Struggling Times for Young Heinrich
In a recent announcement, forklift manufacturer Jungheinrich has revised its financial outlook for 2025, citing ongoing market challenges and the need to restructure and cut costs.
Declining Competition and Pressure on Prices
Jungheinrich has reported a decline in international competition, with increased pressure on prices in new business. This trend is expected to continue, putting pressure on the company's profitability.
Financial Performance in Q2 and Beyond
In the second quarter, Jungheinrich's operating profit before interest and taxes (EBIT) fell by more than 6% to EUR 106 million. The company's sales remained virtually stagnant at around EUR 1.3 billion.
For 2025, Jungheinrich's management expects both orders and sales to be between EUR 5.3 billion and EUR 5.9 billion, a significant revision down from earlier forecasts. The expected operating profit (EBIT) has been substantially revised downward to a range of EUR 160 million to EUR 230 million, compared to earlier forecasts of up to €500 million.
The EBIT margin is now forecast at around 3.1% to 3.9%, significantly lower than prior expectations. The company has also announced a cost-cutting program with plans to reduce approximately 1,000 jobs globally and target €100 million in annual expense reductions.
Cost-Cutting Measures and Job Cuts
The cost-cutting program aims to optimize production, management, and administration. Job cuts and relocations will affect 1,000 jobs, with the measures expected to reduce the company's costs by around EUR 100 million per year in the medium term. However, these measures will initially result in one-time costs of around EUR 90 million in the current year. Two-thirds of these costs are expected in the current quarter and around one-third in the final quarter.
Stock Performance and Market Impact
Jungheinrich's stock has been on a downward trend, losing around one-fifth of its value in the past four weeks. The weaker margin is cited as the reason for the stock's performance by Peter Rothenaicher of Baader Bank.
Despite the revised outlook, Jungheinrich's share price of its preferred stock listed in the MDax has increased by around 30% this year, outperforming the index for mid-cap stocks, which has risen by almost a quarter since the end of 2024.
Ownership Structure
It's worth noting that more than half of the share capital of Jungheinrich is in the hands of the families of the two daughters of the company's founder, Friedrich Jungheinrich.
These revisions come amid ongoing market challenges such as an economic slowdown in Europe, strong competition especially from lower-cost Chinese suppliers, and the sale of Jungheinrich’s Russian subsidiary at a significant discount, which also impacted profit forecasts.
Jungheinrich is currently valued at EUR 3.4 billion on the stock exchange. Despite the challenges, expectations for Jungheinrich were more or less met, even with the increased order intake.
[1] Baader Bank Report on Jungheinrich [2] Reuters: Jungheinrich to cut 1,000 jobs, target €100 million in annual cost savings [3] Jungheinrich Press Release: Jungheinrich presents its Q2 2022 results [4] Financial Times: Jungheinrich sells Russian subsidiary at discount
The ongoing market challenges, including economic slowdown in Europe, strong competition from lower-cost Chinese suppliers, and the sale of Jungheinrich's Russian subsidiary at a discount, have led to a revision in Jungheinrich's financial outlook for 2025, affecting both business revenues and profit margins. This industry-wide finance pressure is contributing to Jungheinrich's decision to implement cost-cutting measures, including job cuts and a restructure, in an effort to optimize production, management, and administration.
