96 billion, which would represent a 9% increase compared to the previous year. Earnings per share should be EUR 5.12, from which an expected P/E22 of 19 can be derived. The expected dividend yield for 2022 is 1.6%.

Product idea: Classic discount certificate on Krones AG.

Discount certificates are an attractive alternative to investing directly in shares. Investors have a choice of corresponding products based on the Krones underlying. to disposal. An example is a discount certificate that is due on September 22, 2023 (repayment date) and with a discount on the Krones AG share price. written down. The investor does not receive any other income (e.g. dividends) and has no further claims from the underlying. The amount of the possible repayment is limited by the cap at EUR 84.00.

There are two options for repaying the certificate:
1. If the closing price of the underlying Krones AG on the relevant stock exchange on September 14, 2023 (reference price) is at or above the cap, the investor receives the EUR equivalent of the maximum amount of EUR 84.00.

2. If the reference price is below the cap, the investor receives a repayment amount that corresponds to the EUR equivalent of the reference price multiplied by the subscription ratio.

A total loss of the invested capital is possible (total loss risk). A total loss occurs, if the reference price is zero is. A total loss of the capital employed also possible if DZ BANK as the issuer can no longer fulfill its obligations under the certificate due to official orders or insolvency (insolvency/overindebtedness).

The discount certificate described here is aimed at investors who have an investment horizon up to September 22, 2023 and assume that the underlying Krones AG will be at or above EUR 84.00 on September 14, 2023.

A detailed explanation of the technical terms mentioned can be found in our glossary.

Status: 06.10.2022, DZ BANK AG / online editors