Strengthening the core business means profitable growth for Voith in the 2018/19 fiscal year

“Voith performed well in a challenging environment over the past fiscal year. We are in an excellent position in our markets, have increased our earnings power and are able to continue building our future on the foundation of a robust balance sheet. This allows us to be confident that we will achieve our strategic objectives for the coming years,” explained Dr. Toralf Haag, President and CEO.

Focus on strengthening the successful core business, accompanied by targeted expansion of digital expertise

Voith adjusted its growth strategy over the past fiscal year. In this respect, the focus was on further strengthening the successful core business, also by way of targeted acquisitions, such as the takeover of BTG which was announced by Voith in September. With a volume of € 319 million, this was one of the largest transactions of its kind in the Company’s history. BTG is a global supplier of integrated, highly specialized process solutions for the pulp and paper industry worldwide and will boost Voith Paper’s position as a full-line supplier in the future. The transaction was successfully closed on December 1.

Voith’s organic growth over the coming months and years is securing numerous new orders, one of the more noteworthy ones being the contract for the Snowy 2.0 project. This project is one of the largest pumped storage power plants in the world for which Voith Hydro is supplying six reversible pump-turbines for delivery to Australia. Snowy 2.0 is the second largest individual contract in the Voith Group’s 152-year history.

Voith Turbo will strengthen its market position by means of two joint ventures with China Railway Rolling Stock Corporation (CRRC), the world's largest manufacturer of rail vehicles, among other transactions. The joint ventures will make a contribution to further expanding its business in the market for rail vehicles and in various industrial markets. The announced streamlining of Voith Turbo’s production network in Germany is also intended to safeguard the Group Division’s competitiveness and viability over the long term.

The ongoing expansion of the digital activities remains a strategic focal point alongside strengthening the core business. The success of Voith’s customer-oriented digitalization strategy is becoming apparent, one example being the sharp increase in demand for OnCumulus, Voith’s proprietary modular IIoT (Industrial Internet of Things) platform. Acquisitions such as Pilotfish and ventures such as TSP OnCare Digital Asset Inc. will also help Voith further expand its offering of digital products and solutions along the value chain in its core business.

“By strengthening its core business and its needs-orientated digital strategy, Voith is pursuing a clear objective: we intend to use our extensive technological expertise and in-depth knowledge of markets as the basis to become a driving force and key player in the post-carbon industry of the digital age. This fundamental concept pervades all Group Divisions and is expressed for example in the refinement of hydropower, resource-conserving papermaking or the electrification of mobility,” explains CEO Haag. This strategic agenda is linked to clear financial targets. In this respect, Voith is striving for appreciable sales growth and a significant increase in the key profitability indicators.

Review of 2018/19: all Group objectives reached – operating business developing well in a challenging environment

Voith took an important step forward along this path over the past fiscal year. In this respect, the Group once again benefited from its broad positioning, both in terms of geography and sectors served. All in all, the Voith Group secured orders totaling € 4.69 billion in 2018/19 after € 4.29 billion the year before. This corresponds to an increase in orders of 9 percent. As of the reporting date, orders on hand rose by 9 percent to € 5.63 billion (September 30, 2018: € 5.17 billion). This is the highest level of orders on hand in seven years.

In terms of sales, Voith saw a slight increase of 2 percent to € 4.28 billion (€ 4.21 billion in the previous year). There was also a gratifying development in net result at the Group level: the Company succeeded in growing EBIT by 12 percent to € 215 million (€ 193 million in the previous year). This was mainly due to the very strong performance once more by Voith Paper and the appreciable reduction in the deficit at Voith Digital Ventures. The return on sales improved correspondingly from 4.6 percent to 5.0 percent, ROCE rose to 12.0 percent from the 10.9 percent reported in the previous year. The Group’s net result increased 49% percent to € 72 million.

After the good performance in the previous fiscal year, the Voith Group’s financial position remains very sound. As of the reporting date, net liquidity stood at € 552 million, which is still a reassuring level. This means that there are considerable funds for further acquisitions left over, even after the acquisition of BTG. The equity ratio, which reached a record high in the previous year, fell slightly due to pension measurements, among other factors, and now stands at 26.2 percent after the 28.5 percent seen one year earlier.

Sound development in all Group Divisions

Voith Hydro succeeded in almost doubling its orders received in comparison to the previous year, primarily due to winning the megaproject in Australia, as already mentioned. Sales remained stable. In contrast, EBIT declined due to orders being processed that were posted in weaker market phases with higher prices pressure.

The business of Voith Paper, which has returned to its former strength over recent years, normalized at a high level over 2018/19. Orders received declined from the very high previous-year figure, as expected. Sales declined slightly, mainly due to the decline in paper production in China. In the Chinese market, paper production fell noticeably, particularly due to the shortage of raw materials in connection with the import ban on recovered paper. The Group Division’s EBIT improved perceptibly. Voith Paper once again made the largest contribution to the operating result of the Voith Group.

Voith Turbo saw a robust performance in a demanding environment and is working intensely towards achieving a more efficient and more effective structure. The Group Division’s orders received increased slightly, sales improve perceptibly. Voith Turbo’s EBIT stood roughly at the previous year’s level, mainly due to a change in the way research and development costs are settled internally with Voith Digital Ventures.

The sales generated with third parties outside of the Group by the youngest Group Division Digital Ventures, saw dynamic growth in the past year due to acquisitions, among other factors. As anticipated, Voith Digital Ventures’ build-up costs fell appreciably as part of this process.

Outlook 2019/2020: orders received continuing at high level, increases in sales and net result

The Voith Group will continue to focus on profitable growth again in the 2019/20 fiscal year that has just begun. Orders received are budgeted to remain stable at the high level of the past year. An increase is forecast for sales, buoyed by growth at Paper, Turbo and Digital Ventures. The planning assumes ongoing perceptible growth in the operating result, as is the case for the profitability indicators.