Wacker Neuson SE

XETRA:WAC

Earnings Call Transcript 2020-Q3

[Christopher Helmreich, Head of Investor Relations]

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 and 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.

[Martin Lehner, CEO, CTO & Chairman of Executive Board]

Yes. Hello, ladies and gentlemen, welcome to our conference call Q3 2020. I will start with a short overview and then I will hand over to my colleague, Wilfried, and he'll give you more details on the financials. Here, you see an overview about what we have achieved in Q3. And you see on the right side also the 9 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%. And in Americas, we -- 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 a similar free cash flow with EUR 87 million. Last year, we had minus EUR 16 million. On the 9-month result, we are standing at EUR 1,118 million. Also here, we are down 16.4% compared to last year. EBIT margin is 6.2%. Previous year, we achieved 9%. For the full year -- for the full 9 months, free cash flow is close to EUR 180 million. And that's turned in very positive compared to last year, where we had minus 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 in -- after 9 months compared to last year. But we are highly affected in the countries where we have strong business with rental companies. And that's affecting our business, especially in the United States, but also in some countries and markets in Europe, like in France or U.K. Profitability, also highly affected because of the lower volume. But also some one-time effects are here included in our EBIT margin. And 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. And that's reducing also our net debt heavily. We have announced, beginning the year, our cost reduction and the efficiency program. Also here, we have made good progress and 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 and also October, the group order income is above last year. So this reflects also the positive or that the confidence is coming back in our industry again. We see later on in the pictures also from -- for 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 short introduction. Now I will hand over to Wilfried to give you more details on the financials. Thank you.

[Wilfried Trepels, CFO & Member of Executive Board]

Yes, 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 in U.S. dollar, minus 15%. We have seen single-digit revenue declines in Europe. But on the other hand side, we have seen a strong high double-digit drop in the Americas and Asia reports a slight growth. The service segment is doing quite well and so 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%. And that is purely volume. Only by minus 0.3 percent points, the gross margin dropped. And this is a certain quality issue. The capacity utilization in our production plants is due -- is low due to the, on the one hand side, the sales volumes, which are significantly lower. But on the other hand side, as you can see later on, we have a significant inventory reduction hit. When we now look to the EBIT, the EBIT is overproportionately going backwards by minus 44.7%, not all volume-related. Also a lot of impact from one-time effects out of the restructuring and out of -- or COVID-related, let's say. This way, so the EBIT margin is minus 3 percent points down compared to the respective quarter in 2019. The 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 do a reserve for bad debts amounting to EUR 7.5 million in the quarter. And 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 top line -- the bottom line and we have had cost for the CEP program, which have been EUR 1.7 million. So if we would calculate the EBIT before restructuring costs, it would have been a positive impact. And 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 overproportionally 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 9 months on the next slide, accumulated January to September. The revenues declined because of the COVID situation, most severe impact, of course, in Americas. And the ag business for the group is down by 3%. When we look later on to the development on the next slide, we would 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 the factory where the shipping department was affected so that we have had severe problems here to ship the stuff out. The gross profit is minus 17.6%. Volume-related gross profit margin, only minus 0.4 percent points, same picture as we have for the quarter -- for the last quarter. The EBIT is down by minus 42.5%. Also here, the EBIT margin is 2.8 percent points lower. Same story, the operating costs are under control. We have had, in total now for the first 9 months, bad debt allowances 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. So 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's significantly more negative with minus 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 impaired -- the impairment loss for North America and also other aspects regarding the deferred tax assets. Coming now to the next slide, where you'll see the business development by region and business segment, just here referring to the quarter -- to the third quarter. So Europe, high single digits with minus 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's really specific here is the growth in U.K. And 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 [ Scandics ], in the southern part of Europe as well as in France. And as I said before, the business with compact equipment for the ag business is minus 12.2% in the quarter. And I said already, when you take the first 9 months, it's around about minus 3%. So we have had a strong impact in the third quarter, partly a problem of our own organization due to impacts -- negative impacts from the COVID pandemic. The revenues in the Americas, a shocking number, was 43.1% below the comparable quarter in 2019. And 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. And it is the uncertainty in the market. And we would 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 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 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. But positive sign is that we are here positive. Adjusted for FX effects, we are plus 4.3%. We have significant double-digit growth in China. The demand for the excavators and light equipment is developing quite positively. In Australia/New Zealand, we have had massive impact from the COVID crisis over the year. Permanently, we were talking here about another shutdown and another shutdown. But we see here also some light at the end of the tunnel with a single-digit growth in Australia and New Zealand. And 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'll see furthermore also the development of the segments, light equipment, compact and service. And service is positive with 9%. Also a good sign that this is a sustainable development. And then you see light equipment, compact equipment, they differ here, minus 31%, respectively, minus 20%. So why is it higher in light equipment? Because we are selling overproportional high volumes in North America. And North America is down in total with more than 40%. Coming now on the next slide to the development of the components of the net working capital. Inventory went down again in the third quarter to EUR 476 million. Is this good? 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. So there is still a way to go down here. The trade receivables are developing from EUR 400 million compared -- when I compare Q3 '19 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 is positive? Because we have reduced our days sales outstanding to 64 days. On the left-hand side, you see the column -- 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. And 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 3 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, unbelievably high. But 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. And if you look to the numbers in Q3 2018, there, you see that we have reached 38%. So 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 in -- especially in the net working capital, but also the investment activities are under control here. And the result is what you see here. Furthermore, the remark that we have issued in August, a small Schuldscheindarlehen, a promissory note of EUR 50 million to have our cash situation positive. And we have reduced here the short-term credit lines to be more secure in the future because nobody knows what will -- 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 513 million to EUR 276 million. We are quite close to 20%, which would be our short-term target. And 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%. About the Schuldscheindarlehen, I talked already when I talked about the slide before. So the cash position is quite good. And we are prepared for -- liquidity-wise, we are prepared for the further development in these uncertain times. On the next slide, and 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 SDAX as well as the DAX. But 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 relatively good business. Regarding the suspension of the dividend. It's an old story. We talked already about it. But you see that on the right-hand side. So no change in the shareholder structure. It remains what it is. There are also no signs that this will change. And so I would now like to get back and give back the presentation to Martin for the outlook.

