Decline in earnings reported by Jungheinrich forklift manufacturing company - Drop in profits reported by forklift manufacturer Jungheinrich
Jungheinrich, a leading forklift manufacturer, has announced a profit decline in its second quarter of 2021, attributing the drop to a combination of factors impacting its earnings. The company made this revelation while presenting its Q2 financial results.
The intensification of international competition and increasing price pressure in new business have been observed by Jungheinrich, contributing to the profit decline. Lower fixed cost absorption in its Intralogistics segment (ITS) and adverse foreign exchange (FX) effects are the primary culprits behind the decline.
The ITS segment, which primarily focuses on new truck sales, has been under pressure, resulting in lower fixed cost absorption. Meanwhile, the service business in both segments showed growth, but it only nearly compensated for the weaker new truck sales in ITS and reduced revenues from Business Solutions in the Supply Chain Solutions (SCS) segment.
FX translation effects had a notable negative impact on order intake, revenue, and adjusted EBIT in this quarter. For instance, the order intake dropped by €64 million due to FX effects.
In Q2 2021, the adjusted EBIT margin was affected mainly by these factors: lower fixed cost absorption in ITS, adverse FX effects impacting orders and revenues, and softer ITS new truck sales and reduced revenues in SCS Business Solutions.
Despite these challenges, a growing service business partially offset these declines but was insufficient to avoid a profit dip during that quarter.
Jungheinrich's European core business is also facing weak economic momentum, further compounding the challenges. In summary, the profit decline stemmed from a combination of weaker new truck sales, adverse currency impacts, and cost absorption challenges in the manufacturing segment, counterbalanced only partially by growth in service revenues.
[1] Source: Jungheinrich's Q2 2021 financial report.
In light of Jungheinrich's Q2 2021 financial report, the company's European core business faces challenges due to weak economic momentum, international competition intensification, and increasing price pressure in new business, leading to a profit decline. To address these issues, Jungheinrich could consider implementing a community policy that includes vocational training programs to enhance its workforce's skills, ultimately contributing to improved business finance and productivity. By focusing on cost reduction and efficiency improvements in the Intralogistics segment, as well as growing the service business, Jungheinrich might mitigate future profit declines.
