Wacker Construction Equipment AG grew sales 38.3 percent during the first six months of 2008, with sales of €472.4 million (about U.S. $699.4 million), compared with €341.7 million during the first six months of 2007. The dramatic increase was fueled by the merger of Wacker with Neuson Kramer Baumaschinen, which was finalized in October 2007. EBITDA increased for the first half from €55.3 million in the first half of 2007 to €63.2 million (about U.S. $93.6 million).
“During the first half of fiscal 2008, we continued to implement measures that consolidate the success of the merger,” said Dr. Georg Sick, CEO of the combined companies, which will soon be known as Wacker Neuson SE. “This involves making the planned investments to further the global launch of our compact equipment portfolio and to expand the rental business in Central and Eastern Europe. It also entails the continued expansion of our development and production capacities.”
As part of the expansion and transition phase, Wacker is ramping up deliveries to its rental and demo fleets using equipment produced at its own facilities. The internal build-up has an initial dampening effect on revenue and profit that would otherwise have been generated had the equipment been sold to end customers, but it enables the company to fast-track the roll-out of compact equipment and strengthen the profitable rental business in the long term.
“The measures we implemented following the merger are proceeding according to plan and the merger itself has been well received by our customers,” said Sick.
Wacker has budgeted €100 million (about U.S. $148 million) for growth activities and has already invested about €25.7 million into its rental business in Central and Eastern European countries where the company is not in competition with its customers.
The company said uncertain construction market conditions in the first half of 2008 and the downturn in global market trends fueled by the U.S. subprime crisis, the weakening of the U.S. dollar and increases in raw materials prices have had an adverse effect on the company’s key construction markets in the U.S. and, increasingly, Western Europe. After strong performances in April, these developments resulted in significant drop in demand for products in the light equipment business segment in May and June, particularly in the U.S., Spain and the U.K. However, light equipment sales performed strongly in Asia, South Africa, South America and Eastern Europe. Sales generated by the rental business in Central and Eastern Europe remained stable at about €21.6 million.
Wacker’s new production facilities at Norton Shores, Mich., and Pfullendorf, Germany, started operations ahead of schedule.
Wacker officials expect the downturn in the U.S. and Western European construction industries to continue through the rest of 2008, and to impact customer order patterns for products in the light and compact equipment segments. At the end of June, 2008, the volume of open orders for compact equipment was 12 percent below last year’s record high. The current dampened market along with figures for the first half of 2008 have led Wacker to revise its forecast for fiscal 2008, now expecting sales of at least €870 million (about U.S. $1.29 billion).
“Overall, we are confident of achieving sustainable growth in the medium term and therefore remain committed to our corporate strategy,” added Sick. The company expects the global roll-out of compact equipment via the existing sales and service network to provide Wacker with new impetus for 2009 and beyond.