[Martin Lehner, CEO, CTO & Chairman of Executive Board]

Yes. Coming finally to the outlook. 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 both indexes are coming back, agriculture, more like a V-shape with already 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's going slower. It's also coming back, the mood, but on a slower pace. And we expect also that we have an impact through, because of corona, also in the fiscal year '21. So 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 5th of August that we expect significantly lower revenues and earnings for 2020. We're expecting significantly lower working capital. As already shown, investments will be around EUR 80 million this year. What's the reason why we have no clear visibility regarding revenue and finally also EBIT margin is? We're still once again in a 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 at our factories, the last couple of weeks that our shipping department was closed. So we had to find other solutions to bring the products to our customers. And we don't really know what will happen in the supply chain internally but also external with partners, with our suppliers in the next couple of weeks. And there is a risk that we see an interruption in the supply chain because of rising COVID cases. And that's finally the reason why we are not able to give 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. So that's a positive sign for the future. We also hear the discussions in many countries regarding additional programs to stimulate the economy. And we see in several countries already announced infrastructure programs. So these -- we expect this will have a positive effect also to our customers, to the construction industry and finally also to us. But 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 lower. And we don't know yet when they will and how much they will invest in '21. But we expect that we are -- they will invest on a lower level compared to 2019. So we see and expect an impact also into the year '21. And that's the reason why we expect that our strategy goals will be -- have to be postponed for 1 or 2 years. So we still stick on the targets: revenues of EUR 2 billion; and an EBIT margin on an average of 11%; and net working capital at 30% or lower. But from today's perspective, we expect to achieve these targets 1 or 2 years later. Yes. That's a summary of our Q3 results 2020. And now we are open for your questions. Thank you.

[Christopher Helmreich, Head of Investor Relations]

Thank you, Mr. Lehner. All right. So we're ready now for your questions. And I would like to demand the operator to give you some instructions. Thank you.

[Operator]

[Operator Instructions] The first question is from Jonas Blum of Warburg Research.

