Hello. Good afternoon, ladies and gentlemen. This is Christopher Helmreich speaking of Wacker Neuson Investor Relations. Thanks for dialing in. Welcome to our Q3 results call. Today with me in Munich are Mr. Lehner, CEO, and Mr. Trepels, CFO. As usual, the gentlemen will give you a short overview of Q3. Then we're happy to take your questions. The respective presentation can be found on our website or accessed through the webcast. Please note, the entire call will be recorded. Thank you. Okay, let's start. I will hand over to Mr. Lehner, CEO.
Hello, ladies and gentlemen. Welcome to our conference call Q3 2020. I will start with a short overview. Then I will hand over to my colleague Wilfried, and he give you more details on the financials. Here you see an overview about what we have achieved in Q3. You see on the right side also the nine months figures 2020. Q3, our revenues stand at EUR 391 million. That's 16.5% below last year. We have here a quite different picture in our regions, Europe, U.S., and China. In Europe, the business slowed down by 8.5%. In Americas, our business were dropping close to 40% FX adjusted. The EBIT margin, what we achieved was 5.8%, also clearly down to previous year where we achieved 8.8%. Very positive is the free cash flow. Here our measures and activities showing continuous progress.
As already have seen in Q2, also in Q3, we achieved similar free cash flow with EUR 87 million. Last year we had EUR -16 million. On the nine-month result, we are standing at EUR 1.188 billion. Also, here we are down 16.4% compared to last year. EBIT margin is 6.2%. Previous year, we achieved 9%. For the full nine months, free cash flow is close to EUR 180 million. This turned in very positive compared to last year where we had EUR -200 million. As already mentioned, in the regions, a very different picture. In Europe, especially in Central Europe, we are on a similar level after nine months compared to last year.
We are highly affected in the countries where we have strong business with rental companies. That's affecting our business, especially in U.S., but also in some countries and markets in Europe, like in France or U.K. Profitability is also highly affected because of the lower volume, but also some one-time effects are here included in our EBIT margin. Wilfried will explain a little bit more in details in a few minutes. Net working capital, we have made good progress. We strongly decreased our inventory. Also, the receivables went strongly down. That's reducing also our net debt heavily. We have announced beginning the year our cost reduction and efficiency program. Also here we have made good progress. Also more details will come later on. A few words to the actual situation in order income. We see since June, continuous improvement in order income.
June, July, August, September, October, the group order income is above last year. This reflects also the positive or that the confidence is coming back in our industry again. We see later on the pictures also for the business climate indexes. We see a stronger rebound in agriculture, but also in construction. The confidence is coming back, but on a little bit slower pace. That's for a short introduction. Now I will hand over to Wilfried to give you more details on the financials. Thank you.
Good afternoon. Coming to the revenue and earnings situation for Q3, for the quarter. As you can see in the slide and on the chart that the revenue has declined by 16.5%, adjusted for FX effects, mainly USD minus 15%. We have seen single-digit revenue declines in Europe. On the other hand side, we have seen a strong high double-digit drop in the Americas. Asia reports slight growth. The service segment is doing quite well. That helped us also for the gross profit. If we now have a look to the gross profit, the gross profit declined by 17.6%. That is purely volume. Only by minus 0.3 percentage points the gross margin dropped. This is a certain quality.
The capacity utilization in our production plants is low due to, on the one hand side, the sales volumes, which are significantly lower. On the other hand side, as you can see later on, we have a significant inventory reduction ahead. When we now look to the EBIT, the EBIT is over-proportionally going backwards by minus 44.7%, not all volume related. A lot of impact from one-time effects out of the restructuring and out of all COVID-related, let's say it this way. The EBIT margin is minus 3 percentage points down compared to the respective quarter in 2019. A good message is that we are still having our operating costs under control. They are significantly below prior year. On the other hand side, we have had to do a reserve for bad debts amounting to EUR 7.5 million in that quarter.
In particular here, the Americas are the problem. On the other hand side, short-time work models were cut back significantly related to Q2 2020, which is somehow a good message. Furthermore, we have had restructuring expenses which were hitting the bottom line. We have had cost for the CEP program, which have been EUR 1.7 million. If we would calculate the EBIT before restructuring costs, it would have been a positive impact. The adjusted EBIT would have been EUR 24.5 million, and the margin 6.3% compared to 9% in the previous quarter. Sorry, 8.8%. The financial result, when you look to the numbers, is slightly below prior year. Nothing specific here to be reported. The tax rate is over-proportionally high with 35.5%, mainly due to losses reported by affiliates for which no deferred tax could be capitalized and existing deferred tax assets were partly driven down.
