Datwyler laying the strategic groundwork for future growth
In the first half of 2015, the Datwyler Group generated net sales of CHF 579.1 million. Despite a challenging environment, this equates to organic growth of 1.7%. The reported EBIT margin increased slightly to 11.6% – or 12.5% adjusted for negative currency effects. Net profit fell to CHF 42.1 million due to currency losses. Assisted by its newly acquired companies, Datwyler is confident of reaching its sales target of CHF 1,200 million for the year as a whole and anticipates an EBIT margin in the range of 10% to 13%. In 2015, the Group is laying the strategic groundwork for future growth in both divisions.
Despite a challenging environment, the Datwyler Group further increased profitability in the first half of 2015. Datwyler was also able to achieve organic growth in revenue. This failed to translate into stronger organic revenue growth at Group level due to the highly contrasting performance of the two divisions. On the one hand, the Technical Components division's Europe-focused distribution business is still dealing with difficult market conditions, whereas the Sealing Solutions division continues to benefit from growth in the global market segments Automotive, Health Care, Civil Engineering and Consumer Goods. The appreciation of the Swiss franc had a significant impact on the Datwyler Group's reported financial key figures for the first half of 2015. Compared to the prior-year period, the average euro exchange rate was 13.9% lower.
Organic sales growth and improved profitability of continuing operations
Datwyler achieved organic revenue growth of 1.7% from its continuing operations (without Maagtechnic). Negative currency effects came to –9.5%, while the acquisition of Columbia resulted in a positive effect of 1.9%. Net revenue consequently fell by –5.9% to CHF 579.1 million (previous year: CHF 615.1 million). The strong Swiss franc also detracted from the operating result (EBIT). EBIT was down slightly, amounting to CHF 67.4 million (previous year: CHF 70.0 million). However, this equates to a slightly improved EBIT margin of 11.6% (previous year: 11.4%) – or 12.5% adjusted for negative currency effects. Net profit declined to CHF 42.1 million (previous year: CHF 49.8 million) due to currency losses.
Strategic objective of sustainable, profitable growth
Following wide-ranging changes in recent years, the new Group portfolio offers promising growth potential to coincide with Datwyler’s 100-year anniversary. The Group wishes to exploit this through organic expansion and company acquisitions. The target is to achieve revenue of CHF 2 billion and an EBIT margin of between 12% and 15% by 2020. As a high-service distributor, the Technical Components division caters to short-term demand, predominantly among professional users, for electronic components in small quantities. The Sealing Solutions division, on the other hand, manufactures large quantities of consistently high-quality, system-relevant sealing components. The announced acquisition of Italian firm Origom to complement the Sealing Solutions division – with completion of the transaction scheduled for September 2015 – is a good example of how Datwyler is working towards the 2020 growth objective through a variety of systematic measures. By acquiring Origom (115 employees, around CHF 23 million in annual sales), the Group will gain access to the global O-ring market and have the opportunity to develop new strategic market niches outside the automobile industry. With cash, cash equivalents and money market investments of CHF 283.6 million, Datwyler has plenty of entrepreneurial scope for further acquisitions and for investments in growth projects.
Technical Components division focuses on implementing integration projects
The Technical Components division's distribution business, which focuses mainly on Europe, again had to contend with a difficult market environment in the first half of 2015. In addition, product availability did not always meet clients’ expectations due to the ongoing integration projects. As a result, net sales from continuing operations fell by –2.6% year on year. This was compounded by negative currency effects amounting to –13.0%. Reported net sales thus dropped by –15.6% to CHF 227.0 million (previous year: CHF 268.8 million; continuing operations without Maagtechnic). Due to the stronger franc, Swiss-based Distrelec was also forced to make price reductions, which led to a temporary reduction in margins due to existing stocks. Furthermore, the integration projects and suboptimal processes added to operational costs. Together with the gap in sales volume, these factors led to a disproportionate contraction in the reported operating result, with EBIT totalling CHF 5.3 million (previous year: CHF 12.3 million; continuing operations), which translates into an EBIT margin of 2.3%.
The new management under Neil Harrison is focused on increasing customer orientation and on the rapid implementation of the strategic integration projects. In the second half of the year, the Swedish logistics centre of Elfa Distrelec will be closed and moved to the central distribution centre at the Nedis location in the Netherlands. The conversion to SAP at all locations of Distrelec Elfa should also be completed by the end of the first quarter of 2016. Together with the joint purchasing organisation in Asia, the Technical Components division will be able to reap the cost benefits of using a shared purchasing, logistics and ICT infrastructure platform, starting in the first half of 2016. By 2017, the distribution business should subsequently be able to emulate the EBIT margin of over 10% from 2011.