[Jonas Blum, Analyst]

I've got three, please. Firstly, I was wondering with regards to your outlook, I mean, I'm aware that you can't give a guidance yet for 2021. But we have seen peers posting some sort of market expectation for North America and for Europe in terms of growth ranging from 0% to 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, I mean, you talked about agriculture, that sentiment is constantly improving. Then 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? Then just finally, in terms of free cash flow, you mentioned that you also expect inventories to decline further in Q4. So I was just wondering what kind of level you have in mind here. And 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 mean I remember it was EUR 60 million in existing and EUR 90 million in the future. But will the EUR 60 million be already booked in 2020? Or will be some -- will there be some spillover effects in 2021?

[Martin Lehner, CEO, CTO & Chairman of Executive Board]

Yes. I will start with your first questions regarding outlook. We are -- for sure, we are -- 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. And 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 9 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. by -- for the 9 months by around 12%. In Q3, we already achieved an increase in revenues, double-digit -- low double-digit increase in U.K., but the market is double-digit down in Q3. So 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 2 effects. While we were down in agriculture in Q3, first off, we have seen prebuy effects in the first half for certain products in agriculture. We had a change in the emission regulation from Tier 4 to Tier 5. And we had some prebuy effects here in the first 6 months. And as already -- Wilfried already mentioned, we have also some new product launches, where we are a little bit behind our schedule to ramp up the products. So these were the 2 impacts. But generally, we see also in the last 2 months, a very good development in order income in agriculture. So here also, we are more positive in agriculture for the next months than generally for construction. Because, as I said, construction, the big question is how fast is the CapEx coming back in the -- from the rental chains. That's the big question. But overall, also from today's perspective, I can give you an outlook for '21. But we are planning, generally we see the development positive and we will -- I guess that we will see and planning a growth, clear growth also in -- once again in '21.

[Wilfried Trepels, CFO & Member of Executive Board]

Okay. Then your question three was regarding the free cash flow development for the fourth quarter. And you mentioned the reduction of inventory, which happened in the course of the last quarters. Yes, 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 the -- our internal targets? The internal target, as I said, was clearly EUR 400 million. But I have my clear doubts that we are going to achieve that. And why? Because in U.S. and in Canada, we have the biggest issue with the inventory. Most of the inventory was shipped -- was ordered and shipped before the COVID crisis was hitting then the industry in North America. And so we are sitting there on a lot of inventory in our plant there in Wisconsin. Also the same aspect is not -- not only for the finished goods, also for the raw materials and components. Also there, we are sitting on a bunch of materials which was shipped. It was ordered because we were not expecting such a slowdown and shutdown of our factory. So we're sitting there also on a lot of materials or raw materials and components so that we have definitely no chance to reduce inventory significantly in North America. So it will be quite difficult to fulfill our internal targets. And so 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. And yes, I said the expectation is EUR 60 million from our bank -- 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 NRs in our balance sheet, we expect in October to move around 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 in trouble. You saw that we have increased our reserve for bad debt significantly in North America. And 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. And so 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?

[Jonas Blum, Analyst]

Yes. Great.

[Operator]

The next question is from Aliaksandr Halitsa of H&A.

[Aliaksandr Halitsa, Equity Analyst]

I'd like to ask on the outlook for 2020 still. I mean I appreciate the uncertainty and the, I guess, uncertainty around your internal distribution capabilities. But given the fact that you comment quite a positive on the order intake situation and on the situation in the field, in construction and agriculture, assuming a scenario where you don't have incremental issues on the distribution side, could you kind of give a little color, flavor how Q4 then could pan out? From the face of it, it looks like that shouldn't be worse at least than Q4 last year, given, I don't know, again the comment around the order intake and the, I guess, the situation in the field. If you could give any thoughts on that, that would be helpful.

[Wilfried Trepels, CFO & Member of Executive Board]

Yes. If you would assume that we will have no negative impacts on -- from the COVID crisis, that our supply chain is not hit by this development, if we have our internal -- 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 million should be achievable. But 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?

