Job cuts due to declining order intake
The Homag Group is responding to the significant drop in order intake in the first nine months of 2023 with a package of measures. Almost 600 jobs are to be cut worldwide. Due to the high order backlog at the beginning of the year, the company achieved the same high level of sales and earnings in the first three quarters of 2023 as in the previous year.
“Following the extraordinarily high investments made by our customers in 2021 and 2022, we expected a cyclical downturn – however, with almost a third less incoming orders worldwide, this is much more pronounced than expected,” explains CEO Dr. Daniel Schmitt. “We had to respond to this and quickly drew up a package of measures to adjust capacity and discussed it with the employee representatives.” The Homag Group plans to cut almost 600 jobs worldwide and expects this to result in cost reductions of around EUR 25 million in the coming year and around EUR 50 million per year from 2025. Around 350 of the 600 jobs are to be cut at the German locations. In Germany, the reduction is to be achieved in a socially responsible manner through volunteer programs and early retirement models. There are currently no plans for redundancies for operational reasons, but these cannot be ruled out. In addition to the job cuts, the Homag Group plans to make use of other flexibilization instruments, such as the reduction of working time accounts and short-time working, and has imposed an extensive hiring freeze.
Mixed picture in the first nine months of 2023
Between January and September 2023, incoming orders fell by 32% to EUR 968 million (previous year: EUR 1,418 million). In terms of sales, which again increased slightly to EUR 1,222 million (previous year: EUR 1,195 million) compared to the previous year’s high figure, the Homag Group still benefited from its very high order backlog from the beginning of the year, which was gradually processed and accordingly reduced to EUR 832 million as of September 30, 2023 (September 30, 2022: EUR 1,256 million). At EUR 93.2 million, EBIT before special items remained at the previous year’s high level (EUR 92.4 million). As of September 30, 2023, the Homag Group employed 7,482 people (September 30, 2022: 7,462).
Outlook: Decline in sales expected in 2024
The extraordinary expenses resulting from the package of measures amount to EUR 35 to 50 million and will be recognized in the fourth quarter of 2023. This will reduce the Homag Group’s earnings before taxes and before profit transfer in 2023 as a whole compared to the previous year. “The sharp drop in incoming orders will affect us with a time lag and will lead to a significant decline in sales of up to 15% in 2024,” explains Dr. Daniel Schmitt. “In order to limit the impact on earnings, we want to use the package of measures to adjust our cost structure. We will also benefit from this in the medium and long term and will return to profitable growth when the next upturn comes.”