Third Quarter Results 2012
- Order intake up by 7 % to CHF 898 million
- Sales up by 2 % to CHF 957 million
- EBIT of CHF 111 million; EBIT margin at 11.6 %
- Drive Systems Segment continued to streamline manufacturing in Italy
- Oerlikon net cash positive for the first time in six years
- Outlook for FY 2012 confirmed in a more challenging business environment:
sales at 2011 levels, order intake at up to -5 % and EBIT margin of around 12.5 %
| Q3 20121 | Q3 20112 | ∆ | 9M 20121 | 9M 20112 | ∆ | |
|---|---|---|---|---|---|---|
| Order intake | 898 | 837 | +7 % | 2 850 | 2 996 | −5 % |
| Order backlog | 1 240 | 1 485 | −16 % | 1 240 | 1 485 | −16 % |
| Sales (to third parties) | 957 | 939 | +2 % | 2 908 | 2 839 | +2 % |
| EBIT | 111 | 123 | −10 % | 3783 | 322 | +17 % |
| EBIT margin | 11.6 % | 13.1 % | 13.0 %3 | 11.3 % | ||
| ROCE | 17.3 % | 16.5 %4 | 17.3 % | 16.5 %4 |
1 Continuing operations; 2 Restated; 3 EBIT for 9M 2012 excl. sale of Arbon property of CHF 339 million, EBIT margin of 11.7 %;
4 ROCE FY 2011; Margins calculated on unrounded figures
Pfäffikon SZ, Switzerland – October 30, 2012 – The Oerlikon Group reported a solid increase in order intake of 7 % and a sales growth of 2 % for the third quarter 2012. The Q3 EBIT margin was sustained at the same level as in Q1 (excluding one-time effects) and Q2 2012. With 11.6 % it was lower than the exceptionally high EBIT margin of 13.1 % reported in Q3 2011, the Group’s strongest quarter last year. These positive results were driven by strong performance in the Textile, Drive Systems and Coating Segments. Oerlikon CEO Michael Buscher said: “We have delivered a consistently competitive level of profitability every quarter this year. This is the result of the systematic execution of our agenda, reinforced in an uncertain business environment. Based on our continued progress we can confirm our guidance”, Buscher emphasized.
Textile order intake increased by 17 %
Order intake for the Group was 7 % higher at CHF 898 million than in the third quarter of 2011 (Q3 2011: CHF 837 million) with the strongest contribution from the Textile Segment (+17 %). Following the exceptionally high order intake in the financial year 2011 as customers restocked following the financial crisis of 2009, order levels normalized quarter by quarter in 2012. Order backlog for the Group at the end of the third quarter 2012 decreased to CHF 1 240 million (Q3 2011: CHF 1 485 million).
Coating posted strongest sales growth rate
For the third quarter 2012 the Group reported an increase in sales of 2 % to CHF 957 million (Q3 2011: CHF 939 million). Three of five Segments contributed positively to this growth: Coating achieved the highest sales growth rate, reporting an increase in sales of 5 % compared over the previous year, benefitting from solid demand in the tools markets in Japan, Germany and the United States. The Textile Segment made a substantial contribution to the increased Group sales: Manmade Fibers was able to offset the sales decline within the Natural Fiber business, achieving overall sales growth of 4 % for the Segment. Whilst the Drive Systems Segment increased sales by 3 % in the third quarter 2012, the Vacuum Segment saw continued customer project postponements in a softening market environment, posting a sales decline of 9 %. Sales in the Advanced Technologies Segment slightly declined.
Strong growth in Europe and China
In the third quarter Europe posted the strongest regional growth across the Group and reached a 13 % increase in sales, primarily driven by Drive Systems and Textile. Today, Europe accounts for 33 % of total Group sales. Asia also contributed with a strong 9 % growth to the Group’s positive results as in the previous quarters with China growing by 12 %. Overall the Asian region contributed 50 % to total Group sales.
The expansion in emerging markets continued during the third quarter. The Coating Segment opened a new coating center in Malaysia as well as two new sales offices in the country. Today, the Segment runs 88 coating centers in 33 countries worldwide.