[Aliaksandr Halitsa, Equity Analyst]

Yes. That helps. And then 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? And then also regarding the nature of those receivables, I would presume that it has to do with the anchor dealers.

[Wilfried Trepels, CFO & Member of Executive Board]

Yes. 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. And we made it, I wouldn't say very conservative, we tried to make it also not too optimistic. But as you can imply already from what I'm saying, there might be still a risk also for the upcoming months. But we do not know. Otherwise, we have -- 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. And 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. And so 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. And that was also the reason why we have had to increase the numbers in September. So there is some positives and there are some negatives. But we are actively handling those issues. So we are not waiting that something happens, which is out of our control. We try to control the process.

[Aliaksandr Halitsa, Equity Analyst]

Okay. And then 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 2021 to be -- or the COVID will have a major impact in 2021. And I guess that the common sense for 2021 suggests that, that should get kind of sequentially easier for most businesses. And you used to specifically kind of stress it out that the situation for Wacker Neuson is going to be a tougher -- or not tougher but tough. Is there a reason why should Wacker Neuson sustain this second wave of lockdowns, yes, be impacted stronger than, for example, your peers?

[Martin Lehner, CEO, CTO & Chairman of Executive Board]

No. We don't expect that we are affected heavier than any 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 minus 20%. But if you look, I think Caterpillar is minus 30%. Manitou is minus 28% or something like that. So the heavy equipment manufacturers generally affected 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, tele handlers for construction business is mainly related to rental companies. This is what we don't have. In tele handers, we are -- our main portion going to agriculture. So this -- our low connection or relation to rental -- to big rental companies is helping us in this way. And -- but for sure, it's also roughly 10% of our revenues, what we do in a normal year with rental companies and big key customers. And here, the question is how fast are they confident again for doing normal CapEx and investment. And that's the real question for us.

[Wilfried Trepels, CFO & Member of Executive Board]

And may I add something? When you referred to our wording, the wording was, "Corona pandemic is expected to continue to have a major impact into fiscal 2021." And I mean it was quite obvious that we were, at the end of 2019, before COVID crisis, close to achieve EUR 2 billion in 2020, respectively, late 2021. Let's assume -- and 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 ], then 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 that we'll 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.

[Martin Lehner, CEO, CTO & Chairman of Executive Board]

And 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 achieve 1 or 2 years later.

[Operator]

The next question is from Charlotte Friedrichs of Berenberg.

[Charlotte Friedrichs, Analyst]

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 in 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? And the third question is around the supply chain. Are you seeing the trends here already? And to what extent does your -- which I understand is a relatively elevated level of raw materials and components, provide some extent of protection here?

[Martin Lehner, CEO, CTO & Chairman of Executive Board]

Sorry, I didn't get your first question. Can you repeat it again?

[Charlotte Friedrichs, Analyst]

The order intake right now, is it drying up a lot currently with the second wave?

[Martin Lehner, CEO, CTO & Chairman of Executive Board]

No. We don't see any impact now in the order income in the last couple of weeks because of the second wave. So it's still positive and above last year.

[Wilfried Trepels, CFO & Member of Executive Board]

So your second question was regarding the restructuring program. Can you specify this question a little bit more?

[Charlotte Friedrichs, Analyst]

No. I was just wondering because you had a comment in your prepared remarks around having an update here soon. And I was just wondering if you can maybe share some specifics already.

[Wilfried Trepels, CFO & Member of Executive Board]

Yes. We can give you certainly a short summary regarding the restructuring program. The restructuring program is going quite well, especially with the pressure out of -- 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 but 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 will be in Europe, speaking in euros, will be lower because of lower volumes, which we are buying. But everything is on the way slightly above our set targets. In the production, we are really working hard on the reduction of the underabsorption. The underabsorption still is there. The underabsorption is on the level of last year. But imagine how small the basis is, how small the production basis is this year. So there are already significant steps ahead. But especially regarding the production, there is still a lot to do, running into the next year. And 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 markets will not remain in the same situation where it is today. But also here, most of our steps are underway 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. So there is still a little bit to come in the first quarter also in North America. Does this answer your question?

[Charlotte Friedrichs, Analyst]

Yes.