The market environment in the second half of 2015 will depend heavily on currency values and the economy in Europe. Good demand and margin development for the Nedis brand as well as the successful international expansion of the Reichelt brand into new European markets give cause for optimism. Besides, the Technical Components division traditionally performs better in the second half of the year owing to seasonal effects.
Sealing Solutions division achieves profitable growth
The Sealing Solutions division managed to maintain the momentum of the second half of 2014 and increase net sales organically by 5.1% in the first half of 2015. Negative currency effects resulting from the conversion into Swiss francs amounted to –6.8%. Columbia Engineered Rubber, which was acquired in 2014, accounted for 3.3% of sales. Overall, reported net sales rose by 1.6% to CHF 352.1 million (previous year: CHF 346.6 million).
Despite a strong Swiss franc, Datwyler further increased profitability in the Sealing Solutions division. The reported operating result (EBIT) climbed by 7.6% to CHF 62.1 million (previous year: CHF 57.7 million), which equates to an EBIT margin of 17.6% (previous year: 16.6%). This gratifying margin trend is the result of targeted strategic and operational optimisation measures over recent months and years. For example, the merger of the former subdivisions continued apace and generated additional synergy effects in the first half of 2015. The integration of newly acquired companies and the expansion of the division's presence in low-wage countries also proceeded according to plan and added value. In addition, the division is systematically shifting towards a more higher-end mix of products, while favourable raw material prices have also recently contributed to the im-proved margin.
The Health Care market segment has contributed significantly to the division's increased sales and revenue. The outsourcing of a rapidly expanding product range from the plant in the US to the factory in India is progressing on schedule. In the Belgian plant, the clean room standards are being further upgraded, thus strengthening our position in the FirstLine segment.
The Automotive market segment enjoyed continued strong demand in Europe and the US, with the additional sales capacity of Columbia Engineered Rubber – which the company acquired in October 2014 – playing a valuable role in this respect. The slowdown in China and Korea had a dampening effect. Datwyler will put a modern mixing plant into operation at its Chinese location in the fourth quarter of 2015 as a means of furthering enhancing competitiveness.
In the Civil Engineering market segment, the restructuring of the product portfolio has proved to be a success. Buoyed by a healthy order book, the margin has exceeded the sector average.
The Consumer Goods market segment continues to perform well, recording above-average growth.
Datwyler is confident that the pace of growth in the Sealing Solutions division can at least be maintained in the second half of the year, not least thanks to the acquisitions of Columbia and Origom and to the significant number of new health care components currently in serial production.
Outlook: Group on course to achieve targets
Thanks to the encouraging performance of the Sealing Solutions division, Datwyler remains on course to achieve the targets as a Group. Assisted by the newly acquired companies, the Group is confident of reaching the sales target of CHF 1,200 million for the year as a whole. Datwyler expects the EBIT margin to be in the target range of 10% to 13%. To accelerate profitable growth, the company will invest specifically in sales promotion measures in both divisions – in the distribution business by combining online and offline activities, in the Sealing Solutions division by developing the Key Account Management. Datwyler is thus building on the momentum of the anniversary year through a wide range of activities that will allow the Group to continue enhancing the employees' commitment and the customer relationships.
Datwyler Group (www.datwyler.com)
The Datwyler Group is a focused industrial supplier with leading positions in global and regional market segments. With its technological leadership and customised solutions, the Group delivers added value to customers in the markets served. Datwyler concentrates on markets that offer opportunities to create more value and sustain profitable growth. The Technical Components Division is one of Europe’s foremost high-service distributors of electronic, ICT and automation components and accessories. The Sealing Solutions Division is a leading supplier of customised sealing solutions to global market segments, such as the health care, automotive, civil engineering and consumer goods sectors. With a total of more than 50 operating companies, sales in over 100 countries and around 6,500 employees, the Datwyler Group generates annual revenue of some CHF 1,200 million. The Group has been listed on the SIX Swiss Exchange since 1986 (security number 3048677).
A conference call in English will be held today, Friday, 14 August, at 14.00 p.m. in the afternoon. The results will be presented by CEO Paul Hälg and CFO Reto Welte.
The dial-in numbers for this call are:
Europe +41 (0)58 310 50 00
UK +44 (0)203 059 58 62
USA +1 (1)631 570 5613
Enquiries: Guido Unternährer, Head Corporate Communications, T +41 41 875 19 00, guido.unternaehrer[at]datwyler.com
Photos (in print quality): www.datwyler.com > Media > Image Library
Announcement of net revenue 2015 22 January 2016
Annual Press Conference and Analyst Conference 4 March 2016
Annual General Meeting 5 April 2016
Interim Report 2016 12 August 2016