If we now go to the nine-month on the next slide, accumulated January to September, the revenues declined because of the COVID situation, most severe impact, of course, in Americas. The ag business for the group is down by 3%. When we look later on to the development on the next slide, we will see that the negative development in the ag business was stronger in the last quarter, but this is also reflecting some issues which we have had with new products for the markets where we had issues to bring them into the market, and we have had also COVID impacts in a factory where the shipping department was affected, so that we have had severe problems here to ship the stuff out. The gross profit is -17.6%, volume related. Gross profit margin only -0.4 percentage points.
Same picture as we have for the quarter, for the last quarter. The EBIT is down by -42.5%. Also here, the EBIT margin is 2.8 percentage points lower. Same story, the operating costs are under control. We have had in total now for the first nine months, a bad debt allowance necessary to be built in the amount of EUR 12.1 million, mainly Americas, and an impairment on U.S. goodwill of EUR 9.3 million, which we booked in Q2. Restructuring expenses linked to the cost reduction and efficiency improvement program were in total EUR 3.8 million, and there is still something to come up to the end of the year. We are restructuring our sales structure here worldwide. The mentioned EUR 10 million cost, which we are calculating for the whole year, will be more or less achieved up to the end of the year.
The EBIT before impairment on U.S. goodwill and restructuring costs out of the CEP program, that would have been then EUR 86.3 million, so a margin of 7.3% compared to the previous year where it was 9%. The financial result here is different than in the quarter. It is significantly more negative with -EUR 19.4 million compared to EUR 11.6 million, and this is due to negative FX effects. A lot of currencies went down in the COVID crisis, so we had to book these negative FX effects, which still have not a liquidity impact. The tax rate also here, same story, 37.2% compared to 30.8%. The aforementioned negative FX effects are not taxable, as well as the impairment loss for North America and also other aspects regarding the deferred tax assets.
Coming now to the next slide where you see the business development by region and business segment, just here referring to the quarter, to the third quarter. Europe, high single digits with -8.2%. A very good situation, I need to say, in the German-speaking countries, in the DACH region, also with the positive aspect coming from the good development in the service segment. Always to be mentioned, because it is really specific here, is the growth in U.K. We are here happy that we were able, in such a difficult market, to gain market share with dumpers due to our Dual View dumper. Unfortunately, we have seen a double-digit decline in sales in the Nordics, in the southern part of Europe, as well as in France.
As I said before, the business with compact equipment for the ag business is -12.2% in the quarter. I said already, when you take the first nine months, it is around about -3%. We have had a strong impact in the third quarter, partly a problem of our own organization due to negative impacts from the COVID pandemic. The revenues in Americas, a shocking number, was 43.1% below the comparable quarter in 2019. We need to state, and this seems to be also the case in the fourth quarter, there is just a little light at the end of the tunnel. The willingness to invest remains very low, and that is valid for all our channels that are the dealers, the key accounts, as well as the rental chains.
It is the uncertainty in the market, and we will see if the situation around the presidential elections will change here the mood also for the industry, despite of the pressure coming from the COVID crisis. The order intake is above prior year. That is a positive sign, and we have postponed month by month the opening of our U.S. plant. Now we are gradually ramping up at the end of the Q3 quarter. We started, as I said, gradually with the production in North America. When we look to revenues in Asia, they are quite small, with EUR 15 million. Positive sign is that we are here positive, adjusted for FX effects, we are +4.3%. We have significant double-digit growth in China. The demand for the excavators and light equipment is developing quite positively.
In Australia and New Zealand, we have had massive impact from the COVID crisis over the year. Permanently, we were talking here about another shutdown. We see here also some light at the end of the tunnel, with a single-digit growth in Australia and New Zealand. The revenues in South Asia, which are very small, but they have halved due to the severe impact on the coronavirus situation. On the left-hand side, you see furthermore also the development of the segments, light equipment, compact, and service. Service is positive with 9%. Also a good sign that this is a sustainable development. You see light equipment and compact equipment. They differ here, -31%, respectively -20%. Why is it higher in light equipment?
