Swiss Conzzeta Group posted improved revenues and income for the 2011 business year, despite the negative impact of the strong Swiss franc and the ongoing global economic crisis.
The fluctuations in the currency markets influenced the performance of Conzzeta in the 2011 business year. Even after the interventions of the Swiss National Bank, the strong Swiss franc remained at a level that was well above purchasing-power parity. These currency trends not only reduced income in terms of Swiss francs, but also put significant pressure on margins due to the high proportion of personnel costs incurred in Switzerland. Nonetheless, the Group increased consolidated net revenues by 7.2% to CHF 1 128.1 million (previous year: CHF 1 051.9 million). Adjusted f...
The fluctuations in the currency markets influenced the performance of Conzzeta in the 2011 business year. Even after the interventions of the Swiss National Bank, the strong Swiss franc remained at a level that was well above purchasing-power parity. These currency trends not only reduced income in terms of Swiss francs, but also put significant pressure on margins due to the high proportion of personnel costs incurred in Switzerland. Nonetheless, the Group increased consolidated net revenues by 7.2% to CHF 1 128.1 million (previous year: CHF 1 051.9 million). Adjusted for negative currency translation effects of 9.7% as well as acquisition and divestment effects, the growth was 17.6%. Operating profit (EBIT) reached CHF 61.9 million, 8.7% higher than previous year (CHF 56.9 million). The operating margin of 5.4% was slightly higher than the previous year (5.3%). The operating result included one-time value adjustments (impairments) on assets amounting to CHF 6.4 million. As announced in January 2012, these were for restructuring in the Glass Processing Systems business unit. The Group result for 2011 amounts to CHF 52.1 million (previous year: CHF 51.5 million).
Worldwide, the recovery was sustained in the majority of the markets, the exception being the hard-pressed economies of Southern Europe. Against this background, most of the Conzzeta business units continued to grow locally, although this growth was partly offset by the negative currency effects. The strongest sales growth was recorded by the Sheet Metal Processing Systems and Automation Systems business units. The consumer-goods-related businesses were affected by changes in the purchasing behaviour of customers in Europe, above all in the home market of Switzerland.
Following a period of caution in investment activity during the two previous years, the Conzzeta Group again invested in capacity expansion in 2011. Investments in property, plant and equipment and intangible assets amounted to CHF 40.1 million, almost twice the amount spent in the previous year (CHF 21.1 million). The investment activity included two major projects: the Sporting Goods business unit began construction of an European logistics centre in Germany, while the Sheet Metal Processing Systems business unit started work on a second production facility in China.
The cash flow from operating and investment activities (free cash flow) generated by the Conzzeta Group was negative CHF 1.3 million (previous year: CHF 17.6 million). Cash, cash equivalents and securities held by the Group fell by CHF 28.4 million to CHF 482.5 million (previous year: CHF 510.9 million). The Group remains solidly financed, with an equity ratio of 74.9% (previous year: 76.3%). At the end of the year, the Conzzeta Group had 3 576 employees, 254 more than in the previous year (3,322 employees).
To mark the company’s centenary, the Board of Directors is proposing an increased dividend to be paid from non-operational funds that originate mainly from the sale of former operating premises. Its proposal to the Annual General Meeting of Shareholders is for a dividend of CHF 217.00 (previous year: CHF 40.00) per bearer share and CHF 43.40 (previous year: CHF 8.00) per registered share. The Board is also proposing a special allocation of CHF 15.0 million to strengthen the financial position of the employee pension funds.
