Annual Results 2013: Conzzeta records substantial increase in profits

Zurich, March 26, 2014 – Conzzeta AG increased operating profit (EBIT) to CHF 87.7 million in the 2013 business year (previous year: CHF 55.3 million), corresponding to an EBIT margin of 7.3% of net revenues. Adjusted for special items related to the employee pension funds of CHF positive 4.1 million (CHF negative 12.7 million), the increase was 23%. EBIT therefore rose disproportionately to revenues, which came in 2.8% to CHF 1,194.0 million (CHF 1,161.5 million). At the Annual General Meeting, the Board of Directors will propose a capital reduction instead of a dividend, with a payout of CHF 90 per bearer share and CHF 18 per registered share.

The business environment improved during the second half of 2013 and was particularly positive in North America and the European countries outside the eurozone. Many of the eurozone countries experienced a subdued trend, while the Asia-Pacific region remained at the previous year's level. The strongest growth rates were recorded by the Graphic Coatings business unit. In absolute terms, Sheet Metal Processing Systems made the biggest contribution to revenue growth. The Glass Processing Systems and Automation Systems business units reduced their offering to focus on their core businesses, and this was reflected in a corresponding decrease in sales.

For the 2013 business year, the Conzzeta Group generated operating profit (EBIT) of CHF 87.7 million (previous year: CHF 55.3 million), corresponding to an EBIT margin of 7.3% (4.8%). Whereas the EBIT figure for 2012 included a charge of CHF 12.7 million for an allocation to the employee pension funds to mark Conzzeta’s centenary, EBIT for the reporting year contains a positive one-time effect of CHF 4.1 million relating to the reversal of renounced use in the employer contribution reserves. Adjusted for these effects, EBIT amounts to CHF 83.6 million (CHF 68 million), an increase of just under 23%.

The cash flow from operating and investment activities (free cash flow) amounted to CHF 111.7 million (previous year: CHF 73.2 million) in 2013, which represents an increase of 53% and a free cash flow rate (relative to total revenue) of 9.3%. This positive development was attributable not only to the higher Group result, but also to the change in net working capital, which fell by CHF 17.3 million, despite an increase in revenues of 2.8%. With cash, cash equivalents and securities of CHF 506.8 million (CHF 422.2 million) and an equity ratio on the reporting date of 75.6% (75.4%), the Conzzeta Group remains solidly financed.

Instead of a dividend payment, the Board of Directors is proposing a reduction in the share capital. The par value of the bearer share will be reduced by CHF 90 from CHF 100 to CHF 10, that of the registered share by CHF 18 from CHF 20 to CHF 2. The payout to shareholders is not subject to withholding tax. After the reduction in par value, the share capital of Conzzeta AG would be CHF 4.6 million. The total payout of CHF 41.4 million is higher than the long-term level of distributions in the past. The purpose of this measure is to reduce the par value in a single step to a sustainable level.

At the end of the reporting year, the Conzzeta Group had 3548 employees worldwide, a fall of 2.2% compared with the previous year (3627). The workforce reduction occurred mainly in the Bystronic glass and ixmation business units.

Business units

The Sheet Metal Processing Systems business unit (Bystronic) increased revenue by 5.5% to CHF 560.1 million (previous year: CHF 530.6 million), with business picking up in the second half following a hesitant start to the year. The American markets again showed the most vigorous growth, followed by northern Europe and Germany. Southern European markets stabilized, while in Asia demand fell short of expectations. Laser machines and services made a particular contribution to the good performance. Greater customer focus is the theme of Bystronic’s marketing, shifting the emphasis from individual machines to one-stop service delivery, which Bystronic is able to offer thanks to additional automation software and service capabilities. This kind of market cultivation takes on greater importance as competitive pressure from a large number of new fiber laser manufacturers increases. These small-scale operations are usually very local in scope and focused on the lower end of the market. Bystronic can stand out from the competition through additional services and expertise. One example is BySoft 7, a software package that enables customers to control whole production processes, which sold very well during the reporting year. Such products offer customers measurable added value and underpin Bystronic’s role as a partner. Another trend is the growing demand for automation, to which Bystronic has responded with the ByAutonom machine.

Net revenue in the Glass Processing Systems business unit (Bystronic glass) came in at CHF 132.2 million in 2013, 6.7% lower than the previous year (CHF 141.8 million). One reason for the fall was the elimination of the architectural glass cutting segment, which, though discontinued, was still generating revenue in the reference year of 2012. The business with glass processing machinery is undergoing a marked regional shift. While there is very little construction activity in many European countries, resulting in stagnating demand for insulating and laminated safety glass, the building boom in Asia is continuing. The Asian market is also growing in importance for the vehicle glass machinery segment. This shift of emphasis is also apparent in the business unit’s sales figures. While revenue in China met expectations, demand in Europe faltered. In China, systems in the mid-range performance segment are in great demand. Bystronic glass has succeeded in aligning itself with customer requirements in Asia by localizing its product range. In the America region, revenues were slightly up on the previous year. Sales in the vehicle glass segment lagged behind the exceptionally good previous year, but are still at a satisfactory level. Revenues in the service and spare parts business developed well in all regions. 

