GEA presents new targets
Technology group, GEA has presented its new medium-term targets for the entire Group and its five future divisions.
The Group plans that consolidated revenues will grow by an average of 2-3% per year until 2022. The EBITDA margin before restructuring expenses, based on the median value of the current projection at around 9.8% for FY 2019, is expected to increase to a target range of 11.5–13.5% by then.
Key drivers of this growth are synergies in procurement, which are expected to take effect as early as 2020, and the optimisation of the global production network.
The Group plans to save costs by cutting around 800 full-time employees worldwide by the end of 2020 – it has already cut around 220 positions in Business Area Solutions. In addition, GEA intends to sell selected business operations in the Farm Technologies and Refrigeration Technologies divisions.
With these measures the Group continues to focus on its strategic core markets – the food and pharmaceuticals industries, and to exit low-margin activities with less synergy potential. The strategic measures will be underpinned by investments in state-of-the-art IT systems and the rollout of a global ERP system.
Stefan Klebert, CEO of GEA Group said: “In our businesses, we operate in attractive and stable markets. People need food, beverages, and pharmaceutical products regardless of the economic circumstances. We supply the sophisticated machines as well as the according maintenance services and hold top market positions resulting from our technological leadership. The megatrends are on our side. Our growth prospects are intact, but we are not satisfied with our current profitability level. However, it is in our own hands to increase our margins. We are laying the foundations for this with our new organisational structure: clear responsibility and greater transparency. Now, we are making procurement and production more efficient, building a future-proof IT infrastructure, and streamlining our portfolio.”
Besides the above-mentioned targets for increasing revenue and EBITDA margin before restructuring expenses, GEA’s new, medium-term targets are aiming for capital expenditure in the range of 2.5 – 3.5% of revenues for the period 2020 to 2022. The increased capital expenditure will be invested in particular into improving the production network and implementing a Group-wide ERP system. By contrast, net working capital intensity will be reduced significantly from 18.6% at the end of the second quarter of 2019 to between 12-14% percent by 2022.
The Group has streamlined its structure, and over 90% of all management positions in the three highest levels of the hierarchy have now been filled. By the start of 2020, GEA will have switched over completely to the new organisation, where the Group will be managed in five divisions, each with up to six business units.