Because we are selling over proportional high volumes in North America, and North America is down in total with more than 40%. Coming now on the next slides to the development of the components of the net working capital. Inventory went down again in the third quarter to EUR 476 million. It's better than it was in the past, but we are still not there where we want to be. If we would assume a sales volume of EUR 1.6 billion, then the comparable number for the inventory would be EUR 400 million. There is still a way to go down here. The trade receivables are developing from EUR 400 million, when I compare Q3 2019 with Q3 2020, down to EUR 273 million. This development is okay regarding the situation that we have had quite high levels in the previous year of sales, and now we are significantly down.
How is here the quality of the development? It's positive because we have reduced our days sales outstanding to 64 days. On the left-hand side, you see in the corner, you see the trade payables development. Also here, quite low number with EUR 113 million compared to EUR 164 million in the comparable quarter last year. This is clearly due to the fact that we have reduced the capacities in our production and that we bought significantly less than we have bought in the previous year. Coming now to the next slide, where we see the result out of the three components of net working capital. It is the net working capital here shown, EUR 636 million, compared to the all-time high of EUR 899 million, unbelievable high. If you look to the percentage also here, it's still a certain way to go. It's 41%. We need to get further down here.
If you look to the numbers in Q3 2018, there you see that we have reached 38%, we need to get here also further down. The cash flow from operating activities as well as the free cash flow are positive due to the mentioned measures, especially in the net working capital, the investments activities are under control here, the result is what you see here. Furthermore, the remark that we have issued in August, a small promissory note of EUR 50 million to have our cash situation positive. We have reduced here the short-term credit lines to be more secure in the future, because nobody knows what this crisis will bring us in the next couple of months. Coming to the next slide, where we see the effect out of what we have done here.
We were able, with all the measures, to reduce the net debt from EUR 530 million to EUR 276 million. We are quite close to 20%, which would be our short-term target. On the right-hand side where you see the net financial debt to EBITDA, you see 1.4 years. Also here, we need to bring that down to 1.0. The reduction of total debt brought us, on the other hand side, a positive impact on the equity ratio. The equity ratio increased to 58%. I talked already about that when I talked about the slide before. The cash position is quite good, we are prepared for liquidity-wise. We are prepared for the further development in these uncertain times. On the next slide, this is my last slide, you see on the left-hand side the share development in 2020.
You see also the effect of our profit warnings here, where the blue line, which is the Wacker Neuson line dipped below the development of the peer group and the DAX. We see now that since mid of the year, we are back and we run in parallel, sometimes a little bit above the peer groups, which shows that the markets obviously find that we do in the crisis a relatively good business. Regarding the suspension of the dividend, it's an old story. We talked already about it, you see that on the right-hand side. No change in the shareholder structure. It remains what it is. There are also no signs that this will change. I would now like to get back and give back the presentation to Martin for the outlook.
Coming finally to the outlook. Here on this page, you see on the left side, on the top, the business climate index for construction, and on the bottom for agriculture. You see those indexes are coming back. Agriculture more like a V shape. It is already in the positive area again. There are still some segments in agriculture which are still slightly negative, but overall, agriculture is already positive again and bouncing back quite fast. In construction, it is going slower. It is also coming back, the mood, but on a slower pace. We expect also that we have an impact through, because of corona, also in the fiscal year 2021. Finally, we are still not able to give a clear outlook and to quantify revenue and earnings for 2020.
We stick what we have already published on the 5th of August that we expect significantly lower revenues and earnings for 2020. We are expecting significantly lower net working capital, as already shown. Investments will be around EUR 80 million this year. What is the reason why we have no clear visibility regarding revenue and finally also EBIT margin is we are still, once again, in wave 2 regarding corona. The cases globally are increasing again. Many countries have a second, so-called soft lockdown. We have also in our companies, certain COVID cases popping up. We had issues, as Wilfried already explained, in one of our factories the last couple of weeks that our shipping department was closed. We had to find other solutions to bring the products to our customers. We don't really know what will happen in the supply chain internally, but also externally with partners, with our suppliers.
In the next couple of weeks. There is a risk that we see an interruption in the supply chain because of rising COVID cases, and that is finally the reason why we are not able to give a guidance regarding revenue and also finally, earnings. As already mentioned, on the order income, we see continuously a better picture since June compared to last year. That is a positive sign for the future. We also hear the discussions in many countries regarding additional programs to stimulate the economy. We see in several countries already announced infrastructure programs. We expect this will have a positive effect also to our customers, to the construction industry, and finally, also to us. We see also that there is still a high uncertainty, and especially the big rental companies, the rental chains globally, they are very strict with investments and CapEx so far.
