Good afternoon, everybody, and welcome to the quarterly Wacker Neuson Group Earnings Call. Thank for joining today on behalf of the release of our full year 2023 results. My name is Peer Schlinkmann, and I am the new head of investor relations and corporate communications of the Wacker Neuson Group since December 2023. My team and I are very much looking forward to intensifying our communication with the financial community. As usual, we will now present our latest results released this morning to you. First, we will show the operational and financial results of the year 2023 and give additional insights on the recent developments and outlook for 2024. Following this, we are happy to answer your questions in the Q&A session. If you are not following today's call via the webcast, the presentation slides are also available for download on our website at wackerneuson.com/investor-relatios.
Please note that the entire call, including the Q&A session, will be recorded, and a replay will be available on our corporate website by the end of the day. Now I would like to hand over to our executives, Karl Tragl and Christoph Burkhard, who will, as usual, lead you through this call.
Thank you, Peer, and welcome on board. This is Christoph Burkhard, CFO of the Wacker Neuson Group. Welcome, everybody, to our 2023 year-end earnings call, and thank you for joining again.
You're all a warm welcome from my side, and thanks again for joining today's conference call. I am Karl Tragl, CEO of the Wacker Neuson Group. The past financial year once again impressively demonstrated our guiding principle: nobody is perfect, but a team can be. Our global teams demonstrated how experienced and motivated employees can achieve great results even with challenges increasing during the year. I am proud of our teams, and I am proud of our company with a long history going back more than 175 years. Our customers, suppliers, business partners, and investors can rely on this continuity of experience and resilience now and in the future. As usual, let's start with the details of our key financials. The Wacker Neuson Group once again grew significantly last year and increased profitability at the same time.
With a revenue growth of roughly 18% to EUR 2.655 billion, we are looking at the strongest year in terms of revenue in the history of the Wacker Neuson Group. Our earnings before interest and taxes, EBIT, grew with 35% year-on-year, even more dynamically. In total, we generated EUR 273 million with an EBIT margin of 10.3%. Neutralizing the two one-off effects from first half-year 2023, the like-for-like EBIT margin of approximately 9.3% is still above the 9% margin of the year before. This was achieved in an economic environment that became increasingly challenging over the course of the year. After a very dynamic development in the first half of 2023, recessionary trends became increasingly apparent in many business areas. In the second half of the year, these developments were accompanied by weakening demand in the construction industry.
However, Wacker Neuson does not only serve the building sector but also the infrastructure and modernization segments of the construction industry. Thanks to continued growth in the agricultural and municipal equipment markets, Wacker Neuson Group was able to achieve its targets for 2023. In addition, rental and aftermarket services complete our product offering on a sustainable basis. With our innovations, we create new growth potential, particularly supported by our continuously broadened zero-emission product portfolio. Now, looking at the fourth quarter of 2023, we must acknowledge that with an EBIT margin of 5.1%, the performance did not meet our expectations. The significant slowdown in production outputs led to a decline in gross profits, which could not be fully compensated by cost savings.
In parallel, we already took a whole series of measures in the areas of direct and indirect production costs, as well as SG&A adjusting to the economic slowdowns. Let me now give you some insights on the development of our revenue by regions. The regional perspective shows that in 2023, our most important markets, Europe and Americas, were supported by a strong order book, generating again significant double-digit percentage growth as the year before. In the EMEA region, our revenue increased by roughly 18%, amounting to around EUR 2 billion in 2023. With a share of 76% of total revenues, EMEA again proved to be our key market. Business with Kramer and Weidemann Compact Equipment for the agricultural sector continued to develop dynamically. For the most part of 2023, it has been relatively unaffected by the deteriorating economic environment.
The Americas region continued to be another important growth driver for us. Our revenues once again increased in the double-digit percentage range in the past financial year, rising by roughly 21% and thereby exceeding the mark of EUR 500 million. Again, it was the U.S. and the Canadian market that shaped our growth in the region thanks to the strong demand across all sales channels. Authorized dealers, independent light equipment dealers, as well as key accounts, showed a sustained high level of interest in new machines and rental equipment. However, in the second half of the year, the demand of the North American market also weakened, triggered by overstocking of our dealers. As recognized in the course of 2023, the Asia-Pacific region remained on a negative growth path with roughly 9% decrease year-on-year.
This is driven in particular by the weakness of the Chinese and the Southeast Asian markets combined with a high price sensitivity in a declining construction market. Nevertheless, we stay positive as the Australian market remains our region's sales driver. We are continuing to pursue our strategy there, expanding our dealer network and partnerships with independent rental companies, as well as strengthening the demand with a product portfolio tailored especially to the local needs. Now I will hand over to you, Christoph, to give us some more insights on the financials.