[Operator]

The next question is from Norbert Kretlow of Commerzbank.

[Norbert Kretlow, Equity Analyst of Industrials]

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 market, how long will this, say, secular growth story go on? And as a follow-up, can you give us maybe some indications regarding major project rollouts in other markets going forward?

[Martin Lehner, CEO, CTO & Chairman of Executive Board]

Yes. Good question but difficult to answer. First of all, we started already now introducing our dual view dumper globally. So that's -- the product is already available in all our markets. We are selling the product -- started to sell in United States, in Canada, in Australia, all over Europe. And the product is received really very, 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, at a certain point, we will have also a competition of dual view dumpers. There is, at the moment, no similar concept available in the market. And the big advantages that the dual view dumper, increased safety and also productivity on the construction side. And 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 don't -- we will buy only dual view dumpers more in the future." So 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. And yes, we have further ideas to bring one more other interesting concept into the dumper market in the next 2 years. So 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.

[Operator]

The next question is from Jan-Erik Schmidt of LOYS AG.

[Jan-Erik Schmidt]

I think I would go through them one-by-one. So maybe on the CapEx planning for the next year. So 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? I mean it seems like CapEx levels have been quite high for the past years. Are we going to come down to a more normalized level? Or what's the plan there?

[Wilfried Trepels, CFO & Member of Executive Board]

Okay. Yes, we are planning for next year, a CapEx between EUR 100 million and EUR 120 million. And...

[Jan-Erik Schmidt]

With the IFRS 16 lease payments, right?

[Wilfried Trepels, CFO & Member of Executive Board]

I mean that for 2021, we are planning EUR 100 million to EUR 120 million CapEx. And for the year 2022, we can expect a similar number. And 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 engineering center. And in the second step, we are increasing here the logistics area because today, we are outsourcing a lot of logistics, which makes it, regarding the handling, more complex and which is quite expensive. So there will be also a certain payback out of this investment into the logistic of Korbach. And we have then 2 other things to do. One is we are talking now -- since a couple of years already about it. And this is the production site in Kragujevac in Serbia, where we are producing components, steel components. There, we have a project to make this factory being a European standard factory. Today, it is not really European standard. It's -- in the summer, it's 40 degrees-plus and in winter, it's minus 5% or minus 10% inside the building. So 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. And therefore, we want to invest into this -- into a new factory in Kragujevac.And last, not least, we have in front of us, the logistics 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 shipping. We are producing in Reichertshofen, shipping the stuff 70 kilometers to Munich. And then from Munich, we are shipping it into the world. That makes no sense. And here, we will invest into a logistics center in Reichertshofen, which will be online mid of 2022. And then all the necessary steps to bring the company above EUR 2 billion sales are done. And then 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.

[Jan-Erik Schmidt]

Okay. All right.

[Wilfried Trepels, CFO & Member of Executive Board]

Okay, precise enough?

[Jan-Erik Schmidt]

Yes. That was good enough. And if we then take those higher CapEx levels, obviously, that's going to lead to your higher depreciation level. Just wondering how that fits into the 2022 plan, which now has kind of like shifted forward 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 by -- due to this increased CapEx spending by, I don't know, maybe 1% or even 2%, how you kind of like want to compensate for that, and how the breakdown is going to be. So how much of that is going to just come by pure gross margin improvement to reach this 11% target?

[Wilfried Trepels, CFO & Member of Executive Board]

Okay. There are 2 aspects. One aspect is the increase in 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. And the return on investment was calculated for each and every project. There are low-hanging fruits with the logistics center in Reichertshofen that the repayment or the return of investment is quite fast. And a longer payment -- 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%. And so from this perspective, I have no problem increasing the CapEx number to the said level.

[Jan-Erik Schmidt]

Okay. And if we break down the 11% target, so how is that then -- how much of that is going to come from improved in gross margin if we take 2019 numbers with 75% of gross -- 25% of gross margin? So...