Many of them have cut down investment this year by 70% or already more. We don't know yet when they will, and how much they will invest in 2021. We expect that they will invest on a lower level compared to 2019. We see and expect an impact also into the year 2021, and that is the reason why we expect that our strategy goals have to be postponed for one or two years. We still stick on the targets, revenues above EUR 2 billion and an EBIT margin on an average of 11%, and net working capital at 30% or lower. From today's perspective, we expect to achieve these targets one or two years later. That is a summary of our Q3 result 2020. Now we are open for your questions. Thank you.
Thank you, Mr. Lehner. All right. We're ready now for your questions. I would like to demand the operator to give you some instructions. Thank you.
We will now begin the question-and-answer session. If you have a question for our speakers, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask the question. If you find your questions answered before it is your turn to speak, you can dial zero and two to cancel your question. If you're using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. The first question is from Jonas Blum of Warburg Research . Your line is now open.
Yeah, good afternoon. Thanks for taking the questions. I got three, please. Firstly, I was wondering with regards to your outlook. I'm aware that you can't give a guidance yet for 2021. We have seen peers posting some sort of market expectation for North America and for Europe in terms of growth ranging from 0%-10%. Is that something you think you can achieve as well or even outperform? Just in terms of getting a feel for what's going on next year. Secondly, you talked about agriculture, that sentiment is constantly improving. Again, you didn't match your sales due to internal reasons. Is that something we should just expect to bounce back in Q4 and beyond, or do you also expect to see some cancellations from that issue?
Just finally, in terms of free cash flow, you mentioned that you also expect inventories to decline further in Q4. I was just wondering what kind of level you have in mind here. Also in terms of receivables, which obviously will be securitized by your ABS financing program. Can you just remind us on the phasing effect of that ABS program? I remember it was EUR 60 million in existing and EUR 90 in future. Will the EUR 60 be already booked in 2020, or will there be some spillover effects in 2021? Thanks a lot.
I will start with your first questions regarding outlook. For sure, because of the good order income in the last months, we are positive for the development in the next couple of months, also for next year, because we think, first of all, that we see some recovery because also of the national programs, what I already mentioned, which are coming. We see also with our product portfolio that we can achieve also in certain markets where we have probably no growth or maybe a slight reduction, that we can also achieve certain market share gain. We have seen this already this year, the whole nine months, and also in Q3, in U.K., for example, where we had also in U.K., the market is heavily down by roughly 35%, and we are down in U.K. for the nine months by around 12%.
In Q3, we already achieved an increase in revenues, a low double-digit increase in U.K., but the market is double-digit down in Q3. That's really showing that we have quite a competitive product portfolio and that we can grow also in markets where we have no growth or even a small or a slowdown. In agriculture, it's mainly an effect in Q3. There are two effects why we were down in agriculture in Q3. First off, we have seen pre-buy effects in the first half for certain products in agriculture. We had a change in the emission regulation from Tier 4 to Tier 5. We had some pre-buy effects here in the first six months. As Wilfried already mentioned, we have also some new product launches where we are a little bit behind our schedule to ramp up the products.
These were the two impacts, generally we see also in the last two months, a very good development in order income in agriculture. Here also, we are more positive in agriculture for the next month than generally for construction. As I said, construction, the big question is how fast is the CapEx coming back from the rental chains? That's the big question. Overall, from today's perspective, I can give you an outlook for 2021, we are planning, generally, we see the development positive and I guess that we will see and planning a clear growth also in, once again, in 2021.
Your question three was regarding the free cash flow development for the fourth quarter, you mentioned the reduction of inventory, which happened in the course of the last quarters. We also expect a further decrease on the one hand side, and on the other hand side, the question for us internally is, are we able to achieve our internal targets? The internal target, as I said, was clearly EUR 400 million, I have my clear doubts that we are going to achieve that. Why? In the U.S. and in Canada, we have the biggest issue with the inventory. Most of the inventory was ordered and shipped before the COVID crisis was hitting then the industry in North America. We are sitting there on a lot of inventory in our plant there in Wisconsin.