Thank you, Karl. Now, let me start with a brief deep dive into net working capital in 2023, a key topic which significantly influenced all financial KPIs displayed on, on this slide. The question is, which were the main driving forces behind the working capital development in 2023? Now, when specifically analyzing the development of the respective inventory categories, and I mean with that raw materials, goods in transition, work in progress, and finished goods, we do see a buildup of raw materials until the middle of the year 2023, subsequently declining again, basically down to the levels at the end of 2022, corresponding to the economic slowdown. In contrast, we do see a steady growth of finished goods in line with the revenue growth, however, remaining at constant high levels throughout Q4 despite the weakening market dynamics.
This is a typical pattern of a year where dynamics quickly changed from growth to consolidation, leading to a wave going through the value chain from raw materials eventually to finished goods. Since all market participants have been facing the same rapid development, everybody, including the dealers, were confronted with a slowdown in demand, leading consequently to temporary high stock levels of finished goods towards the end of the year, while the inflow of raw materials got cut down quite quickly. On the other hand, the improving supply chain environment in combination with focused actions led to a very significant reduction of the unfinished machines back to normal levels. I guess you recall we had this topic quite a couple of times during our quarterly calls last year.
And we were able to reduce the number of unfinished machines down from record levels of more than 1,600 in July to around 450 at the end of December 2023. So we ended with a mixed picture. Certainly, we would have liked to finish with a black zero free cash flow, but eventually we could not fully absorb the sudden demand dynamics with our working capital management, eventually leading to a -EUR 25 million free cash flow. At the same time, the successful and fast reduction of our unfinished machines also contributed to the temporarily increased finished goods position. But despite this fact, our net financial debt position, as well as our leverage below one, and our constant strong equity ratio remained stable at very decent levels at the end of 2023. And in this context, maybe already one comment from my side towards 2024.
I expect that everybody in the industry, including us, will remain quite busy throughout the first half of the year 2024 to get back to normalized finished goods stock levels due to the mentioned market dynamics spilling over from financial year 2023 into 2024. Now, some words about our dividend. Continuity in delivering attractive shareholder dividends is one of the pillars of our financial policy at Wacker Neuson. Again, we achieved the year with strong growth, as Karl already explained, and our group reached new milestones in both revenues and EBIT. Based on this performance, we want our shareholders to again participate in our results. Therefore, we will propose a dividend of EUR 1.15 per share for the past financial year at the Annual General Meeting, which will be held on May 15th here in Munich.
This corresponds to a payout ratio of around 42% of our earnings per share and marks an attractive dividend yield of 6.3% based on 2023 year-end share price. With this, back to you, Karl.
Thank you, Christoph. At the end of our presentation, let's talk about our guidance for 2024 and our Strategy 2030 implementation. Based on the volatile political and economic developments at the beginning of 2024, we expect the current financial year to be characterized by a higher degree of uncertainty compared to the past year. As mentioned, we already prepared our company for a weaker market environment. Many business associations in our core market, Germany, are pointing to a recession in industry segments that are important for us.
We need to further keep our production and sales activities as flexible as possible to enable the Wacker Neuson Group to successfully stay on track despite low visibility. Our focus right now is geared towards the short-term sight and dynamic adaptation to demand changes. But of course, we always have the long-term development of our company in mind as well. We have the right people, the spirit, and dynamic to deal with the challenges ahead of us. After two years of strong growth supported, among other things, through our solid financial position, we are highly convinced that the Wacker Neuson Group is well positioned and equipped for the tougher times ahead. In a nutshell, fiscal year 2024 will be a year of consolidation, a year which, despite all challenges, also offers opportunities to further improve operational structures, to increase our resilience, and to build a strong foundation for future growth.
For 2024, we expect revenue to be in the range of EUR 2.4-EUR 2.6 billion and the EBIT margin in the range of 8%-9%. Our goal is to reduce our net working capital ratio back to around 30% by the end of 2024. We also aim to invest around EUR 120 million. Before we conclude the presentation, let me remind you of our Strategy 2030, which we presented for the first time in the summer of 2023. Let me point out that despite short-term impacts, the Wacker Neuson Strategy 2030, with its 10 levers for growth and profitability, remains our north star guiding our way. We are highly convinced that after 175 successful years of Wacker Neuson Group, we have set the right course for the years to come. We are investing in our future and help to preserve our planet for the next generations.