The Sheet Metal Processing Systems business unit (Bystronic) increased net revenue by 22.4% to CHF 503.0 million (previous year: CHF 410.9 million). Adjusted for currency translation effects, the increase was 36.2%. Bystronic generated particularly strong growth in the US, where the market recovery continued to gather pace. During the reporting year, the business unit transferred its headquarters from New York to the US industrial hub in the Chicago region, where most of its customers are located. Other markets that performed well were Eastern Europe and South America; China also showed good growth rates. In these important sales regions, the negative currency effects were not sufficient to put a brake on revenue growth. Bystronic is continuing to invest in future markets, developing its business activities in India and Vietnam, and establishing a sales and service centre in Taiwan. To keep pace with demand in China, the business unit started construction of a second production facility in Tianjin. This is partly to ensure increased capacity, but it will also offer extended capabilities for the development of new machines, as well as accommodating a large demonstration centre to support sales. The service business was only marginally above the previous year’s level, since customers were investing more in new machinery. The fiber laser system, a new cutting technology for thin sheets that was launched at the end of 2010, has had a very positive reception in the market. In 2011, Bystronic also launched BySpeedPro, a high-performance laser-cutting machine, ByTower, an automation system, and ByJetSmart, a compact model for waterjet cutting.
In the Glass Processing Systems business unit (Bystronic glass), net revenue fell by 10.4% to CHF 150.2 million (previous year: CHF 167.5 million). In local currencies, the drop in sales was 2.0% compared with the previous year. Bystronic glass was hard hit by the marked decline in construction activity in Europe as well as by the strength of the Swiss franc. Demand for machinery for cutting architectural glass and laminated safety glass (LSG) suffered a significant decline. The business unit therefore had no choice in its decision, announced in January 2012 (see media release issued on January 10), to give up the architectural glass cutting segment at the Swiss plant in Bützberg. The costly manufacture of customized machinery and systems can no longer be operated economically from a Swiss base. In this field, Bystronic glass is therefore seeking to cooperate with HEGLA. In a parallel move, the manufacture of LSG machinery is being transferred from Gunzenhausen (D) to the Neuhausen-Hamberg (D) site. This is in order to compensate for the decline in demand and benefit from synergies. The automotive glass segment, whose highly specialized products will continue to be produced in Bützberg, continued to develop well.
The Automation Systems business unit (ixmation) increased net revenue by 24.2%, or 43.7% in local currencies, to CHF 70.0 million (previous year: CHF 56.4 million). This surge in growth is due to a major one-time order from the solar industry. The business unit is continuing to focus on the alternative energy, medical technology, and automotive segments, where ixmation acquired prominent customers during the reporting year. In the Asian region, there was growing interest in manufacturing automation. On the one hand, growing sales in the automotive segment increased the demand for mechanization from automotive manufacturers and component suppliers. On the other hand, mechanization of manufacturing processes increasingly appears the more cost-effective option in many industries, owing to rising wage costs. This applies not only in the automotive industry, but also in the manufacture of medical products.
In the Foam Materials business unit (FoamPartner), net revenue fell slightly by 2.6% to CHF 124.6 million (previous year: CHF 127.9 million). Adjusted for negative currency translation effects, the business unit posted a 3.7% increase compared with the previous year. The strong franc put pressure on sales, above all in the comfort foam segment of the Swiss market, where foreign competitors made the most of the currency advantage by lowering prices. At the same time, the exchange rate situation put a brake on exports from Switzerland. By contrast, the markets in Asia recorded growth. Technical foams and packaging materials are in demand in these markets because customers who have had a positive experience in their dealings with FoamPartner in Europe wanted to be able to rely on the same trusted supplier at the new locations in Asia. Regardless of the regional markets or business fields, demand for converted foam products was generally high. In the technical foams, for example, ceramic filters, sponges and polishing disks were particularly in demand. Capacity utilization was correspondingly high in plants with a high proportion of foam conversion.
