DEUTZ AG CMD 2024: Key Takeaways

During the CFO perspective segment of DEUTZ AG’s Capital Market Day, Oliver Neu outlined the financial roadmap that supports the company’s Dual+ strategy. His presentation focused on ensuring sustainable growth while maintaining financial discipline, with key goals to achieve €4 billion in revenue by 2030 and €3.2 to €3.4 billion in revenue by 2028, paired with an adjusted EBIT margin of 8-9%.

Key Highlights from Neu’s Presentation:

1. Growth and Revenue Targets
   DEUTZ’s path for revenue growth is centred on three key areas: Classic Engines, Services, and Solutions. The focus on expanding service offerings and the energy business through both strategic M&A and organic growth reflects DEUTZ’s confidence in its growth potential.

   
   The Classic business, bolstered by acquisitions like Rolls-Royce Power Systems, is poised to contribute significantly, particularly as the market recovers and the portfolio is refined.

   
   

2. Cost Reduction and Structural Efficiency
   Neu introduced a €50 million cost reduction program to drive long-term cost improvements. This program includes streamlining the company’s global operations and reducing R&D spending in the New Tech segment, resulting in a more efficient supply chain.
   DEUTZ expects to save €20 million by 2025 and an additional €30 million by 2026, which will contribute to stronger margins and more efficient operations.

   
   

3. Capital Structure and Financing M&A
   M&A is a key pillar in DEUTZ’s growth strategy, particularly in the service and energy segments. Neu highlighted that future acquisitions will focus on high-margin, growth-oriented companies, exemplified by the recent acquisition of Blue Star Power Systems.
   DEUTZ will maintain its disciplined approach to capital allocation, with an equity ratio above 40%, which allows room for further investments. The company aims for a leverage ratio of 1-2x EBITDA to optimize financial flexibility.

   
   

4. Increased Shareholder Value
   Neu reaffirmed DEUTZ’s commitment to improving free cash flow through better operational performance, reduced CapEx intensity in new ventures, and more effective working capital management. This approach ensures that DEUTZ remains in a strong financial position while increasing shareholders' dividends.
   DEUTZ has updated its dividend policy, committing to stable or growing dividends that reflect the company’s improved profitability.

   
   

5. Financial Reporting and Segment Restructuring
   Starting in 2025, DEUTZ will restructure its financial reporting to align with its engines & services and solutions categories. This change will provide clearer insights into the performance of its traditional and forward-looking businesses, such as energy and new technology.

   
   

Conclusion
Neu’s presentation emphasized DEUTZ’s focus on ensuring profitable growth while remaining financially flexible to seize opportunities in the energy and technology markets. By maintaining cost control, optimizing the balance sheet, and prioritizing shareholder returns, DEUTZ is well-positioned to expand globally, particularly in the energy sector, while delivering value to its investors.

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