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By presenting its interim report, Jungheinrich confirmed both the key data and the quantitative outlook for the entire year 2020 as announced on July 22. All in all, Covid-19 will have a much milder effect on Jungheinrich's activities over the course of the year than we had anticipated in March or even in May.

 

In H1/2020, Jungheinrich recorded a 12.3% decline in incoming orders in terms of value (compared with the prior year). Related to Q2/2020, the order volume slumped by 23.9%. The Covid-19 burden was concentrated on orders for new material handling equipment (especially forklift trucks). Orders for services however had a stabilizing effect. The management stated that customer interest in complex warehousing systems had fully reawakened after a few weeks of downtime. Jungheinrich also did not have to complain of any cancellations or postponements of project implementation in Q2. Competitor Kion (Dematic) had reported large orders from the e-commerce sector in Q2 - Jungheinrich had not expected such statements of success because Dematic also benefited from special demand due to a product portfolio that differed in parts from Jungheinrich's. At least we now assume that the recovery in demand will also manifest itself in the form of medium-sized orders for the installation of warehouses over the coming quarters.

Overall, H1 revenues shrank by 7.9% and Q2 revenues by 12.6%. The new equipment business was hit disproportionately hard by the drop in demand, with revenue declining by 15.5% (H1 vs. previous year) and 20.1% (Q2 vs. previous year). Downstream services (equipment for short-term hire, used equipment sales) declined by 7.3% (H1) and 13.9% (Q2). By contrast, maintenance activities and the spare parts business recorded revenue declines of only 0.4% (H1) and 4.5% (Q2). Jungheinrich's EBIT margin dropped significantly, by 1.1 percentage points to 5.3% in H1 and by 1.8 percentage points to 4.7% in Q2. A massive decline in production (no quantitative production data since the 2020 report) is associated with underutilization of capacity and corresponding idle capacity costs, even of long-established capacity. A lower capitalisation ratio with constant development/R&D spending increased profit-reducing R&D expenses in H1 by EUR 9m (H1 margin effect: -0.5 percentage points). Impairment charges in H1/2020 on assets in South America had a negative impact of EUR 5m (-0.3 percentage points).

Jungheinrich had already switched over to crisis mode in September 2019 (newly instated CEO) after a decline in incoming orders had been recorded. The time lead will benefit the company in coping with the current slump.Since Jungheinrich was already operating below a "cash is king" target and recognized working capital items (net current assets; other leverage: reduced additions of new trucks to the short-term hire fleet) as the central optimization tool, the company will hold up well until overall economic activity picks up again.  As of June 30, 2020, net financial liabilities amounted to only EUR 36 million; they were reduced by EUR 136 million compared to the end of 2019 (IFRS 16-compliant: EUR 172 million, before operating leasing of real estate and vehicle fleet: EUR 14 million), by EUR 262 million compared to June 30, 2019 (IFRS 16-compliant: EUR 298 million, before operating leasing: EUR 79 million). We believe that Jungheinrich's strategic decision to become involved in the development, production and recycling of Li-ion batteries puts it in a promising position to gain additional market share once the economy recovers. One of the best in its class among mechanical engineering companies in terms of balance sheet figures, an established service network for recognized products, but nevertheless: The performance of the share price is not in line with our valuation assessment.

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