(pressebox) Altdorf, 31.03.2009, The Daetwyler Group increased revenue and profit again in 2008, growing net revenue from continuing operations by 10.3% to CHF 1,294.9 million and improving profit for the year by 27.0% to CHF 109.6 million. Despite the good results, the Board of Directors proposes that the payout ratio be reduced to 25% (CHF 1.80 per bearer share). Last year, Daetwyler acquired the ELFA Group, successfully completing the portfolio realignment initiated in 2007. Due to the sharp decline in demand during the early months of 2009, Daetwyler is continuing to adjust all the divisions’ cost structures to the changed environment. The balance sheet is robust with an equity ratio of 58.7% to weather the storm, while high liquidity provides for intact business opportunity.
Altdorf, 31 March 2009. The Daetwyler Group enjoyed another extremely successful year in 2008. The general slowdown in demand in the industrial and construction markets did not reach the Daetwyler companies until very late in the year. Overall, net revenue from continuing operations grew 10.3% to CHF 1,294.9 million from CHF 1,173.5 million a year earlier. Prior year net revenue and all comparatives below have been adjusted to exclude the figures of the sold Precision Tubes Division. The ELFA Group’s first-time consolidation for eight months had an impact of CHF 101.8 million or 8.7% on revenue. Excluding adverse currency effects of CHF 32.1 million or negative 2.7%, organic growth was 4.3%.
Continued improvement in profitability
Operating profit (EBIT) from continuing operations climbed 20.7% to CHF 134.2 million from CHF 111.2 million a year earlier, lifting the EBIT margin by another 0.9 percentage points year on year to 10.4%. This performance was driven by the good capacity utilisation during nine months, ongoing productivity enhancements and the concentration on high-end products and projects with wider margins. Profit for the year from continuing operations was up 27.0% to CHF 109.6 million from CHF 86.3 million the year before. Earnings were impacted by a number of positive and negative exceptional factors: book gains on the sale of non-operating property (CHF 5.8 million), foreign exchange losses on financing activities (CHF 4.7 million), impairment charges on financial investments (CHF 4.5 million), write-down of the Cables Division’s copper inventories to net realisable value (CHF 6.3 million), as well as supply bottlenecks and additional one-off costs during the installation of a new ERP system in the specialist distribution business. In view of the uncertain economic outlook, the Board of Directors recommends that the long-standing payout ratio of about 33% be exceptionally reduced to 25%. This will increase the Daetwyler Group’s financial flexibility for strategic activities. A dividend of CHF 1.80 per bearer share will be proposed for approval at the Annual General Meeting.
Catalogue distribution successfully expanded
Whatever the economic climate over the short term, Daetwyler is adhering to the Group’s overriding strategy: focusing on attractive industrial market niches with the aim of delivering sustainable profitable growth. With the successful realignment of the portfolio during the 2007 and 2008 financial years, the company laid an important strategic cornerstone to achieve this. By selling the Precision Tubes Division and acquiring Swedish-based ELFA, the Daetwyler Group has become less susceptible to cyclical swings and widened its margins, while reducing the percentage of Group revenue from the automotive industry to about 6%. Geographically, the acquisition of the ELFA Group ideally complements Distrelec, the catalogue distributor already owned by Daetwyler. By acquiring the Swedish ELFA Group, Daetwyler has become the Number Two catalogue distributor of industrial electronic and automation products in Continental Europe and the best positioned supplier in the growing East European markets.
Cables Division: impacted by copper prices and currencies
The Cables Division, operating as Daetwyler Cables, posted another slight increase of 0.8% in revenue to CHF 273.3 million for 2008 from the very good previous year’s level of CHF 271.2 million, with 3.2% growth in foreign currencies. The change in copper prices had a slightly negative impact. Despite continued productivity improvements, operating profit (EBIT) for 2008 was down 34.0% year on year, falling to CHF 13.6 million from CHF 20.6 million. The EBIT margin came in at 5.0% compared with 7.6% a year earlier. This decline is mainly due to inventory write-downs caused by the plummeting copper prices during the last quarter. Operating profit was also adversely affected by the weakening of various currencies against the Swiss franc. Last year, Daetwyler Cables progressively established itself successfully as a supplier of complete integrated solutions for electrical building infrastructure.
Rubber Division: enhanced profitability
The Rubber Division, operating as Daetwyler Rubber, fell short of the targeted growth rates due to the economic crisis. Revenue reached CHF 154.9 million, only marginally higher than the previous year’s level of CHF 153.9 million. Daetwyler Rubber significantly increased its profitability by constantly streamlining the product and customer portfolio, while taking early measures to reduce costs and getting a major project successfully up and running. In 2008, operating profit (EBIT) climbed 28.5% to CHF 15.8 million from the previous year’s CHF 12.3 million before impairment charges. This represents an EBIT margin of 10.2% compared to 8.0% before impairment charges a year earlier. To improve the situation in North America, Daetwyler Rubber is planning to transfer production to the new facility in Mexico. The plant in the USA will be shut down in the fourth quarter of 2009.