[Wilfried Trepels, CFO & Member of Executive Board]

No. 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 underabsorption of more than EUR 30 million the last 2 years -- in the last 3 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. And then in the 2 years before, it was the problem of aligning sales and production. That was always the case in Wacker Neuson. And that was costing us not only a lot of resources on the cash side, it costs also a lot of money within the factory, so 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 [ IPP-1 ] that happened until this year. And the second part of [ IPP ] for production planning will be online mid of next year. So from this perspective, we need to get better here. And the third point is that we need to increase our productivity in the production side. And with the investments we do today, we are able then to produce more efficient than we are producing today. And that will help significantly to increase our gross profit margin from today, 25.5% up to 27%, 27.5%.

[Jan-Erik Schmidt]

Okay. All right. And in the EUR 2 billion revenue planning, how much of that is then going to come from Europe? And how big of a chunk is actually going to make the Americas and Asia business?

[Wilfried Trepels, CFO & Member of Executive Board]

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 and the rest remains for Europe.

[Jan-Erik Schmidt]

Okay. All right.

[Wilfried Trepels, CFO & Member of Executive Board]

That was always the original plan. It might be that we do EUR 450 million or EUR 470 million in U.S. So I do not have it such precise. But I think the split I gave to you is quite reasonable.

[Jan-Erik Schmidt]

Okay. And then how much factoring did you use in the financial year 2019? And how much is going to go forward, how much is then -- I mean you've increased the amount in the U.S., not as much -- I think it was one of the questions before, not as much as you planned for. But is it going to go up to the full amount of EUR 70 million then in total for the U.S.? And so how much is it in total, the factoring amount?

[Wilfried Trepels, CFO & Member of Executive Board]

So you're asking about factoring, right?

[Jan-Erik Schmidt]

Yes.

[Wilfried Trepels, CFO & Member of Executive Board]

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. But with the program, we have a volume of EUR 150 million. And we need next year, end of next year, if the business went as -- if the business goes as we believe, we need another EUR 150 million to support the sales and the growth in North America. So 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. But 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. Sorry, nobody comes along and gives us money.

[Operator]

The next question is from Jean Francois Coste from Tocqueville Asset Management.

[Jean Francois Coste, Senior Equity Analyst]

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 owned? So that's for the first one. And the second one is on the postponement of the targets. I think -- I mean I'm not particularly surprised by the sales. But I think you were more confident on the margin target. So I'm wondering -- even recently, so I'm wondering what has changed there.

[Wilfried Trepels, CFO & Member of Executive Board]

So regarding your first question regarding light equipment, light equipment, we have more than 40% market share in North America as well as in Europe. And we do not split or we do not deliver more details to this key figure. And your second question, I'm sorry, I did not understand what your question was.

[Jean Francois Coste, Senior Equity Analyst]

Just on the light equipment, I mean, 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. And I guess, so it's very highly geared to U.S. and Europe, correct? And I'm assuming you're not geared to rentals in that business. Or are you?

[Wilfried Trepels, CFO & Member of Executive Board]

So 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 believe, then the EBIT will follow.

[Jean Francois Coste, Senior Equity Analyst]

Okay. Now 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 1 to 2 years in line with sales. And so I'm just wondering what changed. Because until very recently, until September, that was -- you were still hopeful of making the 11% by 2022.

[Martin Lehner, CEO, CTO & Chairman of Executive Board]

Sorry, we did not get your last question. Can you repeat it again, please?

[Jean Francois Coste, Senior Equity Analyst]

We talked in September, you said the sales target for 2022 was highly questionable, which we all agreed. And you said that, the CFO, you said that for the margin targets, you were a lot more hopeful because all the plans were in place. So I'm just wondering what has changed that you've pushed back the margin target of 11% by 1 to 2 years as well.

[Wilfried Trepels, CFO & Member of Executive Board]

Yes. Because of...

[Jean Francois Coste, Senior Equity Analyst]

I don't know how I can be more precise than that.

[Wilfried Trepels, CFO & Member of Executive Board]

1 second. Yes. Because it's related. If we don't have the revenues, we -- it's also not -- we will not achieve the EBIT margin. So it's a relation. We need also a certain level of revenues to achieve this 11% EBIT margin.

[Operator]

If there are no further questions, I hand back to the speakers for the conclusion.

[Christopher Helmreich, Head of Investor Relations]

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.