Impact of economic conditions on business performance

Uncertainties hold back investment activity

Overall, the economic environment was characterised by a variety of risks and uncertainties in 2016 that will continue to have an impact this year. The tendency is therefore for a wait-and-see stance as far as investment activity is concerned. Moreover, prices for oil, commodities and agricultural goods were again at a very low level in 2016, although they did rise over the course of the year. However, higher prices would encourage investment in the relevant areas – and thus would benefit business at DEUTZ.

While the global economy grew by 3.1 per cent in 2016, revenue at DEUTZ rose by 1.0 per cent. The economy in the eurozone expanded by 1.7 per cent in the year under review. Against this backdrop, the situation varied significantly across DEUTZ's main customer markets in Europe. Whereas demand for construction equipment rose, there was a decline in the agricultural equipment sector. Nevertheless, DEUTZ was able to increase its unit sales of engines for agricultural equipment applications because demand in the previous year had been very low due to customers using up their inventories. In 2014, they had purchased significant volumes of engines ahead of a new emissions standard. DEUTZ's revenue in its largest market, EMEA (Europe, Middle East and Africa), rose by 3.3 per cent in 2016.

Economic growth in the United States slowed to 1.6 per cent in the reporting year (2015: 2.6 per cent). DEUTZ's revenue in North America fell by 13.0 per cent. This was largely caused by declining unit sales of engines for construction equipment in North America and by rental companies' reluctance to invest.

Momentum in China, our key international market, slowed again, with economic growth of 6.7 per cent (2015: 6.9 per cent). However, the markets for construction equipment and for light and medium-duty trucks stabilised following sharp decreases in previous years. DEUTZ’s revenue in the Asia-Pacific region rose by 15.9 per cent thanks to the positive impact of new customer projects.