Jungheinrich: Better Than Expected Orders And Sales In Q3

Jungheinrich’s (JUN3.DE) solid Q3 results and better-than-expected order intake demonstrate its robustness and favourable strategic positioning within a mixed environment for material handling equipment. While the overall market outlook has deteriorated and a dip is anticipated for Q4, Jungheinrich’s management remains confident that it
can deliver higher revenue (~1.6%) and stable profitability in 2012. Moreover, a pause in growth for 2013 is almost welcome. Time and resources are required to deliver its three important strategic projects by 2014, as are new product offerings. The modest valuation rating appears to reflect general cyclical industrial sector concerns rather than the longer-term opportunities for Jungheinrich.

Better than expected orders and sales in Q3
Jungheinrich’s strong presence in Germany (27% of sales), its specialisation in electric counterbalance forklift trucks and the growth of warehousing equipment/ logistics automation continued to serve it well. While worldwide material handling equipment industry volumes declined by 2% in Q3, with Europe down 6% (due mainly to the fall in ICE truck demand), Jungheinrich reported Q3 sales revenue up 4% and incoming orders up 16.7%. This growth was helped by a favourable product mix, higher short-term truck hire demand and aftermarket sales. The stable Q3 EBIT (€38.5m, 7.1% margin) was despite higher R&D expenses on new products (+24% for nine months) – including entry with a new competitive product in the ICE segment in 2014. The order book (€404m +6% on Q2), boosted by a large single client order (c €10m), represents four months’ sales and should help Jungheinrich through a possible dip in activity in Q4.

Low-cost online transactions: A driver of automated logistics
The potential from the important 2014 strategic projects (new warehouse equipment plant, parts and sales centres and Chinese factory) means management is optimistic about the future, driven by rental, internet transactions and growth in Asia. Valuation: Modest given current stability and future potential The 2012 P/E ratio of 8.8x is a 35% discount to the German market. This is modest and appears to reflect general cyclical industrial sector concerns rather than demonstrated stability the longer-term opportunities for Jungheinrich.

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