The Automation Systems business unit (ixmation) reported net revenue of CHF 41.8 million in 2013, a decrease of 25.2% compared with the previous year (CHF 55.9 million). After facing technical problems and unplanned costs during the previous year, more stringent criteria are now being applied to the evaluation of contracts and the technical specification of orders. Several potential orders have failed to match up to these conditions, with the result that ixmation has declined jobs where the risks would have been unacceptable. This, coupled with the postponement of deliveries until 2014, led to lower sales. Capacities were adjusted accordingly and a management process put in place to improve handling of complex orders. In the reporting year, the business unit received most of its orders from the automotive and consumer goods industries. Rising labor costs, particularly in Asia, are driving up demand for automation systems.

The Foam Materials business unit (FoamPartner) increased net revenue by 5% to CHF 136.4 million (previous year: CHF 129.9 million). Growth in all market regions was driven by technical foams. By contrast, sales in the comfort foam segment, particularly for mattresses, were below expectations. These products are sold primarily in the European market where customers are currently showing a certain restraint when it comes to placing major orders. Sales of technical foams grew in a wide range of applications, above all acoustic parts and products for the automotive industry. Demand for converted foam products is continuing to grow, a trend that is also apparent in Asia, the business unit’s strongest growth region. Automotive manufacturers are the most important customers, with demand growing for converted products as well as rolls. As a result, the manufacturing joint venture in China invested in new processing facilities, including foam impregnation equipment. In the US market, sales also increased slightly, with brisk demand for a novel cleaning sponge.

The Sporting Goods business unit (Mammut Sports Group) grew in the reporting year by 6.2%, recording net revenue of CHF 246.9 million (previous year: CHF 232.5 million). Currency effects (negative 2.2%) and an acquisition in South Korea (positive 1.1%) had an impact on sales. Adjusted for these influences, the rise would have been 7.3%. The figure is above average for the outdoor equipment market, where growth rates are only moderate. Mammut improved sales in all product segments, with footwear the biggest contributor. The business unit introduced new products during 2013. The launch of a clothing and footwear line for trailrunners, an upcoming sport trend, was very well received by customers. Sales of established products such as Barryvox and the avalanche airbag protection system also increased. In regional terms, sales growth in the markets of the USA and Canada, Great Britain, France and Eastern Europe deserves particular mention, while the Japanese market again produced double-digit growth in terms of the local currency. In view of the marked weakening of the yen as a result of Japanese monetary policy, this growth was not reflected in the result in the reporting currency, the Swiss franc. Another positive aspect is that the Swiss market is also on an upward curve again. The markets in Southern Europe are still weak. In 2013, Mammut opened a sales company in China to tap into this growth market. Chinese customers are showing strong interest in the Swiss mountain sports brand, and the first sales returns exceeded expectations, albeit with relatively low volumes. The business unit opened 14 new monobrand stores last year, and there are now 68 outlets around the world selling exclusively Mammut products, helping the brand grow stronger all the time. The new selective distribution system will further enhance brand appeal. Since its introduction in 2013, dealers have had to meet certain criteria if they want to become Mammut partners. One condition is being able to give expert advice on the products and their use.

The Graphic Coatings business unit (Schmid Rhyner) increased net revenue in the reporting year by 11.3% to CHF 56.1 million (previous year: CHF 50.4 million). The sales growth was driven principally by UV varnishes, while sales of water-based varnishes declined. The decline is the result of a planned move, as Schmid Rhyner has reduced its range of water-based products to focus on special varnishes with a significant value-added element. The strategy has so far proven correct. Development of the UV-hardening line is continuing, and not only through the introduction of new product features: process stability and technical customer support are also key sales arguments. New varnishes in the Touch&Feel range – products which create textured effects – are meeting with great interest from suppliers of branded consumer goods. EPPI varnishes are also opening up new market opportunities. They offer enhanced safety thanks to their chemical properties, making them particularly suitable for applications such as food packaging. In addition to its successes in the UV sector, Schmid Rhyner is also establishing itself in the area of security printing, though initially on a small scale. At the end of the reporting year, the business unit completed its new production and logistics building at the Adliswil site. This investment will improve not only the logistics processes and inventory management system, it will also allow further expansion of production capacity.

The Real Estate business unit (Plazza Immobilien) generated revenue of CHF 19.9 million, 0.4% higher than the previous year (CHF 19.8 million). Rental income is stable overall, although there is evidence of saturation in the market for commercial property. The apartments in the “Im Tiergarten” development, Plazza’s largest property, continue to enjoy brisk demand. The preliminary phase of the “Im Glattgarten” project in Wallisellen has been completed. Detailed planning work and the planning application will follow in the current business year. More than 200 mid-range apartments will be built on the former industrial site. Work progressed in the reporting year on a development plan for a former manufacturing site in Crissier, which extends to 63,000 square meters. A preliminary proposal will be submitted to the canton of Vaud for approval during the current year. The sale of a property in Avenches that is no longer required for operational purposes generated an extraordinary profit of CHF 3.0 million.

Trends and outlook

For the 2014 business year, Conzzeta AG is not expecting a fundamental change in the situation on the European markets since the economic adjustment still needs some time. There is no prospect of a recovery in the Southern European markets, which means customers in the other eurozone countries will act with caution, at least. The Group is more optimistic about the American markets, where it anticipates further growth. Asia will remain an important market. Against this background, Conzzeta will monitor the markets and push ahead with the expansion of its worldwide activities as a stabilizing factor. The cost base will continue to be a focus of attention so that the Group is in a position to react quickly to any fall in revenues. Strengthening profitability and further profitable growth remain the declared goals of Conzzeta AG: a prerequisite for achieving a slight increase in revenue and earnings, given a stable economic climate and a reliable political framework


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