Finanzbericht - Outlook

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OUTLOOK

Overall economic environment

According to the Kiel Institute for the World Economy (IfW), the global economy will not lose further momentum in 2020, although the increase in production will remain modest at 3.1% (2019: 3.0%). This corresponds to a forecast reduction of 0.1 percentage points compared with September 2019. In view of the high capacity utilization in the advanced economies and the expansion rates of the global economy, the IfW does not believe that the economy is in a pronounced state of weakness, although economic growth in the advanced economies is expected to remain weak. Accordingly, the euro area and Japan will benefit from a renewed expansionary monetary policy stance and a slight upturn in world trade, while in the United States the fiscal stimulus will taper off. In a large number of emerging markets, production is expected to expand only slightly due to the lack of a global economic tailwind and structural problems. Although the easing of US monetary policy stabilized the framework conditions for economic development in the emerging economies, the only moderate demand dynamics in the advanced economies and the slowdown in economic development in the People's Republic of China will stand in the way of a rapid recovery.¹

According to forecasts by the IfW, the pace of expansion in the euro zone will increase slightly in 2020, after the export economy is expected to regain momentum once world trade picks up. With a stabilization of production in the manufacturing sector, economic development will pick up again in the course of 2020. Nevertheless, the IfW expects economic growth in the euro zone in 2020 to only match the previous year's level (2019: 1.2%) and only in 2021 to return to a stronger increase of 1.5%.²

For Germany, the Kiel Institute for the World Economy (IfW) also expects a gradual revival of growth in 2020 with an increase in gross domestic product (GDP) of 1.1% (2019: 0.5%). According to this, the decline in industrial production is being followed by a bottoming out and slight growth. The IfW perceives an upward trend, particularly in foreign business.³

Development of relevant industries

The German Engineering Federation (VDMA) does not anticipate any new momentum for industry companies in 2020 and expects a further decline in production at the previous year's level (2019: 2%). The order books in the industry are only expected to fill up again in the course of the year and, due to technical start-up times, will not lead to renewed production growth before the second half of the year. The VDMA expects exports to the USA to be less dynamic in 2020, which could benefit from the impetus of the corporate tax reform in 2019.¹ All in all, the VDMA considers a renewed decline in exports for the whole of 2020 to be probable in view of the order intake of mechanical engineering companies at the beginning of the year. According to the VDMA, the effects of the corona epidemic in China on global exports cannot yet be estimated, even though the fundamental importance of the Chinese market for the German mechanical and plant engineering industry remains unchanged.²

After the end of a decade of records, the Robotics + Automation sector suffered a significant setback in the past fiscal year (2019: -5%). According to the VDMA Robotics + Automation Association, there is no trend reversal in sight in this innovation and growth industry with a further decline in industry sales of -10% forecasted for 2020. In addition to the weak global economy, saturation effects will therefore continue to make themselves felt in important markets. Uncertainty in customer industries, such as the transformation of the automotive industry, is expected to lead to investment reticence. The VDMA Robotics + Automation is convinced that robotics and automation will return to its growth course in the medium term as a key technology for optimizing production and as a guarantee for high quality and sustainability standards.³

According to the German Association of the Automotive Industry (VDA), the subdued development of the global economy will present further challenges for the international passenger car markets in 2020. Accordingly, suppliers will feel the economic headwind more strongly than manufacturers after a long period of growth. As a result of the lack of growth impetus, the VDA expects a 1% decline in sales in the global passenger car market in 2020.⁴ The automotive industry in Europe will record the first decline in seven years. At the same time, according to the Association of European Automobile Manufacturers (ACEA), companies will have to make massive investments in zero-emission vehicles.⁵

According to the industry association Spectaris, the future development of the medical technology industry will be determined by regulatory issues and the export business. It is therefore unclear whether medical technology, which has historically been resistant to crises, will be able to escape the global economic slowdown in the long term. On the other hand, growth impulses are emanating from the digitalization of the health care system and technological developments in diagnosis and treatment, as well as global population growth and demographic change in the developed economies. Consequently, the industry association Spectaris expects the medical technology market to continue to grow in the coming years and believes that German manufacturers are well positioned with their innovative products to benefit from the developments outlined and to maintain their position on the global markets⁶. According to Spectaris, the medical technology submarket of the optical industry is expected to achieve sales gains of 2.5% in Germany and 3.5% for exports in 2020.⁷ Current forecasts by the industry association Spectaris on the development of the medical technology industry for 2020 were not available at the time of writing this report.

