Krones margins improve despite subdued equipment market

Krones increased earnings and order intake during the first nine months of 2026 despite broadly unchanged reported revenue, as operating improvements supported the German filling, packaging and process equipment manufacturer’s profitability.

Results published on 6 November show order intake rising 2.9% to €4,223.6m, compared with €4,104.7m a year earlier. Reported revenue was €4,099.7m, slightly below the €4,107.4m recorded during the corresponding period of 2025.

After adjusting for currency translation effects, revenue increased 0.8%. The difference reflects approximately €40m of negative currency effects during the period, alongside other factors influencing the reported results.

Profitability improved more substantially than sales. Earnings before interest, taxes, depreciation and amortisation increased 5.2% from €430.7m to €453.1m, lifting the reported EBITDA margin from 10.5% to 11.1%.

The earnings figure includes approximately €10m of positive profit impact associated with refunds of US tariffs. Excluding that effect, Krones calculates an EBITDA margin of 10.8%, representing an improvement on the previous year’s performance but a smaller increase than the headline reported margin suggests.

Krones also identifies approximately €20m of negative revenue impact associated with the tariff refunds, which it describes as not recognised in profit or loss. The accounting treatment is distinct from the positive earnings contribution and should not be interpreted as a comparable operating loss or an additional deterioration in underlying demand.

Cost and performance measures contributed to the improvement in earnings. Krones says its machinery and production-line prices remained broadly stable, indicating that the higher margin was not simply the result of widespread increases in selling prices.

The company’s operations span filling, packaging, processing technology and associated industrial services. Its equipment is used in beverage production and other manufacturing environments where investment decisions depend on production capacity requirements, equipment replacement and the expected operating costs of a completed line.

Customers face a combination of general economic uncertainty and higher operating expenditure. Krones identifies geopolitical conditions and associated cost pressures as factors affecting purchasing decisions across its markets, although demand remained sufficient to support higher order intake during the reporting period.

The relationship between orders and revenue provides another measure of activity. Krones recorded a book-to-bill ratio of 1.03, meaning that the value of incoming orders slightly exceeded revenue recognised during the first nine months.

As a result, the order backlog increased from €4,190.4m at the end of December 2025 to €4,314.3m at 30 September 2026, a rise of 3.0%. The backlog includes projects that Krones expects to recognise as revenue towards the end of 2027 or later.

Large packaging and process equipment orders can involve engineering, manufacturing, delivery, installation and commissioning over extended periods. Consequently, the timing of an order does not necessarily correspond with the period in which the equipment supplier recognises the associated revenue.

Project complexity also affects the scheduling of machinery production. A complete filling or packaging line requires several components and systems to operate together, while customer specifications influence the engineering and commissioning activities required before acceptance.

Although the backlog provides a substantial pipeline of contracted work, its conversion into revenue depends on project progress and the agreed delivery arrangements. A higher order book therefore supports future workload visibility without guaranteeing the same rate of revenue growth in every subsequent quarter.

Krones’ net income increased 2.7% to €219.5m, compared with €213.7m during the previous year. Earnings before tax rose 2.1% to €308.7m, while earnings per share increased from €6.75 to €6.94.

The smaller improvement in earnings before tax than in EBITDA reflected higher depreciation and amortisation, together with less favourable financial income and expense. These items affect the relationship between operating profitability and the amount ultimately reported as pre-tax earnings.

Cash generation remained under pressure during the first nine months. Free cash flow excluding mergers and acquisitions was negative €5.0m, compared with positive €80.2m a year earlier, partly reflecting increased investment expenditure.

The quarterly trend improved between April and September. Free cash flow excluding acquisitions moved from negative €21.3m in the second quarter to positive €25.8m during the July-to-September period.

Krones reported net cash of €410.2m at the end of September, compared with €361.2m a year earlier. Its equity ratio increased from 42.1% to 44.8%, while return on capital employed declined to 17.6% from 19.5%.

The reduction in return on capital employed provides a counterpoint to the stronger EBITDA margin. The two measures examine different aspects of financial performance, with capital efficiency reflecting the relationship between operating results and the resources employed in the business.

Management revised its 2026 revenue outlook on 21 October, before the full nine-month results were published. The forecast for full-year revenue growth, adjusted for currency translation effects, was reduced from 3–5% to 1–2% because of less favourable market conditions and the resulting outlook for the fourth quarter.

The 6 November announcement confirmed that previously revised forecast. It did not introduce a second reduction in the revenue target, and Krones retained the full-year EBITDA margin forecast of 10.7–11.1% and return on capital employed target of 19–20%.

Medium-term revenue expectations had also been adjusted in October. Krones now targets revenue of €6.0bn–€6.2bn in 2028, compared with the previous objective of approximately €7bn. The EBITDA margin target for that year was narrowed to 11–12%, while the return on capital employed target remains above 20%.

These targets describe management’s forecasts rather than contracted revenue or assured profitability. The company will need to translate its existing equipment orders into completed projects while responding to changing customer investment requirements and maintaining cost control.

The first nine months produced higher order intake and stronger earnings without equivalent growth in reported sales. With some backlog projects extending beyond 2027 and near-term revenue expectations already reduced, the final quarter will test whether the improved margin can be maintained while equipment demand remains uneven.