Pharmaceutical Packaging Division: non-cyclical growth
By consistently implementing its niche strategy, the Pharmaceutical Packaging Division significantly outpaced the market growth of 6% during 2008. The division, operating as Helvoet Pharma, increased net revenue by 8.6% year on year to CHF 283.2 million from CHF 260.8 million, up 14.2% in local currencies. With demand remaining strong, production capacity utilisation continued to improve. At the same time, the prices of raw materials rose considerably. All in all, Helvoet Pharma’s profitability nearly matched the previous year’s level with an EBIT margin of 11.1% as compared to 11.3% in 2007. In absolute terms, operating profit (EBIT) grew to CHF 31.4 million, up 6.8% from CHF 29.4 million a year earlier. On the market and product fronts, Helvoet Pharma successfully launched the third generation of its strategically important Omniflex product line last year.
Technical Components Division: delays in project execution
Daetwyler’s Technical Components Division implemented several strategic projects during 2008, strengthening the foundation for further expansion. Due to delays in project execution in the specialist distribution business, operating performance lagged behind the strategic progress. Net revenue grew to CHF 585.3 million, up 19.2% from CHF 491.1 million a year earlier, with CHF 101.8 million contributed by the ELFA Group acquired at the end of April. Operating profit (EBIT) increased 9.6% year on year to CHF 53.5 million from CHF 48.8 million. However, excluding the first-time contribution of CHF 12.5 million from the ELFA Group, operating profit was down 16.0%. The EBIT margin, including ELFA, fell to 9.1% from 9.9% the year before.
The lower profitability was due to the specialist distribution business, which operates as Maagtechnic. Delays occurred in transferring the plastics centre from Basel to St. Marcellin in France and in installing a new group-wide ERP system. Supply and capacity bottlenecks, coupled with higher one-off costs incurred to accomplish the relocation and migration work halved the profit contribution. In the meantime, the projects have been completed, and the focus is clearly directed at customers and their needs. In the mail order distribution business, the work to integrate the ELFA Group acquired at the end of April proceeded according to plan. The first synergy projects were successfully implemented, including the move to combine Distrelec’s and ELFA’s product management and catalogue production. With double the volume of purchases, the two companies already generated substantial savings in sourcing as well. Distrelec is pressing ahead with various growth projects to counteract the effects of the economic slowdown.
Outlook for 2009: difficult environment
The spreading economic crisis and the severe slumps in a wide variety of industries have led to a high degree of uncertainty surrounding the short-term outlook for 2009. Daetwyler currently expects all the divisions, except for Pharmaceutical Packaging, to face a difficult environment, reporting considerably lower revenue and earnings year on year. A reliable forecast cannot realistically be made because the foreseeable horizon is hazy. When and if the pent-up demand to be unleashed sooner or later will trigger a pickup during the second half of the year is anybody’s guess. The situation is exacerbated further by the volatile exchange rates and commodity prices.
Adjustment of cost structures
In the early months of 2009, net revenue dropped sharply by approximately 20% excluding the impact of acquisitions. This is forcing Daetwyler to continue adjusting all the divisions’ cost structures to the changed environment. The measures include cutting back temporary staff, reducing holiday and flexitime balances, working short time (part of the Swiss Cables and Rubber workforce; France; Germany) and, in a few cases, pruning the workforce (specialist and mail order distribution; Rubber Division in the USA). Having rapidly implemented these measures, the Daetwyler Group again generated a profit and positive free cash flow in the first few months of 2009. Further developments in the relevant markets are being watched closely.
Intact business opportunity
Despite the prevailing uncertainties, Daetwyler is confident that the Group is well prepared to embrace the challenges ahead. On the market side, Daetwyler companies hold strong positions, supported by their consistent focus on attractive niches and the disposal of subcritical operations. On the cost side, the Group is reaping the benefits of investing in productivity enhancements rather than in capacity expansion in its cyclical businesses over the past two years. The successful portfolio realignment has reduced Daetwyler’s cyclicality and strengthened its profitability as a Group. Added to that, the Pharmaceutical Packaging Division generates more than 20% of Group revenue in a non-cyclical market that is growing steadily at about 6% per annum. The balance sheet is robust with an equity ratio of 58.7% to weather the storm, while high liquidity provides for intact business opportunity. Daetwyler is keen to capitalise on the phase of economic weakness to gain market share and make strategic acquisitions at reasonable prices.
New CFO
As announced in September 2008, the Board of Directors has appointed Reto Welte as the new CFO of the Daetwyler Group. He will take up this position on 1 June 2009 and not, as previously announced, on 1 July 2009. On the same date, Silvio A. Magagna will retire from the Executive Board and take on other functions in the Daetwyler Group. After handing over, he will serve as Executive Director of Pema Holding AG and assist the Board of Directors with special tasks. We would like to take this opportunity to thank the outgoing CFO for his long service and wish his successor a good start.Über Dätwyler Holding AG
The Daetwyler Group is an international multi-niche player dedicated to industrial component supply and distribution of engineering and electronic components. Its activities concentrate on attractive niches that offer opportunities to increase value added and sustain profitable growth. The Group’s four divisions – Cables, Rubber, Pharmaceutical Packaging and Technical Components – are focused on the manufacturing, pharmaceutical and datacom industries. With more than 50 operating companies, sales in over 80 countries and some 4,700 employees, the Daetwyler Group generates approximately CHF 1,300 million in revenue. Daetwyler has been listed on the main board of the SIX Swiss Exchange since 1986 (security number 3048677).
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