A conversation with Oerlikon Chairman of the Board, Michael Suess (MS), and Group CEO, Roland Fischer (RF).
Interview with the Chairman and CEO
Mr. Fischer, what were the highlights for 2021?
RF: We delivered a strong performance in 2021 in line with our guidance that was increased with half-year results. We grew the company and delivered strong margin expansion in 2021, and expect the profitable growth to continue in 2022.
We executed well operationally, efficiently managed cost and successfully mitigated supply chain shortages, which drove EBITDA above pre-COVID-19 levels. Moreover, we successfully executed two accretive bolt-on acquisitions, further diversified our business and made excellent progress in our sustainability initiatives. Once again, we proved that we have the right strategy, business model and people, underpinned by our excellent full-year performance.
Group order intake amounted to CHF 2.8 billion, an increase of 24.8% compared to the previous year (2020: CHF 2.2 billion) and Group sales increased by 17.3% to CHF 2.65 billion (2020: CHF 2.3 billion). Group operational EBITDA increased by 38.5% to CHF 447 million, corresponding to a margin of 16.9% (2020 operational EBITDA margin:14.3%). The unadjusted EBITDA was CHF 444 million, or 16.7% of sales. Compared to 2020, results from continuing operations were higher by more than 300% to CHF 162 million (2020: CHF 38 million). Net results for 2021 significantly improved to CHF 168 million (2019: CHF 38 million). Consequently, earnings per share were CHF 0.50. With an equity ratio of 33%, the Group’s financial position remains strong.
What key achievements marked the year?
RF: Our Polymer Processing Solutions Division achieved record orders and sales and significantly improved its EBITDA margin. We also scored a success with the acquisition of INglass as we accelerated our strategy in expanding our manmade fibers business into the high-growth polymer processing solutions market. Oerlikon HRSflow, the new brand that ensued from the acquisition, has a market-leading innovative hot runner systems technology, which is applied in multiple industries from automotive, consumer goods and household appliances to packaging, waste management, construction and transportation.
Our surface solutions business saw good top-line results, driven by strong sales and business development execution as the tooling, automotive and general industries gradually recover. The aerospace industry saw a slight reprieve from the pandemic but the recovery is off a very low base. Our successfully executed cost containment measures resulted in a notable 30% improvement of the division’s operational EBITDA.
We also successfully closed an important acquisition for surface solutions – Coeurdor – a leading full-service provider of components for the fast-growing luxury goods industry. Coeurdor’s creativity, agility and fast turnaround to meet the needs of customers in the highly demanding luxury market are strong additions to what we offer today in the high-end deco market.
What market factors impacted Oerlikon in 2021?
RF: Like many companies, we faced supply chain, logistics and energy bottlenecks, e.g. the energy crisis in China, in 2021. We managed to mitigate the impacts and were only slightly affected by these developments. Our global production, service and supply chain networks supported us in minimizing the disruptions to our production and customer delivery. By carefully balancing between countries and industries, we were able to fulfil most of our customer needs and deliveries by reallocating resources and benefited from faster recoveries in certain countries and industries. Looking ahead, we expect the markets to gradually recover as countries remove and relax COVID-19-related restrictions. The supply chain challenges are also ex pected to be short-term issues and will be overcome during the next months. We are in a strong position to capture opportunities as markets recover and will continue to implement our cost containment measures to drive further margin improvement.
What progress has Oerlikon made in sustainability?
RF: Following the publishing of our first Sustainability Report, we received very positive feedback from our stakeholders. Many of the sustainability benefits that we deliver to customers were already well known, since sustainability is an inherent part of our R&D. The report provided transparency to what we have in place and publicly transported our commitment to further foster sustainability in our technologies, solutions and operations.
In this year’s Sustainability Report, which will be published on March 30, we are proud to show the progress we have made despite the pandemic challenges. To name a few, our top energy-intensive sites, which account for 50% of our total energy consumption, all have energy management systems in place. We organized our first Diversity Conference themed “I See You” to raise awareness on diversity, equity and inclusion. We were pleased to see more than 4 500 participations at the conference.
With the strong results, what does this mean for the dividend and outlook?
MS: The Board will propose a stable ordinary dividend of CHF 0.35 per share at the 2022 Annual General Meeting of Shareholders (AGM).
