Datwyler grows revenue and improves margins
In the first half of 2018, the Datwyler Group increased its net revenue by 7.7% to CHF 694.1 million. Both divisions grew their revenue, with demand for high-quality seal components for the health care industry in particular outstripping market growth. The Group’s EBIT margin improved to 13.1%, while the net result rose by 17.3% to CHF 62.5 million. For the year as a whole, Datwyler is expecting net revenue of between CHF 1'350 million and CHF 1'400 million and an EBIT margin in the 12%-to-15% target range. Some promising acquisition projects should generate additional momentum in the second half of the year.
The Datwyler Group maintained its profitable growth path during the first half of 2018 in what was a moderate market in parts. Unaudited net revenue was up 7.7% on the same period last year at CHF 694.1 million (previ-ous year: CHF 644.5 million). Thanks to its leading market positions and operational strength, the Sealing Solu-tions division made a significant contribution to this growth. Demand for high-quality seal components for the health care industry outstripped market growth. However, the Technical Components division also succeeded in increasing revenue on the back of its core business-to-business (B2B) online distribution activities. Adjusted for positive currency effects, this resulted in 2.5% organic growth for the Datwyler Group as a whole.
Further improvement in EBIT margin
Focusing on system- and time-critical components for long-term growth markets has allowed Datwyler to fur-ther improve its profitability. The operating result (EBIT) thus rose by 13.2% to CHF 90.7 million (previous year: CHF 80.1 million). The EBIT margin improved further to reach 13.1% (previous year: 12.4%). Drawing on its operational strength, Datwyler was able to offset higher raw material prices and set-up costs associated with growth projects. The net result improved by 17.3% to CHF 62.5 million (previous year: CHF 53.3 million). Con-struction work on the new Health Care plant in the USA saw investments increase to CHF 71.7 million during the first half of the year (previous year: CHF 37.7 million). When this new US plant opens in the second half of 2018, Datwyler will be well positioned to profit from the rapid rise in demand for high-quality components for prefilled syringes and other modern drug delivery systems.
“The Datwyler Group has maintained its profitable growth path in the first half of 2018. The healthy order book in the key market segments of Health Care and Automotive as well as some promising acquisition projects should generate additional momentum in the second half of the year,” says CEO Dirk Lambrecht.
Sealing Solutions division remains on course for profitable growth
The Sealing Solutions division maintained its profitable growth path during the first half of 2018. In spite of a rather moderate mood in some of its market segments, the division’s leading positions helped to raise net revenue by 7.9% year on year to CHF 453.2 million (previous year: CHF 420.2 million). Adjusted for positive currency effects, this resulted in 3.4% organic growth for the division.
For the sixth consecutive time since the merger of the two former divisions, the sealing business increased the operating result (EBIT) by 6.6% to CHF 83.8 million (previous year: CHF 78.6 million). The EBIT margin stood at 18.5% (previous year: 18.7%). Further efficiency savings nearly offset higher raw material prices and set-up costs associated with growth projects.
The Health Care market segment recorded demand above the market average for high-quality components for prefilled syringes and other modern drug delivery systems from First Line production. Improved efforts to cul-tivate the market began to bear fruit in this regard The upcoming commissioning of the new first-line capacities in India and the new first-line plant in the USA in the second half of the year will further accelerate organic growth.
The Automotive market segment also continued to expand despite growth in China and the USA being slower than the strong performance that they enjoyed in the prior year period. Demand for high-quality components used in selective catalytic reduction (SCR) continued to develop very positively, with this technology gaining ground in the treatment of exhaust gases produced by diesel vehicles.
The Civil Engineering market segment had to contend with a slight decrease in revenue during the first six months of the year, although new tunnelling and track construction contracts will bring an improvement during the second half. In the Consumer Goods market segment, meanwhile, the multi-year contract with Nespresso that entered into force in early 2018 promises further potential.
Increase in revenue for the Technical Components division
The Technical Components division increased its revenue in the first half of 2018 by 7.4% to CHF 240.9 million (previous year: CHF 224.3 million). While Reichelt made a disproportionately large contribution to revenue growth thanks to its international expansion, Nedis suffered another decline in demand in the wholesale supply of in-home/consumer electronics due to its range being streamlined. Adjusted for positive currency effects, organic growth at division level amounted to 0.8%. Organic growth per trading day amounted to 1.4%. Rigor-ous cost discipline increased the operating result (EBIT) to CHF 6.9 million (previous year: CHF 1.5 million after one-off costs). The EBIT margin improved to 2.9% (previous year: 0.7%). Adjustments to customer segmenta-tion led to a restructuring of the project portfolio, triggering impairments that slowed down margin growth.
Distrelec is pressing ahead with its focus on the Maintenance, Automation and Robotics market segments, which bring in higher margins. The considerable improvement in customer satisfaction, as measured by the Net Promoter Score that is standard in the sector, shows that Distrelec is making progress on the operational front, even if this has yet to translate adequately into improved revenue and margins. The new enterprise hub in Man-chester is continuously improving operating performance.
Reichelt succeeded in accelerating its profitable growth further. The strategy of international expansion, with new local online shops in France, the Netherlands and Poland, is generating pleasing levels of demand from new customers. The proportion of B2B business in its home market of Germany also increased. Reichelt stepped up its marketing activities in a targeted manner in order to raise its brand profile.
Nedis is working very hard to implement its comprehensive optimisation programme. Among other things, the company is replacing its various product brands with a single, common brand as well as enhancing product quality, fine-tuning product management and making sales more efficient. The positive feedback received from major customers provides grounds for optimism and suggests that the negative revenue trend can be reversed when the new product brand officially launches at the end of August. Nedis further streamlined its range during the first half of the year with a view to improving margins, accepting that this would lower revenue.
Datwyler firmly believes that the Group can maintain the pace of growth from the first half of the year through-out the second half. The Sealing Solutions division should be able to outstrip market growth in the key Automotive and Health Care market segments on the back of its strong market positions and healthy order book. The Technical Components division will intensify its off- and online marketing measures across all three units – Distrelec, Reichelt and Nedis – during the second half of the year. We still expect the Group’s net revenue to be between CHF 1'350 million and CHF 1'400 million for the year as a whole. In spite of a general rise in raw material prices and start-up costs for the new plants, the EBIT margin should continue to be within the 12%-to-15% target range. Some promising acquisition projects should generate additional momentum in the second half of the year.
A conference call in English will be held today, Friday, 10 August, at 10.00 a.m. (Central European Summer Time). The results will be presented by CEO Dirk Lambrecht and CFO Reto Welte.
The dial-in numbers for this call are:
Europe +41 (0)58 310 50 00
UK +44 (0) 207 107 0613
USA +1 (1)631 570 5613
Enquiries: Guido Unternährer, Head Corporate Communications, T +41 41 875 19 00
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Annual Press Conference and Analyst Conference 8 February 2019
Annual General Meeting 12 March 2019
Interim Report 2019 13 August 2019