The same aspect is not only for the finished goods, also for the raw materials and components. There, we are sitting on a bunch of material which was shipped, it was ordered because we were not expecting such a slowdown and shutdown of our own factory. We are sitting there also on a lot of materials for raw materials and components so that we have definitely no chance to reduce inventory significantly in North America. It will be quite difficult to fulfill our internal targets. I need to say, I would be happy if we come into a range of EUR 450 million-EUR 460 million at the end of the year. The fourth question was regarding the ABS program. We were able, in October, to shift from our balance sheet into this program.
Yes, I said the expectation is EUR 60 million from our balance sheet and EUR 90 million for new business. New business is not there in a such environment that we are able to put a lot of new business in there. What I can tell you is that from the existing accounts receivables and NRV in our balance sheet, we expect in October to move round about EUR 32 million into the program. Why is it not more? At the beginning of the year, we were talking about EUR 70 million potential. Now we are seeing that also some of our customers are getting trouble. You saw that we have increased our reserve for bad debts significantly in North America.
What we don't want to do is we don't want to put any account receivable into the program where it might come to a problem with the payment behavior of the customer. We were quite conservative and therefore it's only EUR 32 million and that will happen in October, or that happened in October, I need to say. Does this answer your question?
Yeah. Great. Thanks a lot.
The next question is from Alexandre Ralitza of HSBC. Your line is now open.
Yes, thank you very much for the question. I'd like to ask on the outlook for 2020 still. I appreciate the uncertainty and the, I guess, uncertainty around your internal distribution capabilities. Given the fact that you comment quite positive on the order intake situation and on the situation in the field, in construction and agriculture. Assume a scenario where you don't have incremental issues on the distribution or on distribution side, could you give a little color, flavor, how Q4 then could pan out? From the face of it looks like that there shouldn't be worse at least than Q4 last year, given, again, the comments around the order intake and the situation in the field. If you could give any thoughts on that, would be helpful.
If you would assume that we will have no negative impact from the COVID crisis, that our supply chain is not hit by this development. If we do not create our internal crisis because of COVID, then based on a quite promising October sales, I would say that the EUR 1.6 billion should be achievable. We do not really know, because every day we are confronted with a new situation, and we need to cope somehow with this. Does this answer your question?
Yes. Thank you very much. That helps. Maybe another question on the bad debt allowances, EUR 7.5 million you booked this quarter in Q3. I was just wondering how conservative is that, and do you see further risk in the remaining of the year? Also, regarding the nature of those receivables, I would presume that has to do with the anchor dealers?
Yeah. Most of it is, of course, with the anchor dealers because they have the biggest ticket with us, and they have the highest amount of financing in their own books. We made it, I wouldn't say very conservative. We try to make it also not too optimistic. As you can imply already from what I'm saying, there might be still a risk also for the upcoming month. We do not know, otherwise we would have done a more precise number here. Today, we are in discussions, and we are working together with also other suppliers to agree on restructuring plans with those customers. We are, I would say, on a quite good way. We have the same understanding that we only can survive in this crisis if we all work together.
We are, at the moment, on a quite good way that we are able to restructure those companies in the future. One of these companies is in Chapter 11 now, that was also a reason why we have had to increase the numbers in September. There is some positives and there are some negatives, we are actively handling those issues. We are not waiting that something happens, which is out of our control. We try to control the process.
Okay. Thank you very much. Maybe lastly, again, a little bit on the outlook for 2021. I was specifically wondering about the kind of wording that you used in the press release, that you expect that the COVID will have a major impact in 2021. I guess that the common sense for 2021 suggests that should get sequentially easier for most businesses. You used to specifically stress it out that the situation for Wacker Neuson is going to be tougher, or not tougher, but tough. Is there a reason why should Wacker Neuson sustain this second wave of lockdowns? Yeah. Be impacted stronger than, for example, your peers?
No, we don't expect then that we are affected heavier than any of our peers. If you look also on the figures of the peers, I think we are doing better than many of our peers. We are doing anyway better than most of the heavy equipment manufacturers. There is only one exception, that's Volvo. They are a little bit better than we. I think they are down -12%, but if you look, I think Caterpillar is -30%, Manitou is -28% or something like that. The heavy equipment manufacturers generally are affecting heavier. Manitou is not heavy equipment. It's compact equipment, but they have a much higher relation to big rental companies than we have, because also of the product portfolio. Telehandler for construction business is mainly related to rental companies. This is what we don't have. In telehandlers, our main portion going to agriculture.
