Impact of economic conditions on business performance

DEUTZ suffering from customers’ reluctance to invest

Whereas the global economy grew by 3.1 per cent in 2015, DEUTZ’s revenue fell by 18.5 per cent and its unit sales by 29.8 per cent. The even greater decrease in unit sales was due to the growing proportion of unit sales accounted for by higher-value engines. Overall, most of our key customer sectors experienced significant negative growth. DEUTZ’s performance was therefore similar to that of its customer sectors.

The economy in the eurozone expanded by 1.5 per cent in the year under review. DEUTZ’s key customer sectors in this region did poorly, however: volumes in the agricultural machinery sector were down by roughly 8 per cent, for example, and demand for construction equipment declined by around 10 per cent. Furthermore, European customers drew on their inventories of the engines that they had purchased on a large scale in 2014 in anticipation of the new emissions standard. DEUTZ’s revenue in our biggest market, EMEA (Europe, Middle East and Africa), went down by 27.6 per cent in 2015; the decrease in unit sales was 38.6 per cent. US economic output grew by a relatively strong 2.5 per cent in 2015, and demand for construction equipment in North America was at the same level as in 2014. Our unit sales in the Americas region fell by 11.0 per cent, but we were able to increase our revenue by 7.3 per cent. Momentum in China, our key international market, continued to slow, with economic growth of 6.9 per cent year on year. In this environment, the markets for construction equipment and medium and heavy-duty trucks declined by approximately 44 per cent and 29 per cent respectively. By contrast, DEUTZ’s revenue rose by 18.8 per cent and its unit sales by 14.4 per cent in the Asia-Pacific region. However, the revenue generated by our DEUTZ (Dalian) Engine Co., Ltd. joint venture, which is not included in consolidated revenue, dropped by 5.6 per cent year on year; its unit sales were down by a substantial 29.5 per cent.