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HOMAG Records High Sales Revenue With Declining Order Intake

 Wednesday, February 28, 2024

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In the fiscal year 2023, the HOMAG Group achieved impressive sales and earnings figures, excluding extraordinary effects. However, a significant drop in order intake reflects the ongoing weak demand since the third quarter of 2022.

Preliminary data shows that the HOMAG Group managed to slightly increase its sales revenue to EUR 1,625 million compared to the previous year’s EUR 1,602 million, thanks in part to a robust order backlog at the year’s outset and growth in the service sector. “We benefited from our high order backlog at the beginning of the year, which we have gradually worked through. There was also growth in the service business,” explains CEO Dr. Daniel Schmitt. Nonetheless, the order backlog decreased to EUR 841 million by December 31, 2023, down from EUR 1,102 million on December 31, 2022.

The slight increase in sales is also reflected in earnings before extraordinary effects, which rose by around four percent to EUR 129.7 million (previous year: EUR 124.8 million). The HOMAG Group attributes this increase, among other things, to the efficiency improvements achieved in previous years and cost reductions in response to the market downturn.

Despite a significant year-end order from China, 2023 saw a notable 18% decline in order intake to EUR 1,395 million compared to the previous year’s EUR 1,706 million.  “We are dealing with a pronounced cyclical market weakness, which has resulted in a sharp decline in orders,” explains Dr. Daniel Schmitt. “We were expecting a slowdown in the furniture sector, but we were hoping for a better trend in the timber house sector. The sharp rise in interest rates has led to a crisis in the construction industry, which has significantly slowed down investment in production technology for timber construction elements.”

Anticipating this slowdown, the HOMAG Group implemented capacity adjustments in November 2023, including reducing approximately 600 jobs globally to cut fixed costs initially by EUR 25 million, aiming for a total reduction of EUR 50 million per year from 2025. This restructuring led to just over EUR 50 million in extraordinary expenses, predominantly booked in the fourth quarter of 2023, resulting in a decrease in EBIT after extraordinary effects to EUR 71.1 million from the previous year’s EUR 107.5 million.

The HOMAG Group responded to this weak order intake in November 2023 with a package of measures to adjust capacity in order to avoid losses in the current year. The key element is the reduction of around 600 jobs worldwide in order to reduce fixed costs by EUR 25 million initially and by a total of EUR 50 million per year from 2025. The extraordinary expenses for this amounted to a just over EUR 50 million and were largely booked in the fourth quarter of 2023. As a result, EBIT after extraordinary effects decreased to EUR 71.1 million (previous year: EUR 107.5 million).

“We do not anticipate a general market recovery before the end of 2024 and, from today’s perspective, expect order intake in the current fiscal year to be at most on par with the previous year’s level,” says Dr. Daniel Schmitt. “As a result of the continuing weakness in orders, we expect a sharp decline in sales and earnings. Our capacity adjustment measures are designed to sustainably increase our flexibility so that future market fluctuations will have less of an impact on earnings,” Schmitt continued.

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