Our low connection or relation to big rental companies is helping us in this way.
For sure. It's also roughly 10% of our revenues, what we do in a normal year with rental companies and big key customers. Here the question is, how fast are they confident again for doing normal CapEx and investment? That's the real question for us.
May I add something? When you refer to our wording, the wording was Corona pandemic is expected to continue to have a major impact into fiscal 2021. It was quite obvious that we were, at the end of 2019 before COVID, quite close to achieve EUR 2 billion. Yeah?
In 2020, respectively later 2021, let's assume, Mr. Blum said it already, if we would have an increase next year from 0% to 10%, we would then end up, let's speculate, with EUR 1.7 billion or EUR 1.75 billion. That would be a significant and a major impact to what we have planned before. The difference would be EUR 250 million sales. Therefore we said it will continue to have a major impact into the fiscal year 2021. Perhaps this gives you a little bit more light on the background of what we tried to say in our outlook.
We tried also to make this a little bit more specific because we said we stick on our targets, but we expect the targets to achieved one or two years later.
Yeah. Thank you very much. That makes it more clear.
The next question is from Charlotte Friedrichs of Berenberg. Your line is now open.
Hello. Thank you for taking my questions. Three questions as well. Firstly, on the current trading, could you talk a little bit more about how the order behavior of your customers has changed throughout the third quarter now, specifically the last couple of weeks, perhaps, if you already have that data. Are you seeing already that they're becoming a lot more cautious now with the second wave? The second question would be on the restructuring program. You mentioned in the beginning that you are going to have an update soon. Are there any details on the progress that you can share already? The third question is around the supply chain. Are you seeing restraints here already? To what extent does your, which I understand is a relatively elevated level of raw materials and components, provide some extent of protection here?
Sorry, I didn't get your first question. Can you repeat it again, please?
The order intake right now. Is it drying up a lot currently with the second wave?
No, we don't see any impact now in the order income in the last couple of weeks, because of the second wave. It's still positive and above last year.
Okay.
Your second question was regarding the restructuring program. Can you specify this question a little bit more?
I was just wondering because you had a comment in your prepared remarks around having an update here soon. I was just wondering if you can maybe share some snippets already.
We can give you certainly a short summary regarding the restructuring program. The restructuring program is going quite well, especially with the pressure from COVID. The pressure is there so that we are quite good on track regarding this. The sales structure will be restructured. Mostly, I would say 90% is done at the end of this year. A little bit will swap over to the first quarter, not that much. The inventory targets are also on. We are on the way for this, to achieve these numbers. I talked already about this. The procurement program is running quite well. The cost reductions, speaking in EUR, will be lower because of lower volumes, which we are buying. Everything is on the way, slightly above our set targets. In the production, we are really working hard on the reduction of the under-absorption. The under-absorption still is there.
The under-absorption is on the level of last year, imagine how small the basis is, how small the production basis is this year. There are already significant steps ahead. Especially regarding the production, there is still a lot to do, running into the next year. Last not least, we talked also about North America, the restructuring in North America. That is also a little bit more specific. Also here we are on a good way, so that we will see already next year positive EBIT, if the market will not remain in the same situation where it is today.
Also here, most of our steps are on the way and partly finished. Still open in North America is the merger of our legal entities there to reduce the complexity in North America and also some additional cost cuttings in the admin area, which we can do after we have merged the company. There is still a little bit to come in the first quarter, also in North America. Does this answer your question?
Yes. Thank you.
The next question is from Norbert Lihl of Commerzbank. Your line is now open.
Good afternoon, ladies and gentlemen. I had a follow-up question on product rollouts, in particular regarding the U.K. market and the Dual View dumpers. Could you give us an idea about the current market penetration of this product? Or to put it in other words, with regards to the addressable markets, how long will this, say, secular growth story go on? As a follow-up, could you give us maybe some indications regarding major project rollouts in other markets going forward?
Good question, difficult to answer. First of all, we started already now introducing our Dual View dumper globally. The product is already available in all our markets. We are selling the product. Started to sell in U.S., in Canada, in Australia, all over Europe. The product is received really very well. Difficult to say how long this success story will go on. We have, at the moment, no real competition on that, but I'm sure we are getting at a certain time, the certain point, we will have also a competition of Dual View dumper. There is, at the moment, no similar concept available in the market. The big advantage is that the Dual View dumper increase safety and also productivity on the construction site.
