Ardan Livvey's view on 3Q21 earnings results of Deutz AG
Ardan Livvey is a ‘Top Five’ investor in Deutz AG and we are therefore again disappointed by the lack of substantive guidance provided at the company’s November 10 third quarter earnings results on addressing the critical operational and strategy issues we have raised in recent months. Most notable among these is the lack of a strategy provided in the Q3 analysts’ call on how Deutz AG intends to bring its faltering Asia-Pacific regional engine production financial year 2022 targets back on track towards the 80,000-unit goal and how management will address the crucial challenge of customer price increases when inflationary pressures are mounting fast on input prices.
André Cabral, Senior Analyst at Ardan Livvey, said: “It is not surprising that Deutz AG reported double-digit increases in Q3 unit sales and revenue from markets that bounced back strongly in the quarter as Covid pandemic restrictions were eased. This is a rising tide that is lifting all ships. The real story of the company’s management failures lie in its lower multiples and margins compared with its sectoral peers, as we have identified in previous commentaries. There appears to be no clear well-structured corporate strategy in place that has profitability as its overarching goal. This does not bode well for the road ahead, with a management that has struggled to adapt to fast-changing circumstances in the Covid crisis and is providing only vague guidance on how it will lift Deutz’s China operations, central to future growth, back towards their mid-term targets. Now with inflationary pressures rising on production inputs and no credible strategy forthcoming from Deutz on how it intends to absorb these with price increases, Ardan Livvey, as a leading shareholder, is rapidly losing patience with the management’s lack of urgency and strategic leadership.”
