DEUTZ presents financial results for 2014

• Unit sales and revenue increased

• Operating profit dented by exceptional factors

• Strong free cash flow and positive net financial position

DEUTZ AG has today presented its financial results for 2014. The new orders received by the DEUTZ Group totalled €1,379.0 million, which was 16.4 per cent below the record figure reported for 2013 (€1,649.7 million). The Mobile Machinery and Stationary Equipment application segments managed to expand their volumes of new orders, and service business grew as well. By contrast, new orders fell significantly in the Automotive and Agricultural Machinery application segments. It was encouraging to see that new customers were acquired across all regions and applications.

The number of engines sold by DEUTZ rose by 6.7 per cent year on year from 184,028 units in 2013 to 196,403 in 2014. This was largely attributable to stronger demand in the Mobile Machinery application segment. Revenue advanced by 5.3 per cent to €1,530.2 million (2013: €1,453.2 million). The 2014 financial year as a whole was strongly influenced by the changes to emissions standards for engines under 130kW that came into effect across the European Union on 1 October 2014. Consequently, European customers purchased more engines than they needed in the first three quarters of the reporting year, which reduced demand accordingly in the fourth quarter of 2014 and will continue to do so in the quarters ahead.

Operating profit (EBIT before one-off items) fell from €47.5 million in 2013 to €31.7 million in the reporting year. One-off items amounting to €18.9 million related largely to the measures taken to optimise the Company's production sites in Germany. The EBIT margin (before one-off items) narrowed from 3.3 per cent to 2.1 per cent. An impairment charge of €20.4 million was recognised in the third quarter of 2014 owing to the higher amounts transferred to provisions for warranty costs. Excluding this charge and further exceptional factors – which, however, largely cancelled each other out – the EBIT margin (before one-off items) would have been 3.4 per cent. Net income for the year fell by €16.5 million to €19.5 million (2013: €36.0 million).

One highly encouraging trend was the level of our free cash flow, which almost quadrupled year on year to €52.0 million. Now that all of our new products have been launched on the market, the associated capital expenditure is being depreciated, while the increased level of development costs and capital investment seen in recent years has been scaled back again. The net financial position improved by €45.4 million to €13.7 million in the reporting year and was positive for the first time since 2009. The equity ratio also remained impressively high, amounting to 44.5 per cent at the end of 2014 (31 December 2013: 45.0 per cent).

"We are keen to continue paying a consistent dividend even when business conditions are challenging. We and the Supervisory Board will therefore propose to the Annual General Meeting that an unchanged dividend of €0.07 per share be paid for 2014," commented Dr Margarete Haase, the Chief Financial Officer.

The new orders received in the fourth quarter of 2014 fell by 32.3 per cent year on year to €302.2 million. Unit sales and revenue also weakened in the final quarter, declining by 16.3 per cent and 14.1 per cent year on year to 41,304 engines and €352.3 million respectively. In addition to the impact of the advance production of engines, this was also attributable to an economic downturn towards the end of the year. Operating profit (EBIT before one-off items) fell from €20.3 million to €8.9 million.

"We saw in 2014 just how important it is to operate flexibly. We are also concentrating on further improving our quality and efficiency. In addition to the measures we have already taken to optimise our production sites in Germany, we plan to consolidate our activities in China and to focus on our successful DEUTZ Dalian joint venture there," explained Dr Helmut Leube, Chairman of the Board of Management of DEUTZ AG.

DEUTZ expects 2015 to be a year of transition characterised by lower demand resulting from the aforementioned advance production of engines in 2014. The Company is therefore forecasting that revenue will decline by around 10 per cent year on year and that the EBIT margin (before one-off items) will improve slightly to roughly 3 per cent.

Detailed information about the 2014 financial year can be found in the attached summary of key financials and at www.deutz.com.