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Wednesday 18 October 2017

Claas reports 'respectable' profits despite expected sales fall of 10pc

Bruce Lett

German giant Claas has indicated that its profits before tax are back above 50pc on the previous year while sales were back by 10pc overall.

Like many others in the industry, 2008 was a record year for Claas, but the worldwide market for agricultural machinery suffered significant declines in some areas.

According to Claas, the VDMA (German Engineering Federation) estimates that industry turnover dropped by 25pc last year. Blamed were the highly volatile markets for agricultural products and the worldwide financial crisis and recession, which created uncertainty in the minds of farmers causing them to hold back on investment.

Overall, sales for the Claas Group fell 10.4pc to €2.9bn, while profit before tax was €112.3m. Claas says that although this was 54.7pc below the value from the previous year, the figure still represents a respectable result within the industry.

Claas says that the market for agricultural machinery was relatively stable in western Europe but, after years of continuous growth, their eastern European markets suffered significant declines last year. The Russian Federation was affected particularly badly, with its demand for western agricultural machinery falling very significantly.

Countering the market trend, the sales achieved by Claas in western Europe -- the company's most important market for agricultural machinery -- remained at a high level of almost €2bn. Growth in the agricultural machinery markets in Germany and elsewhere, though, were not enough to compensate for the profit declines elsewhere.

Outside of Europe, overall sales of agricultural machinery have fallen. However, there were differences in trends between individual regions -- while sales dropped in central Asian countries, those in the USA increased significantly.

In its production engineering and industrial engineering segments, sales dropped significantly in the past financial year by 17.9pc to €132.4m. Claas Fertigungstechnik (the production engineering segment) is a supplier to the international aviation and car industry. Claas Industrietechnik (the industrial engineering segment), a system supplier of drive technology, hydraulic systems and electronics, was also unable to escape the difficult conditions unscathed as sales dropped by €11.2m to €31.6m.

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Despite an overall drop in business, Claas increased its investment in research and development by €11m, to a total of €124.8m. This figure represents 4.3pc of turnover (the previous year it was 3.5pc). Some of the results of this investment were the extension of the Xerion tractor range, featured recently in the Farming Independent.

Last year, the Claas group also maintained its staffing levels at 9,467, but despite initial signs of market stabilisation it does expect a further market decline of 10pc this year in accordance with the German Engineering Federation estimates.

Long-term trends, Claas says, will see an increase in population and therefore demand in agricultural produce for food and its production equipment in the agricultural machinery sector.

Irish Independent