Demand for Deutz Ag Products Stabilizes in Second Quarter

August 14, 2009 04:26 AM

Demand for Deutz engines and services in the second quarter of 2009 stabilized at a low level in challenging economic conditions. The company's unit sales and revenue remained steady on the first quarter of the year at approximately 30,000 engines and €220 million, respectively. The operating loss fell sharply from €19.9 million in the first three months of 2009 to €3.5 million in the second quarter.

This trend can be attributed to the MOVE program, which was launched at the end of 2008. The program enabled Deutz Ag to save €19 million in the first quarter of 2009 and €43 million in the second quarter. However, the net loss after one-off items rose from €23.9 million in the first three months of 2009 to €38.7 million in the second quarter as a result of restructuring charges recognized for the ongoing reduction of its workforce as part of the MOVE program.

Deutz generated unit sales of approximately 60,500 engines and revenue of €441 million in the first half of 2009. Compared with the first six months of 2008, which had been the company's strongest half-year in recent years, unit sales and revenue had been reduced by half as a result of the global economic downturn. The company had reported an operating profit of €38.2 million for the first half of 2008, and it incurred an operating loss of €23.4 million in the first six months of 2009. Its bottom line deteriorated from a net income after one-off items of €30.3 million in the first half of 2008 to a net loss of 62.4 million in the corresponding period of 2009, owing to restructuring charges.

Deutz reaped total cost savings of €62 million in the first half of 2009 from the early implementation of its MOVE program. Deutz hopes to have achieved total cost savings of approximately €100 million from its MOVE program by the end of this year, though it does not expect these savings to fully compensate for the losses caused by economic conditions and is expecting an operating loss for the year as a whole.

From 2010, the measures implemented as part of the MOVE program will generate additional cost savings and significantly lower the company's break-even point.

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