That's really a huge advantage against the conventional concepts, though there are many customers which, if they are buying dumpers, they say, "Okay, we will buy only Dual View dumpers more in the future." There is a high pressure on the competition to have an answer also to this. We don't know when this will happen, but for sure we are also working on the next steps already. We have further ideas to bring on more other interesting concepts into the dumper market in the next 2 years. Difficult to answer how it will go ahead. At the moment, it's really becoming, in certain markets, the Dual View concept is becoming a standard, a must-have for certain customers, because mainly of safety, but also because of productivity reasons.
Well noted. Thanks a lot.
The next question is from Jan Eric Schmidt of LBBW. Your line is now open.
Hi. Thanks for taking my questions. I think I would go through them one by one. On the CapEx planning for the next year. This year you're planning about EUR 80 million. If we add on the roughly EUR 20 million from IFRS 16 lease payments, we're at EUR 100 million. What can we expect for the next coming years? It seems like CapEx levels have been quite high over the past years. Are we going to come down to a more normalized level or what's the plan there?
Okay. Yeah. We are planning for next year, CapEx between EUR 100 million and EUR 120 million.
That's including IFRS 16 lease payments, right?
I mean that for 2021, we are planning EUR 100 million-EUR 120 million CapEx. For the year 2022, we can expect a similar number. Then we are through with all, let's say, our projects to bring the company on a level to cross the EUR 2 billion sales. We have then increased our production facility in Pfullendorf, where we have the Kramer brand being produced. We are now investing in Korbach, where we produce the Weidemann products. We are here building up an engineering center. In the second step, we are increasing here the logistic area because today we are outsourcing a lot of logistics, which makes it, regarding the handling, more complex and which is quite expensive. There will be also a certain payback out of this investment into the logistic of Korbach. We have then two other things to do.
One is we are talking now since a couple of years already about it. This is the production site in Kragujevac in Serbia, where we are producing steel components. There we have a project to make this factory
Being a European standard factory today, it is not really European standard. In the summer it's 40 degrees plus, and in winter it's minus five or minus 10% inside the building. We need to invest here, and we want to increase also, strategic-wise, our competence regarding steel components. Today, we are outsourcing more than 90%. We want to turn that back to keep the knowledge in our company regarding steel components, therefore we want to invest into a new factory in Kragujevac. Last not least, we have in front of us the logistic for the new machines produced in Reichertshofen, which is 100% light equipment. There we have today a plant very close to Munich, where we are producing in Reichertshofen, shipping the stuff 70 kilometers to Munich, then from Munich, we are shipping it into the world. That makes no sense.
Here we will invest into a logistic center in Reichertshofen, which will be online mid-2022. All the necessary steps to bring the company above EUR 2 billion sales are done. We think that we can go back to, let's say, a normalized volume in CapEx of probably EUR 90 million-EUR 95 million per year.
Okay. All right. Thanks.
Was that precise enough?
That was good enough. If we then take those higher CapEx levels, obviously that's going to lead to a higher depreciation level. Just wondering how that fits into the 2022 plan, which now is kind of shifted forwards to 2023, 2024, given the margin target of, I think it was 11% on EBIT level. Just wondering if we assume that depreciation is going to go up due to this increased CapEx spending by, maybe 1% or even 2%. How you want to compensate for that, and how the breakdown is going to be? How much of that is going to just come by pure gross margin improvement to reach this 11% target?
There are two aspects. One aspect is the increasing amortization and depreciation. Yes, it is included in our plans, and it will pay back because of higher volumes which we can produce, and we have lower logistic costs, significantly lower logistic costs. The return on investment was calculated for each and every project. There are low-hanging fruits with the logistic center in Reichertshofen that the repayment or the return of investment is quite fast. A longer repayment term is, of course, when we look at the factory or the new factory in Kragujevac, that will take longer. But yes, this is calculated and will have no negative impact of achieving the 11%. From this perspective, I have no problem increasing the CapEx number to the said level.
If we break down the 11% target, how much of that is going to come from improvement in gross margin? If we take 2019 numbers with 25% of gross margin.
