Krones Group Annual Report 2023

Dear shareholders and friends of Krones,

Despite all the economic and political uncertainties, 2023 was yet another highly successful financial year for Krones. The entire Krones team has performed exceptionally well. In a very positive year, our new target picture, “Solutions beyond tomorrow”, played a significant role from the start by providing our workforce with additional guidance and motivation. The first full financial year of “Solutions beyond tomorrow” has already brought numerous examples of successful projects that are based on it. We present a number of these in more detail in our cover story.

Krones also benefited from the stable growth of the beverage and liquid food market during the reporting year. Customers in the international food and beverage industry continue to be very keen to invest. This demonstrates that our customer industries and with them Krones are less affected by cyclical fluctuations. Leveraging our strong global footprint and our innovative and future-oriented product and service portfolio, Krones maintained and expanded its leading market position.

Very positive figures in the 2023 financial year – significant growth in revenue and earnings

Order intake once again reached a very good level at €5.38 billion – as expected, below the previous year’s extremely high figure of €5.78 billion. The continuing very high level of incoming orders led to a further 19% increase in the order backlog to reach an all-time high of €4.12 billion at the end of 2023.

Revenue also developed very positively. Thanks to intelligent production management and the great flexibility and creativity of the workforce, we increased revenue in 2023 despite the short supply of electrical components by 12.2% to €4.72 billion. The company thus met its full-year 2023 growth target, which was raised in July 2023 to between 11% and 13% (previously 8% to 11%).

Krones also further enhanced profitability during the reporting period, despite rising costs. The company benefited from the strategic measures taken in recent years to reduce costs and increase efficiency. We will continue the disciplined implementation of these measures and add new ones. The rigorous implementation of our pricing strategy also had a positive ­impact on profitability in 2023. Krones improved profitability, as measured by the EBITDA margin, to 9.7% in the reporting period (previous year: 8.9%). Our third financial target indicator, return on capital employed (ROCE), went up from 14.1% to 16.3%.

Shareholders benefit from the company’s success – increase in the dividend from €1.75 to €2.20

Our shareholders are also to benefit from the good results. Krones will therefore significantly increase the dividend. Shareholders are to receive a dividend of €2.20 per share for the 2023 financial year, up 26% from €1.75 per share in the previous year.

Continued importance of sustainability for Krones and customers

The opportunities for Krones in the growing and essential food and beverage market are huge, but they come with significant social responsibility. We address this responsibility by contributing to sustainable production with future-ready, innovative technologies.

Sustainability and resource-efficient production will remain the most important innovation and growth drivers for our industry in the years ahead. Our customers’ ambitious sustainability goals can be achieved with our energy and media-efficient products and services. The sustainable, TÜV-certified enviro product range which we have developed dynamically over the years accounted for a significant proportion of our order intake in the 2023 financial year.

Sustainability is also crucial within our own operations. Krones improved many sustainability performance indicators during the reporting year. Further details can be found in the non-financial statement. We published details on the implementation of our climate strategy for the first time in mid-2023, in our public Carbon Transition Plan. In it, we describe our goals, measures, progress and implementation plans in detail.

Weak global economy and further risks in 2024

Despite the good business results and prospects, we must continue to be vigilant. The global environment remains unstable. This is demonstrated by the ­latest geopolitical conflicts, which could have a negative impact on the global economy at any time. The experts at the International Monetary Fund (IMF) forecast global economic growth of 3.1% this year. This is once again well below the average growth of 3.8% for the global economy (2000–2019). At the same time, global supply chains and procurement markets continue to be highly vulnerable to disruption. A challenge in 2024 will continue to be the timely procurement of sufficient materials and supplier parts to maintain good production capacity utilisation.

The Executive Board expects further improvements in revenue and ­profitability in the current year

Despite the ongoing uncertainties, Krones is optimistic for the 2024 financial year and beyond. We started this current year with the biggest order backlog in our company’s history. Demand for our products and services remains at a high level. Additionally, assuming no new disruptive factors, we anticipate that the situation on relevant procurement markets will develop better overall. Based on the expected positive market trend and Krones’ strong position, the Executive Board expects consolidated revenue in 2024 to be between 9% and 13% higher than last year.

Krones is aiming for a further improvement in profitability this year compared to 2023. Alongside higher revenue, the ongoing implementation of the cost optimisation measures will also contribute here. What is more, with the aid of innovative solutions and good project execution at customers, Krones has been able to achieve appropriate price adjustments to offset cost increases in recent year. At group level, we forecast an EBITDA margin of 9.8% to 10.3% for 2024. Krones plans to improve our third target, ROCE, to between 17% and 19% in the current year.

Acquisitions remain part of the growth strategy

We have continued to successfully implement our acquisition strategy, both in the reporting period and also already in the current year. With the acquisition of US-based Ampco Pumps in the second quarter of 2023, we expanded our components business in Process Technology to include high-quality pumps and significantly added to our sales potential in the US market. Following the completion of the forthcoming acquisition of the Swiss injection moulding machine manufacturer Netstal, which is planned for the first half of 2024, Krones will be able to offer its customers all important machines, lines and services for the complete PET packaging cycle. Netstal also underpins Krones’ strategy of extending the customer focus to the medical/pharmaceutical, cosmetics and food industries. Acquisitions of medium-sized, profitable companies continue to be part of our growth strategy.

2025 financial targets will already be largely achieved in 2024

All in all, Krones is well on track to meet its targets for 2025 set at the end of 2021. We planned to generate revenue of at least €5 billion by 2025. Based on our guidance for 2024, we will already meet this target in the current year. The target for the EBITDA margin in 2025 is between 10% and 13%. With our EBITDA margin forecast of 9.8% to 10.3% for 2024, we are well on track to already reach the ­target range for 2025 this year. Consequently, the Executive Board will publish a new medium-term forecast in the course of 2024.

Flexible, creative and motivated – the Krones team makes the ­difference

Our employees were the key driver behind another strong business performance last year. Their creativity, flexibility and motivation form the foundation for our company’s ability to deliver projects on time and with top quality. Customers value Krones for this. The innovativeness of our team consistently gives our company the necessary edge, reinforcing our ambitious goal of delivering “Solutions beyond tomorrow” – solutions that surpass customers’ expectations.

On behalf of the entire Executive Board, I would like to take this opportunity to thank all employees for their outstanding commitment in the 2023 financial year. They work every day to realise our shared vision: Sustainable and affordable beverages, food and essentials for everyone and everywhere. I am confident that we, the Krones team, will realise our vision and continue our profitable growth in the long term.

Christoph Klenk
CEO