Scalable robots

Labour shortages and efficacy gains a good reason to invest in robots and automation. Interestingly, the strongest increase in orders came from China. All in all, received orders reached a record level in Q2. Sales and profitability continued their healthy upward trends coming in well ahead our more cautious expectations.

Strong order intake

It looks as though customers beat a path to KUKA’s doorstep as the order intake strongly increased yoy as well as sequentially leading to a high order backlog. On the other hand, while sales increased the growth looked a bit subdued. Nevertheless, profitability doubled,, generating a higher margin. The management remains fairly confident for the rest of the year but has flagged negative effects from the Ukraine war and the pandemic leading to supply shortages.

Above pre-crisis levels

KUKA reported that profitability was above the pre-Coronavirus levels, but did not meet 2017’s ones when the automotive world was doing well. With a top line quite close to the 2017 level, profitability could not follow due to higher input costs. The outlook provided looks easily achievable, but profitability will be challenged by logistics and other issues.

Electric orders

KUKA’s order intake rose once again as car manufactures, mainly in the US, accelerated their investments in the production of electric cars and also in the use of robots in the production of battery cells. As Q3 21 has high comparables, the group’s strong top-line performance was unable to be matched in profitability. Figures came in ahead of expectations.

Customers lift reservations

KUKA reported the second highest order intake in its company history in Q2 and most of its divisions faced some uptake in H1, which is a continuation from Q1 21. The comparison to the previous year’s quarter looks very strong, but the basis was quite low. The reported figures were slightly above our expectations.

Shaping up well

KUKA suffered from the customers’ reluctance to spend money and then the virus gave the company a hard time. In 2021, the business looks definitely better compared to last year as it is making money and reported a strong rise in the order book. The situation remains quite fragile as the pandemic is far from over. Management has high hopes in the new operational system for robotics. This could help to reduce the barriers for use by reducing the complexity in working with robots.

Sniffy robots

Finally, it appears that a robot business can suffer indirectly from the current pandemic situation. The good thing for KUKA’s robots were the human measures implemented to protect them. The (net) result could not be prevented from turning red. Profitability did not meet our expectations. Q4 became more difficult as clients took a more cautious stance and the re-initiation of stay-at-home was another burden.

One swallow does not make a summer

KUKA saw a strong recovery in order intake, but revenues reported a material decline, as did profitability. This higher order uptake was the silver lining of KUKA’s Q3 figures, which were not bad for a capex-driven business. We are aware such contracts could face cancellation however. Interestingly, the order book did not benefit that much from the higher demand for automation. The figures were broadly in-line with our expectations.

Managing expectations when reality visited

KUKA’s Q2 figures are far from being disastrous, but they gave a realistic view on a capex-driven industry. The figures fit into our broad picture and management’s guidance for a potential negative EBIT for the full year is already our expectation. However, we miss some strategic measures in addition to those to fight the impact of the current situation. What will KUKA’s positioning be in the post-COVID-19 period? How could this be reached? Many questions, no answers.

Good seasonal cash level

Despite the cash drain in Q1, the cash level stood at quite a high watermark. What is a bit more worrying is the lower order intake (should be better in Q2). As expected, automotive and electronics remained quite cautious in placing new orders. Contrary to the stumbling industries, Swisslog’s lower order income was unexpected. The figures were barely better than expected. Management explained the reported declines by limited access to customers’ production sites. Some car manufactures have re-s

A Quandt(um) of solace

‘With a little help from my friends’ could have been another title as the Quandt-family-dominated car producer, BMW, has ordered robots for the manufacturing of car bodies.

Ready to weather the storm?

FY 2019 had quite a nice ending, reporting higher than expected sales and earnings. And here ends the good news. Management failed to provide any outlook, but the CEO has been cited in a press release that the COVID-19 pandemic is impacting KUKA and is causing ‘great concern’. We understand that the company is preparing for shutdowns and other measures, but the order backlog has improved relative to the 9M figures.

Another round of cost cutting

Being highly likened to the automotive and electronics industries, KUKA could not decouple from the development in these industries. The Q3 set of figures showed some deeper skid marks in the main divisions, which had forced management to cancel FY guidance at the end of September and to announce the restructuring of part of a division. Now, we know the segment is in Robotics. Furthermore, it was not unexpected that Europe and China would become difficult markets.

The China commitment isn't really paying off

The current economic environment and the uncertainties, especially in the automotive industry, negatively impacted KUKA’s Q2 report. Despite having a dominant shareholder, who made some direct investments in KUKA subsidiaries, the China division China has not really benefited from this kind of constellation although it has shown some improvement. Profitability was slightly above our expectations.

Strong profitability push

But on omission! KUKA’s management strives to meet guidance, expecting a pick-up of the business in H2. The company had always booked in recent quarters the costs for various initiatives, which burdened the EBIT line, but were expected to be beneficial for future growth. It seems that management has cancelled these in Q1 in order to meet a target. Profitability exceeded our expectations.

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