You should have a look on the gross profit improvement from a different perspective. The gross profit improvement has to come from several aspects. One aspect is that we have had a huge under-absorption of more than EUR 30 million in the last two years. In the last three years, I need to say, because this year is shortly over. This year, the issue was the COVID situation and short-term work, which we have had in our factories. Then the two years before it was the problem of aligning sales and production. That was always the case in Wacker Neuson. That was costing us not only a lot of resources on the cash side, it cost also a lot of money within the factory. At least EUR 30 million per year. This is what we need to get under control. We have implemented a couple of measures.
One measure is the implementation of IBP. That happened until July this year. The second part of IBP for production planning will be online mid of next year. From this perspective, we need to get better here. The third point is that we need to increase our productivity in the production sites. With the investments we do today, we are able then to produce more efficient than we are producing today. That will help significantly to increase our gross profit margin from today, 25.5% up to 27%-27.5%.
Okay. All right. In the EUR 2 billion revenue planning, how much of that is then going to come from Europe? How big of a chunk is actually going to make the Americas and Asia business?
We always said that we want to achieve in Asia EUR 100 million, especially with our own Chinese production site there with the excavators. We said that we are expecting to go into the direction of EUR 500 million in the Americas, the rest remains for Europe.
Okay. All right.
That was always the original plan. It might be that we do EUR 450 or EUR 470 in U.S. I do not have it such precise.
Yeah. Okay.
I think this I gave to you is quite reasonable.
Okay. How much factoring did you use in the financial year 2019? How much is going to go forward? I mean, you've increased the amount in the U.S., not as much. I think that was one of the questions before, not as much as you planned for. Is it going to go up to the full amount of EUR 70 million in total for the U.S.? How much is it in total, the factoring amount?
You're asking about factoring, right?
Yeah.
Factoring, we have not done a lot of factoring before we started with this program. It was, I would say, below EUR 5 million per year. Occasionally we did it. With the program, we have a volume of EUR 150 million. We need next year, end of next year, if the business goes as we believe, we need another EUR 150 million to support the sales and the growth in North America. That is our plan, to support the growth in North America with these programs, because otherwise we have to take it on our own books. The effect, the initial effect, the cash effect is only the EUR 60 million, because that is the amount which we have on our books and which we can put into the program. The rest is running business.
Okay. All right.
Nobody comes along and gives us money.
Okay. Thanks.
The next question is from Jean-Francois Corcos from Topas Asset Management. Your line is now open.
Yes. Hi. Two questions. The first one is on light equipment. Can you remind me in terms of the composition by geographics and also the split between rental and own? That's for the first one. The second one is on the postponement of the targets. I'm not particularly surprised by the sales, but I think you were more confident on the margin targets. I'm wondering, even recently, what has changed there.
Regarding your first question, regarding light equipment. In light equipment, we have more than 40% market share in North America as well as in Europe. We do not split or we do not deliver more details to this key figure. Your second question, I'm sorry, I did not understand what your question was.
Just on the light equipment. You mentioned it's higher margin. It would be helpful to understand if there is a high exposure to rental there or if it's mostly your own. I guess it's very highly geared to U.S. and Europe, correct? I'm assuming you're not geared to rentals in that business, or are you?
If the question is where are we more confident on the achievement of sales or EBIT? I need to say if the sales come as we believed, then also the EBIT will follow.
Okay. Forget it. No, the second question was just on the margin target because of the 11%. I think you were more confident of achieving that in the near term and it seems to have changed. You've postponed it by one to two years in line with sales. I'm just wondering what changed, because until very recently, until September, you were still hopeful of making the 11% by 2022.
Sorry, we did not get your last question. Can you repeat it again, please?
We talked in September. You said the sales target for 2022 was highly questionable, which we all agreed. You said that for the margin target, you were a lot more hopeful because all the plans were in place. I'm just wondering what has changed that you've pushed back the margin target of 11% by one to two years as well.
Yeah.
I don't know if I can be more precise than that.
One second. Yeah, because it's related. If we don't have the revenues, we will not achieve the EBIT margin. It's a relation. We need also a certain level of revenues to achieve this 11% EBIT margin.
Okay, thanks.
If there are no further questions, I hand back to the speakers for the conclusion.
Okay, there seem to be no further questions. Thank you for dialing in. If anything else comes up, please do not hesitate to contact us from the investor relations department. Thank you. Have a good day. Bye-bye.