According to the Federal Association for Secondary Raw Materials and Waste Disposal (bvse), the recycling and waste disposal industry will benefit from altered political conditions, through which the priorities in the economy have changed as a result of the Commercial Waste Ordinance, the Packaging Act and the public discussion on the topics of recycling management and climate protection. According to the report, there is a noticeable increase in the willingness to invest, which is urgently required for the creation of new and the modernization and expansion of existing recycling and waste disposal plants. In addition to China, other countries in Asia have closed themselves off from waste from abroad by imposing import bans. Although this will increase local waste charges, the recycling and waste management industry will also benefit from an increase in demand. The recycling and waste management industry is facing headwinds from economic developments and international conflicts.⁸ Current forecasts by the VDMA Waste and Recycling Technology Association on the development of the industry for 2020 were not available at the time of writing this report.

Prospective development in the financial year 2020

The Management Board of MAX Automation SE sees the performance of the Group in the 2020 fiscal year as generally positive. Based on the current macroeconomic and industry-specific outlooks and the trends in the markets in which the Group companies operate, the Management Board assumes that demand for the Group's solutions will remain strong in the core business.

MAX Automation focuses on attractive growth markets that offer above-average margins and limited volatility. The early identification of trends and a corresponding strategic orientation are essential for the long-term business success of the MAX Group. This includes investments in equipment and machinery to make production more efficient.

Uniform standards for risk management and managerial accounting as well as clear and binding guidelines for the acquisition of orders play an important role in further increasing efficiency in the Group and reducing its risk profile. MAX Automation has invested considerably in corresponding management systems since 2018 and will continue to do so in 2020. The goal is also to further reduce the amount of funds tied up in working capital, which throughout the Group is sustainably at a maximum of 15% of consolidated sales. The Group will also further professionalize its ERP systems and introduce a Group-wide cash pool for stabilization purposes.

An important factor in 2020 will be the continuation of the divestments of IWM Automation GmbH and ELWEMA Automotive GmbH that were decided in September 2018. The closure will be completed for IWM Automation GmbH by 30 September 2020, at the latest. Despite the delays, the sale of ELWEMA Automotive GmbH will continue and should be completed in 2020. The completion of these last areas of activity from non-core business will further improve the MAX Group's financing power, risk profile and results of operations.

Summary statement on the prospective development of the Group

MAX Automation's assessment of the outlook for the global economy in 2020 is similarly cautious as in the previous year. The Group will monitor and closely analyze economic developments, particularly the impacts of the Coronavirus disease COVID-19 and the resulting uncertainties. The MAX Group has not yet been able to identify a pronounced economic weakness and it therefore remains to be seen to what extent the Group's business performance will be affected by a possible lower demand due to economic conditions.

Overall, the Managing Directors consider MAX Automation with its core business areas to be positioned in a strategically promising position and regard the order backlog at the beginning of 2020 as a good starting point for further development in the course of the year. At the same time, the Managing Directors expect revenues development at Group level to be slightly below the level of the previous year. The closure of the IWM Automation companies will result in further declining sales for the non-core business. Adjusted for the revenue contribution from non-core business, the Managing Directors expect growth to be slightly above the level of 2019.

The final processing of the activity fields from the non-core business will still generate costs until halfway through the year, whereby the majority of the financial burdens have already been processed in the consolidated financial statements for 2019. The EBITDA of the non-core business will remain negative due to projects still to be completed at IWM Automation companies, but the negative number will be significantly lower than in 2019. In the medium term, the risk profile and financing ability of MAX Automation will develop positively through the settlement of non-core business. Therefore, the Managing Directors currently expect a clearly positive EBITDA at the Group level for 2020 after a negative EBITDA in the previous year.

Financial forecast

Based on the current portfolio and the expectations for the economic development described above, the Managing Directors expect consolidated sales of between mEUR 380 and mEUR 410 and EBITDA of between mEUR 16 and mEUR 20 for the Group for the 2020 fiscal year.

Prospective business development of the SE

The earnings position of MAX Automation SE is heavily dependent on the development of the Group. Based on the expected development of the operating companies, the Managing Directors are anticipating a slight increase in profit transfer and investment income for the financial year of 2020.

Forward-Looking Statements

This report contains forward-looking statements based on the current assumptions and forecasts made by the Managing Directors of MAX Automation SE. Such statements are subject to risks and ambiguities. These and other factors may lead to a situation where the actual results, financial position, developments or capacity of the Company differ substantially from the estimates given here. The Company assumes no liability whatsoever to update these forward-looking statements or to adapt them in the light of future events or developments.

Dusseldorf, 12 March 2019

Andreas Krause
CFO and Chairman
of the Management Board

Werner Berens
Head of Business Unit
Environmental Technologies

Dr. Guido Hild
Head of Business Unit
Evolving Technologies

Patrick Vandenrhijn
Head of Business Unit
Process Technologies

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