Sustainable profitability
Third quarter EBIT was CHF 111 million (Q3 2011: CHF 123 million) with a margin of 11.6 %. The comparable EBIT margin of 13.1 % in Q3 2011 was driven by exceptionally large orders in the Textile and, to a smaller extent, in the Vacuum Segment. The solid level of profitability in Q3 2012 was mainly due to continued execution of Operational Excellence programs, margin improvements from new products and an optimized portfolio. With reported EBIT margins of 11.8 % in Q1 (excluding one-time effects), 11.7 % in Q2 and 11.6 % in Q3 2012, Oerlikon has delivered a high level of profitability for the third quarter in a row. The strongest profitability improvement in Q3 2012 was in the Drive Systems Segment where margins rose from 6.3 % to 9.3 %, as restructuring measures started to take effect. With the strongest contribution coming from the Manmade Fiber business, the Textile Segment posted a margin of 10.9 % which was close to previous year’s level of 11.1 %. The Coating Segment sustained its high level of profitability in the third quarter at 20.0 %, whereas Vacuum’s Q3 EBIT margin declined to 8.3 % (Q3 2011: 15.2 %).
Continuous value creation
The solid Q3 2012 performance resulted in an Oerlikon Group ROCE of 17.3 % as of the end of Q3 2012, compared to a FY 2011 ROCE of 16.5 %. Coating operates at Best-in-Class levels with Textile and Drive Systems making significant progress. “The Group continues to focus on further value creation with stable investments in R&D, product development and regional expansion”, CEO Michael Buscher said.
Oerlikon net cash positive
For the first time in six years, Oerlikon was net cash positive at the end of Q3 2012. This marks an important milestone in the successful financial restructuring of the past two years. Based on the completion of a comprehensive refinancing in July 2012, including a new syndicated credit facility and a domestic bond, and the Group’s strong operational and financial performance over the past two years, Oerlikon was able to repay the old credit facility two years ahead of maturity. The new package was provided on an unsecured basis, allowing greater flexibility, and generates savings by halving interest costs.
Innovation
Recently launched products contributed to the increase in sales and order intake in Q3 2012. The products recently presented by the Textile Segment at the ITMA Asia fair were well perceived by the markets: The demand for fully-automated products, as well as more energy efficient solutions (e.g. the rotor spinning machine Autocoro 8 reducing the energy consumption up to 20 %) is increasing in markets like China, India and Turkey. More than 40 units have been sold during the third quarter.
The Drive Systems Segment increased its position in the energy market by introducing a winch drive for undersea remote operated vehicles and robots used in deep ocean drilling and recovery. Having gear teeth with increased stress resistance, these vessels are capable of raising and lowering down to 4 500 meters below sea level.
The Coating Segment has deployed the first new generation of Pulsed-Plasma Diffusion (PPD) equipment to the United States as the demand for environmentally friendly plasma-nitriding treatment of large forming tools is constantly increasing. This is an important step on the way to replace chrome-plating by setting a new industry standard. The reengineered PPD system is 40 % more efficient than the previous generation, of which already five are in operation worldwide.
Portfolio adjustments
On October 29, 2012 the Drive Systems Segment announced another streamlining of its manufacturing footprint in Italy to improve operational performance. A contract has been signed to sell the plant in Garessio to a private Italian company for an undisclosed price.
