Despite economically challenging market conditions, Cologne-based drive manufacturer Deutz AG remains profitable, as the results for the first half of 2024 show. Although the company had to accept a decline in sales, it reported an EBIT before special items of 50.1 million euros with an adjusted EBIT margin of 5.7%. The margin is almost unchanged compared to the same period last year (6.1%), which Deutz attributes to the company’s resilience and the success of the ongoing portfolio optimization.

Dr. Sebastian Schulte, CEO of Deutz AG

Due to the weak economy in almost all end customer markets, Deutz recorded a decline in incoming orders of 18.1% to €791.0 million. The company also recorded a decline in sales of 18.9%. 74,162 engines were sold in the reporting period, compared to 91,451 in the same period last year. Sales fell in all application areas with the exception of material handling (+14.1%).

The decline in sales to 875.5 million euros was less severe at 12.6 percent. According to the company, this was due, among other things, to measures implemented to optimize costs and increase performance as well as the further expansion of the service business, in which sales rose by 6.5 percent to 252.9 million euros compared to the first half of 2023.

“Our business development shows that we cannot escape developments in the market. Unlike in the past, however, we are operating profitably and earning money in this phase,” said Deutz CEO Dr. Sebastian C. Schulte. “We owe this to the operational measures we have introduced and the strategic milestones we have achieved. This means we are broadening Deutz’s position and making it more future-proof.”

Such milestones include the expansion of the service business – including the acquisition of Diesel Motor Nordic (now Deutz Nordic) in the second half of 2023 – and the acquisition of US generator manufacturer Blue Star Power Systems, which was completed in early August 2024.

Milestones such as the acquisition of Diesel Motor Nordic, now Deutz Nordic, helped increase service revenue by 6.5% in the first half of the year. (Photo: Deutz)

According to Deutz, the acquisition of Blue Star Power System will enable the company to further advance its transition from a component manufacturer to a systems provider, gain access to new, complementary business models and enter a familiar, fast-growing and less cyclical market. Deutz is expected to generate additional profitable revenues of over $100 million (medium term) to over $150 million per year.

Building on this acquisition, sales in the entire energy business are expected to increase to around EUR 500 million by 2030 through both organic growth and growth through acquisitions.

Deutz is also continuing to expand its classic business. The completion of the takeover of Rolls-Royce Power Systems’ sales and service activities for heavy and medium-duty Daimler truck engines was announced, which is expected to generate additional annual sales of around 300 million euros. At the beginning of July, the company also announced an alliance with the Indian agricultural machinery manufacturer TAFE, which is primarily aimed at expanding the combustion engine business by providing access to the Indian market and enabling Deutz to continue production with a competitive cost structure, it said.

For the full-year outlook, Deutz expects to reach the lower end of the forecast range for sales of 160,000 to 180,000 engines in 2024 and to generate sales in a range of 1.9 to 2.1 billion euros. The forecast for the adjusted EBIT margin remains unchanged at 5.0 to 6.5 percent and free cash flow (before potential M&A activities) is expected to be in the mid-double-digit million euro range.