Net revenue in the Sporting Goods business unit (Mammut Sports Group) was also adversely affected by the strong Swiss franc. Sales in the reporting year fell by 4.7% to CHF 210.8 million (previous year: CHF 221.2 million). After adjustments to account for the sale of the Toko business in 2010, the purchase of Snowpulse in 2011, and currency effects, growth amounted to 4.1%. Across Europe, customers’ interest in winter sports products was curbed by the warm, dry start to the winter. Furthermore, the strength of the Swiss franc prompted customers in Switzerland to stock up in neighbouring eurozone countries or buy products from abroad now available in the Swiss market at cheaper prices. Mammut responded with price reductions. By contrast, in Germany, the strongest market for Mammut in terms of revenues, the Group reported double-digit growth in local currencies. Sales in the South Korean and Japanese markets grew strongly. The opening of additional mono-brand stores in these countries provided further growth impetus. The business unit continued its efforts to make the Mammut brand and product range more visible by opening further stores in Germany, Switzerland and Spain. The Sporting Goods business unit expanded its portfolio by acquiring Snowpulse, a manufacturer of avalanche airbags. Specially designed for skiers, this system has a large airbag that reduces the danger of being completely covered by an avalanche. With the groundbreaking ceremony at the new European logistics centre near Memmingen (D), Mammut embarked on the biggest investment in its history.
The Graphic Coatings business unit (Schmid Rhyner) increased net revenue in the reporting year by 3.3% to CHF 48.1 million (previous year: CHF 46.6 million). The volume growth was not reflected to the same extent in the sales figures due to the negative currency effects. The strong Swiss franc, combined with the exclusively Swiss manufacturing base, put pressure on margins. At the same, raw material costs rose steeply owing to a shortage of capacity at the producers. The Graphic Coatings business unit generated growth in almost all its main markets, above all in the Asian markets of China and India. A new series of dispersion varnishes sold particularly well. New products were successfully introduced in the UV-hardening line during 2011. These were well received in the luxury goods sectors where they are used for printing on packaging.
The Real Estate business unit (Plazza Immobilien) generated revenue of CHF 21.0 million in 2011, roughly the same level as in the previous year (CHF 20.9 million). Demand for rented accommodation in the residential sector in Switzerland remained stable. The plans for a residential development with around 200 apartments on the former industrial site in Wallisellen had to be revised because of an objection and the proposal had to be represented for public inspection. The revised development plans are set to be submitted to the municipal assembly for approval in summer 2012. In the past year, the municipality at Estavayer-le-Lac presented an offer to purchase all the land at a former concrete block factory, which lies within their district. The sale went through at the beginning of 2012.
Conzzeta expects the economic environment will be difficult in 2012, due particularly to the unresolved currency and financial problems in Europe. As long as the debt crisis continues, the Swiss franc will remain strong. Although the intervention of the Swiss National Bank to stabilize the exchange rate did not bring the parity of the Swiss franc down to a satisfactory level for the long term, it did give a measure of security in planning.
The Group started the current business year with order books at the same level as in 2011. From the current perspective, further growth can be expected in the markets of Eastern Europe, America and Asia. In view of the almost daily mood swings on the financial markets, it is impossible to make reliable forecasts. Any further worsening of the debt crisis could lead to an immediate response on the part of customers in the form of a marked decline in demand. Overall, Conzzeta remains very cautious in its assessment of the situation and cannot rule out adverse affects on the consolidated financial statements.
In addition to the difficult economic situation, two further one-time effects will have a negative impact on the result. On the one hand, the restructuring in the Glass Processing Systems business unit will affect the Group result. In addition to the depreciation of CHF 6.4 million already recognized in the 2011 financial year, Conzzeta is reckoning with further costs of around CHF 12.0 million in 2012. On the other hand, on approval by the Annual General Meeting of Shareholders of the proposal for the appropriation of profit, an allocation of CHF 15.0 million to the employee pension funds will be recognized in the income statement.
Bearing in mind the uncertain economic outlook, the Conzzeta Group will keep fixed costs low and maintain a flexible approach. In view of the exchange rate situation, it is important to remain close to the markets and to build up Conzzeta’s own local production as well as purchasing in local currencies. That will act as a natural hedge and reduce the adverse currency effects.