In the course of 2024, we will therefore not only work on the further implementation of our strategic goals, but also present further details of our sustainability strategy. Nobody's perfect, but a team can be. This is our guiding principle to reach EUR 4 billion revenue by 2030 and an EBIT margin of more than 11%. We remain confident about our future business development, and we look forward to continuing our journey of profitable and sustainable growth together with you. Thanks for listening. We are now ready to start the Q&A session, and we are very much looking forward to answering your questions.
Thanks, Karl and Christoph, for the presentation of the full year results 2023 and comments on the recent developments as well as the outlook for 2024. I'm now asking the operator to explain the Q&A procedure to you. Operator, please.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on the touch tone telephone. If you wish to remove yourself from the question queue, then you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is from the line of Stefan Augustin with Warburg Research. Please go ahead.
Yes. Hello, gentlemen. Thank you very much. I have actually a couple of questions that I would bring them one after the other. The first one is, if we would extrapolate the margin from Q4, your outlook for 2024 is quite a bit better. So what are the main ingredients for this margin improvement on the sequential basis from Q4 on, if it is not the top-line development? Could you give us a little bit of insight here?
Yes, Stefan. Christoph here. Let me answer your question. What happened in Q4? I tried already to a little bit explain it in my speech is that we had quite a change in dynamics from growth to, let's call it, consolidation. And it was a fairly rapid change. And of course, we adjusted as quickly as possible to that change. But it had some temporary consequence in terms of our production utilization. So we were clearly confronted with underutilization costs in Q4. You can also see that directly when you look at the reduced gross profit margin. But that's not something that will follow us throughout 2024 because, of course, we took a lot of measures now going into 2024, adjusting the production capacity to our expectations, to our guidance.
Of course, on top, we took a whole series of cost adjustment measures going beyond the pure cost of sales topic, including SG&A. All in all, there is a couple of reasons that I try to explain that you should not take simply the Q4 margin forward as an indicator.
Mm-hmm. Okay. And if I look at your first statements for 2025, it says you expect a slight increase in the margin of the, and if I recall that correctly, I think 2025 is also the start of the Deere Cooperation in the U.S.. And with the coming back of the market, I expected actually a little bit more positive statement here. So is this, let's say, cautious due to the uncertainties we see around, or is that, or is there a reasoning why we should not be expecting a too dynamic improvement of the margin in 2025 over 2024 when the market comes back?
Well, I guess we are all well advised to be a bit cautious when we go beyond the one-year guidance horizon. But there's no specific reasons to be too beyond being simply, you know, beyond dealing with uncertainty, Stefan. There's no specific reasons why we should be overcautious in 2025. Certainly not if that helps.
Okay. Good. And then, finally, a little bit, can you outline what's happening at the order intake front right now? Some comments would be quite helpful here.
Order intake situation, maybe let me start with something that we also find a bit surprising in terms of geographic differences, because against the common perception, actually, we are doing okay-ish, and maybe even a little bit better than in Q4 in Europe and specifically in the DACH region, whereas in the U.S., we are doing a bit weaker than expected. So dynamics in the U.S. is lower, actually, than what we see in Europe currently. That certainly has also to do with temporary overstocking in the U.S., which burdens a bit the demand.
Mm-hmm. How does agricultural equipment look like?
Yeah. I would say the mood in the agricultural industry is still, or agriculture, is still very positive because all the trends and all the need for improvements there in food and everything is still increasing. It's the same effect there as Christoph described for construction in the U.S., is that our agricultural dealers are just simply overstocked. The whole year 2023 for the whole industry, also for our competitors, was just giving more products, more machines into the market than really could be sold to end customers, to end users. And therefore, also, the agriculture dealers are overstocked and are showing a similar effect as we see on the other one. It's not as severe because it's less concentrated, the industry. It's on a broader base, smaller dealers, more end users and farmers.
We are confident that it will be not as much affected and as long affected as the construction segment.
Okay. Thank you very much.
Thanks, Stefan. We have questions. Operator, do we have anyone else in the line for asking questions, or?
Ladies and gentlemen, if you would like to ask a question, please press the star followed by one on your telephone. There are no further questions at this time. I'll hand back to Peer Schlinkmann for closing comments. Thank you.
Ladies and gentlemen, as we can see, there are no further questions from your side. Therefore, we have come to the end of our conference call. As usual, if you have any further questions, please do not hesitate to contact me or the whole Investor Relations team via phone or email. Please be also aware that we will update our financial calendar continuously once we have settled new dates for our roadshow activities during spring and summertime. You will find also our financial calendar also on our website. If you would like to meet us in person, please let us know. We would be happy to catch up. Thanks again for joining our call. We wish all of you pleasant Easter holidays. Have a great day.
Thank you very much.
Thank you very much. Have a great day.