HAMBURG (dpa-AFX) - With the acquisition of the US company Storage Solutions, forklift manufacturer Jungheinrich has landed a real coup. In addition to entering the US market, CEO Lars Brzoska has also managed to position the family-run Hamburg-based company as a serious player in the market for corporate acquisitions. What's going on at Jungheinrich, what analysts say and what the share is doing.

WHAT'S GOING ON AT JUNGHEINRICH:

When forklift manufacturer Jungheinrich announced its acquisition of U.S.-based Storage Solutions Group just under two weeks ago, investors were amazed. The share rose to the level it had before the outbreak of the Ukraine war, and analysts were full of praise. And the Jungheinrich CEO also seems satisfied: The acquisition is a great opportunity to expand Jungheinrich's presence and thus generate strong future growth, Lars Brzoska told the financial news agency dpa-AFX at the end of January.

Storage Solutions' core business is warehouse automation. In perspective, the industry benefits from inflation. Because when prices and wages rise, it makes more and more sense to invest in the automation of processes. Storage Solutions' customers include third-party logistics providers such as Fedex, as well as companies from industry such as ABB and the food sector such as Nestle.

Jungheinrich was able to generate enthusiasm with the acquisition for several reasons. For one, it is an important step towards achieving its medium-term goals. By 2025, one-fifth of sales are to be generated outside Europe, in particular through inorganic growth. In 2021, this figure was just 13 per cent.

In addition, Storage Solutions has finally given Jungheinrich a foot in the door of the US market. The lack of presence in the important market on the other side of the Atlantic was often criticized in the past. So now the Hamburg-based company can serve its customers from the EU in the United States as well - and vice versa.

And with the takeover, Brzoska has also managed to usher in a new era at Jungheinrich. The family-run company had previously been considered rather cautious when it came to acquisitions. "The acquisition of Storage Solutions is the largest transaction of this kind for Jungheinrich to date," Brzoska said. He has been at the helm of Jungheinrich since September 2019. The risk, meanwhile, is manageable. The total purchase price of $375 million (342 million euros) is to be financed from cash and debt, so it will hardly affect Jungheinrich's leverage. "The acquisition will contribute to increasing the value of our company right from the start," Brzoska assured in an interview. Storage Solutions' operating profit adjusted for depreciation and one-time effects (adjusted Ebit) is expected to be around $34 million for 2022.

In the near future, Jungheinrich will initially focus on expanding its Storage Solutions business and the subsequent integration. However, this should not cause too many problems. According to Brzoska, the two companies have "one hundred percent complementary profiles."

"At the same time, we will continue to pursue our M&A strategy and, of course, look for opportunities," he said. The remaining "firepower," as the manager said in a conference call with analysts, has not yet been exhausted. According to analysts, 600 million euros remain. Jungheinrich would not confirm that figure - but would not deny it either.

WHAT THE SHARE IS DOING:

Since the announced acquisition, the Jungheinrich share has been trading back at the level it was at before the outbreak of the Ukraine war - and even higher. On Monday, it cost 35.98 euros. The share price has thus risen by 35 per cent since the beginning of the year. In this respect, the share is one of the biggest winners in the MDax, the index for medium-sized companies. However, Jungheinrich's competitor Kion, which is also listed on the MDax, is doing even better, with a gain of more than 46 per cent.

Moreover, with a market capitalization of 5.1 billion euros, Kion is also worth considerably more. Jungheinrich preferred shares, which have been listed on the stock exchange since 1990, currently have a market capitalization of 1.7 billion euros. The 48 million preferred shares account for just under half of Jungheinrich's share capital. The rest are ordinary shares owned by the heirs of the company's founder.

2023 So far, six analysts covered by dpa-AFX have commented on the Jungheinrich share. The majority of them are positive: Four recommend buying it, while only one stock market expert each recommends holding and selling it. The average price target of the six analysts is 35.67 euros, which is slightly below the current price.

WHAT THE ANALYSTS SAY:

The outbreak of the Ukraine war nearly a year ago had put Jungheinrich under pressure. Among other things, steel was hardly available at times and, if so, only at very high prices. As a result, the order book, which had swollen during the preceding two pandemic years, could not be worked off as planned. In the meantime, however, the clouds have cleared and experts at investment banks and analysts are correspondingly confident - both for the past months and for the months ahead.

For example, in the view of George Featherstone of Bank of America, the latest updates from various companies point to a significant easing of supply chains. In his view, this bodes well for an increased backlog of orders in the fourth quarter across the industrial landscape. According to his colleague Jorge Gonzalez Sadornil of Hauck Aufhäuser Investment Banking, the high order backlogs ensure that Jungheinrich should develop stably in a difficult environment.

In the most recent studies, however, Jungheinrich's operational development took somewhat of a back seat, with analysts focusing instead primarily on the acquisition of Storage Solutions. The company is a good fit for the manufacturer of storage technology, wrote Stefan Augustin from Warburg Research. With a target price of 46 euros, he is the most optimistic analyst for the Jungheinrich share.

According to Augustin, Jungheinrich's entry into the US market for warehouse management systems opens up new potential. The company could be used as a local base for further acquisitions. As a point of criticism, he cited what he sees as Storage Solutions' conservative average annual growth rate of 5.6 per cent in operating profit until 2025. But he also said it should not be forgotten that the environment for storage projects in the U.S. is difficult at the moment.

On the other hand, the integration risk is comparatively low, Augustin added, as the U.S.-based company is expected to continue its business independently. The acquisition of Storage Solutions also complements Jungheinrich's technological offering, he added. All in all, Augustin welcomes the acquisition as it offers solid opportunities at a reasonable valuation with limited risk./lew/mne/jha/