GERMANY – The Homag Group slightly increased its sales revenue to 957 million euros in the first three quarters of 2019 (9M-2018: 937 million euros).

Faced with the slowdown in business, Homag is positioning itself for the future with a package of measures. Its central point is the optimization of the production structure, including the adjustment of production capacity.

At 907 million euros, the orders intake was below the previous year’s high level (9M-2018: EUR 1,047 million) and the order book (orders in process) was EUR 560 million in 9M-2019 (9M-2018: EUR 666 million). Operational EBIT fell to 58.5 million euros (9M-2018: 65.2 million euros).

The key reasons for these figures were falling margins as a result of declining market volume, underutilization and increased staff costs. As of September 30, 2019, the Homag Group employed 6,615 people.

“The reluctance of our customers to invest is naturally remarkable in receiving orders this year,” explains CEO Pekka Paasivaara. “Particularly in China and also in Germany, demand is moderate.”

As reported, Homag’s controlling company, the Durr Group, has adopted a package of measures aimed at achieving substantial efficiency improvements in the Machinery and Wood Systems division (Homag Group). The package involves non-recurring expenses of €40 million, of which around €37 million will emerge in 2019. These measures are to generate annual savings of around €15 million by 2021.

Among other things, Homag Group will suspend production on its Hemmoor site in the German state of Lower Saxony and make further personal adjustments at other German facilities. In total, approximately 350 of the 4,100 jobs in Germany will be eliminated in Homag by 2020. In this way, Homag is actively addressing structural overcapacity in Ger Homag many and responding to capacity additions in growing markets. In previous years, HOMAG was able to make full use of its German national capabilities due to the extraordinarily strong demand in the furniture industry. However, the demand is currently lower, a situation that is likely to continue in 2020 as well. In response, the package of measures, which also includes the merger of the Systems and Automation business units, which is being implemented. Currently, 63 percent of the workforce is in Germany, while HOMAG generates 80 percent of its sales outside Germany.

“Structural adjustments in Germany cannot be avoided. On the one hand, HOMAG has structural overcapacity in Germany and, on the other hand, we must increase our staff in high-growth foreign markets to be competitive there,” says Pekka Paasivaara, CEO of HOMAG Group AG and a member of the Board of Administration of Durr AG. “We want to minimize difficulties for the employees involved as much as possible in consultation with employee representatives.”