- Organic sales to grow by an average of
4.0 to 6.0 percent annually through 2026
- Record EBITDA margin before restructuring
charges of more than 15 percent expected by 2026
- Tapping new opportunities in the dynamic New
Food market and the service business to drive profitable growth
- Company commits to ambitious climate and
LONDON, UK - EQS Newswire - 29 September 2021 - GEA Group presents today its "Mission
26" strategy in London as part of its Capital Markets Day. The plan for
the next five years defines seven key levers to accelerate sustainable,
profitable growth. The focus is on sustainability, innovation and digital
solutions, New Food, as well as excellence initiatives in sales, service and
operations. The company is also looking at targeted acquisitions.
"We have set ourselves the goal of being at the forefront of the
mechanical and plant engineering industry," says Stefan Klebert, CEO GEA.
"We take it upon ourselves to protect future generations by offering
sustainable solutions for the food and pharmaceutical industries. In these
attractive markets, we want to continue to grow profitably while contributing
to a better world, as anchored in our purpose - engineering for a better
Ambitious financial targets set for 2026
"Mission 26" sets ambitious financial targets for 2026. Organic sales
growth of 4.0 to 6.0 percent per year is expected, leading to sales of around
EUR 6 billion (FY 2020: EUR 4.635 billion). The EBITDA margin before
restructuring expenses is projected to grow to a record level of more than 15
percent (FY 2020: 11.5%). The Group-wide return on capital employed (ROCE) is
anticipated to increase significantly to over 30 percent (FY 2020: 17.1%).
In the context of further targets, a stable ratio of net working capital to
sales of 8.0 to 10.0 percent is expected by 2026. Capital expenditure (CAPEX)
is projected to be around EUR 200 million annually until 2026. Overall, this
leads to strong free cash flow generation of around EUR 2 billion from 2022
"We are creating significant value for our shareholders through 2026
and beyond," says Marcus Ketter, CFO. "Our shareholders will
participate in this success with sustainable dividend increases."
Holistic climate and sustainability approach
In June 2021, GEA presented its interim targets for reducing its own greenhouse
gas emissions alongside its net zero ambition for 2040. Greenhouse gas
emissions in Scopes 1 and 2 are to be reduced by 60 percent and in Scope 3 by
18 percent by 2030 (base year 2019). The Science Based Targets initiative
(SBTi), the globally recognized independent body for reviewing climate targets,
validated GEA's CO2 reduction targets in September 2021. SBTi thus
confirms that GEA's interim targets follow the latest climate science and make
an effective contribution to achieving the 1.5-degree Celsius target of the
Paris Climate Agreement.
In addition to the climate targets already communicated, GEA has set ambitious
ESG targets. Combined, these measures focus on environmentally sustainable
customer solutions and responsible operations. Furthermore, GEA aims to be the
employer of choice in the industry.
"Sustainability is firmly anchored in the company's DNA and is
therefore also an essential part of Mission 26," says Klebert. "With
our ambitious approach, we help our customers achieve their own environmental
goals. Likewise, we strive for the highest standards in our operations and
support our employees in developing their skills. In this way, we live up to
our social responsibility and ensure GEA's lasting success."
GEA drives product innovation with R&D and digitalization
"Innovation & Digitalization" are also expected to make a
significant contribution to realizing the goals of "Mission 26".
Here, GEA aims to increase the proportion of sales of products that are less
than five years old - from the current level of 10 percent to about 30 percent.
To fuel this development, GEA will increase its research & development
spending by approximately 45 percent over the next few years.
In addition to introducing new products, GEA will offer customers more
digital solutions to further enhance their processes and GEA machine
efficiency. To drive the digital customer journey and the development of
digital solutions forward, these competencies haven been combined under the
newly created position of Chief Digital Officer (CDO), effective August 1,
Growth market New Food: GEA with unique position
In the dynamically growing New Food market, GEA will expand its already strong
position and become a market leader. Here, the company intends to leverage its
strengths in scaling industrial applications and its unique position as a
full-line supplier. GEA anticipates order intake for newly developed and
existing machines from this segment to exceed EUR 400 million per year by 2026.
"Consumer expectations around food are changing. For example,
environmental impact and animal welfare are increasingly prioritized, and
demand for high-quality, protein-rich foods is growing rapidly. GEA is
optimally positioned to meet this demand," explains Klebert.
GEA has already demonstrated its strength in this dynamic market by winning
one of the largest orders in the company's history: Novozymes, the world's
largest supplier of enzyme and microbial technologies in Denmark, is entrusting
GEA with the turnkey fitting of a large-scale plant in the U.S. to produce
Excellence initiatives in sales, service and operations
Further growth opportunities for "Mission 26" lie in sales, service,
purchasing and production. In GEA's regions and countries, sales effectiveness
and presence will be better exploited by deploying more of the company's own
sales staff in key markets. Sales of new machines are expected to grow by 4.0
to 5.0 percent per year until 2026.
Further growth potential was also identified in the service area, which is a
resilient and profitable business for GEA. The aim is to increase coverage and
expand the service business with customers by 2026, thereby boosting recurring
revenue. This approach is expected to generate annual organic revenue growth of
5.0 to 6.0 percent in the service business until 2026.
The optimization measures announced at the 2019 Capital Markets Day
impacting purchasing, production and logistics will be continued. In the
process, purchasing activities were bundled in a central purchasing
organization, the production network was improved, and greater flexibility was
created at sites. The aim is to enable a transition to best-in-class
procurement by 2026, further optimize the production network and reduce
delivery times to customers.
"Global Operations is undergoing a comprehensive and long-term
transformation process," explains Johannes Giloth, COO GEA: "In
addition to cost reductions, this also involves creating structures for further
growth. In this way, Global Operations will continue to have a significant
positive impact on profitability in the future." Between 2022 and 2026,
further optimizations in purchasing (EUR 90 million) and production (EUR 60
million) are expected to have a total net impact on EBITDA of EUR 150 million.
GEA examines possible acquisitions
Strong cash generation and a solid balance sheet will enable external growth.
GEA will therefore examine value-enhancing acquisitions to strengthen its
Outlook for business development in 2021 and 2022 confirmed
GEA confirms the guidance for fiscal year 2021 that was raised in July 2021.
Organic growth of 5.0 to 7.0 percent is expected for revenue. EBITDA before
restructuring expenses at constant exchange rates is anticipated to be in a
range between EUR 600 million and EUR 630 million. The outlook for ROCE at constant
exchange rates is likely to be in the range between 23 to 26 percent.
At the Capital Markets Day in September 2019, GEA communicated its targets
up to 2022. In March 2021, when the annual figures for 2020 were presented, GEA
adjusted its medium-term financial targets for 2022 upwards. GEA has confirmed
these again. Group revenue is expected to grow by an average of 2.0 to 3.0
percent annually from 2019 until 2022, the EBITDA margin before restructuring
expenses is to increase to a target corridor of 12.5 to 13.5 percent (Capital
Markets Day 2019: 11.5 to 13.5 percent) and the ratio of net working capital to
revenue is to be reduced to the range between 8.0 and 10.0 percent (Capital
Markets Day 2019: 12.0 to 14.0 percent).