We will continue to execute on our strategy to expand our business in growth markets, leverage opportunities in recovering markets and maintain our focus on cost control. We will also continue to actively manage and mitigate any impacts stemming from short-term supply chain and COVID-19 issues. We expect profitable growth to continue in 2022 with sales around CHF 2.9 billion and the operational EBITDA margin around 17.5%.
Can you comment on the changes on the Board and Executive Committee?
RF: To empower our operational businesses and increase our customer focus, Markus Tacke, Division CEO of Surface Solutions, and Georg Stausberg, Division CEO of Polymer Processing Solutions and Chief Sustainability Office, both joined as members of the Executive Committee (EC) on January 1, 2021.
We also announced the retirement of Group CTO, Helmut Rudigier. Helmut joined Oerlikon in 1986 and has been the company’s technology expert, particularly for innovative surface solutions, for many years. He contributed greatly to our R&D, our innovative technologies and the management team. We would like to thank Helmut for his valuable contributions and technological leadership at Oerlikon and wish him all the best in his retirement. To enable closer alignment of R&D with market and customer needs, the division CTOs have taken over leading and managing R&D of their respective Divisions since January 1, 2022.
MS: At the board level, Suzanne Thoma announced that she was not standing for re-election at the 2022 AGM. Suzanne joined the Board in 2019, and her extensive industry experience and strong business acumen were highly valued by the Board. On behalf of the Board, I would like to sincerely thank Suzanne for her considerable commitment and contribution to Oerlikon and wish her all the best for the future.
As her successor, the Board of Directors will propose Zhenguo Yao for election at the next AGM on April 5, 2022. All Board members will stand for re-election.
You have today also announced a new Group leadership structure. Can you please explain why you are doing this?
RF: After six years leading the company, I have decided to step down for private reasons. I am extremely proud of what we have achieved since I joined as CEO and how the company has transformed into a globally active engineering and technology company with a clear strategic focus and organization. In the past two years, the Surface Solutions Division has successfully implemented cost measures and embarked on a transformation to empower the regions and become closer to key markets. The Polymer Processing Solutions Division has successfully continued its strategic diversification into non-filaments markets. My priority now is to ensure a smooth transition, so that the company can continue to be a global market leader in advanced materials, surface engineering and polymer processing.
MS: I very much regret, but fully understand and respect, Roland’s personal decision. On behalf of the Board, I would like to express our deep gratitude for his extra-ordinary service. He has been a key contributor in the successful transformation of Oerlikon.
Following Roland’s decision, we evaluated different leadership models. Our two divisions are distinct from each other. They serve different customers in different industries and also differ in their growth potential. With the Executive Chair model, the division CEOs will gain agility in decision-making, which will enable them to expedite the execution of their business and ensure sustainable growth.
How will the new Executive Chair model work?
MS: The two current division CEOs, Markus Tacke and Georg Stausberg, will continue to have operational control and accountability to lead their divisions. As aforementioned, the new management model will ensure they have the added agility and speed of execution to run and grow their business.
I will assume the position of Executive Chair and oversee all Group-level management topics and lead the Executive Committee in addition to my role as Chairman of Oerlikon’s Board of Directors.
The Executive Committee will be responsible for ensuring the harmonized Group-wide management of all organizational topics with cross-divisional relevance.
With the Executive Chair model, how will you ensure good governance?
MS: To further strengthen our corporate governance, we will introduce a Lead Director and a new Governance Committee at the board level.
An elected independent member of the Board will be appointed as Lead Director, who will also chair the newly created Governance Committee, which will consist of a majority of independent members of the Board. The Lead Director, with the support of the Governance Committee, will be responsible for ensuring adequate control mechanisms.
Subject to re-election at the next AGM, Paul Adams will be appointed as Lead Director and chairman of the Governance Committee, and Gerhard Pegam and Zhenguo Yao will be appointed as members of the Governance Committee. Additionally, I will no longer be proposed as a member of the Human Resources Committee at the next AGM in adherence to good corporate governance.
Do you have any additional comments you wish to share?
Both: We would like to thank all our employees, the management team and our colleagues on the Board of Directors for their dedication and commitment demonstrated throughout 2021. In addition, I would like to thank our partners and customers for their confidencein our services, solutions and technologies, and our share-holders for their unwavering support and continued trust in Oerlikon.