Outlook for 2012 confirmed
The global economic environment is softening and remains difficult to assess. Oerlikon continues its focus on the systematic execution of its agenda to strengthen underlying performance. Despite this uncertain global economic environment, Oerlikon is confirming its outlook for FY 2012. Assuming stable currencies and the successful closing of the Oerlikon Solar transaction, the Group forecasts for the FY 2012:
- sales to be at 2011 levels
- order intake guidance remains unchanged at up to minus 5 %
- profitability to increase to an EBIT margin of around 12.5 %, or around 11.5 % excluding the effect of the Arbon property sale
Segment overview
Segment Textile
| Q3 2012 | Q3 2011 | ∆ | 9M 2012 | 9M 2011 | ∆ | |
|---|---|---|---|---|---|---|
| Order intake | 486 | 415 | +17 % | 1 486 | 1 610 | −8 % |
| Order backlog | 970 | 1 212 | −20 % | 970 | 1 212 | −20 % |
| Sales (to third parties) | 524 | 506 | +4 % | 1 540 | 1 484 | +4 % |
| EBIT | 57 | 56 | +2 % | 202 | 132 | +53 % |
| EBIT margin | 10.9 % | 11.1 % | 13.1 % | 8.9 % | ||
| EBIT (excl. one-time effect1) | 57 | 56 | +2 % | 163 | 132 | +23 % |
| EBIT margin (excl. one-time effect1) | 10.9 % | 11.1 % | 10.6 % | 8.9 % |
1 Sale of Arbon property
For the third quarter of 2012 the Textile Segment reported a strong increase in order intake of 17 % and a rise in sales of 4 %. The EBIT margin remained strong at 10.9 % (Q3 2011: 11.1 %).
The main contributor to the positive sales trend was continued demand for Manmade Fiber products; this Business Unit posted the strongest sales increase within the Oerlikon Group. This was driven by the excellent market reception of Oerlikon’s new products presented at the ITMA Asia trade show in the second quarter. The Segment also benefitted from increased demand for carpet yarn equipment in the United States and sold five plants from the S+ product family. The overall market continues to remain strong and first orders for equipment delivery in 2015 have already been received.
While lower sales and profit contribution was recorded by Natural Fibers, order intake for this business grew significantly, due in large part to the success of the Autocoro 8 rotor spinning machine. The demand for these fully-automated products and more energy efficient solutions is steadily increasing in markets like China, India and Turkey.
Segment Drive Systems
| Q3 2012 | Q3 2011 | ∆ | 9M 2012 | 9M 2011 | ∆ | |
|---|---|---|---|---|---|---|
| Order intake | 165 | 197 | −16 % | 609 | 649 | −6 % |
| Order backlog | 163 | 176 | −7 % | 163 | 176 | −7 % |
| Sales (to third parties) | 195 | 189 | +3 % | 643 | 605 | +6 % |
| EBIT | 18 | 12 | +50 % | 57 | 30 | +90 % |
| EBIT margin | 9.3 % | 6.3 % | 8.9 % | 5.0 % |
The Drive Systems Segment increased both sales and profitability in Q3 2012 compared to the prior period: sales rose by 3 %, EBIT by 50 % and EBIT margin rose to 9.3 % from 6.3 % in Q3 2011, driven by increased sales and the sustainable impact of Operational Excellence measures.
Despite this good performance key markets agriculture, construction, mining and energy continued to slow globally. Order intake fell by 16 % and order backlog declined by 7 %. Market demand in India and China slowed due to softness of the agricultural market. Low natural gas prices reduced the demand for mining and refinery equipment in the Americas. The region continued to benefit from the strong backlog from the first half of the year and full recovery of product shipments to one of the major customers that were delayed from June to July 2012.
The Segment continued to expand its presence in China and India. The factory in China with increased production capabilities started additional assembly and shipments to customers at the beginning of September 2012.
Segment Vacuum
| Q3 2012 | Q3 2011 | ∆ | 9M 2012 | 9M 2011 | ∆ | |
|---|---|---|---|---|---|---|
| Order intake | 93 | 85 | 9 % | 288 | 304 | −5 % |
| Order backlog | 74 | 75 | −1 % | 74 | 75 | −1 % |
| Sales (to third parties) | 92 | 101 | −9 % | 283 | 310 | −9 % |
| EBIT | 8 | 16 | −50 % | 32 | 49 | −35 % |
| EBIT margin | 8.3 % | 15.2 % | 11.2 % | 15.4 % |
The Vacuum Segment reported an increase in order intake of 9 %. Order backlog remained at the previous year’s level. However, the Segment again received postponements of projects and orders due to an overall softening market environment, especially in the industrial sectors. Sales slowed by 9 % compared to the strong third quarter in 2011 following the recovery from the financial crisis. As a consequence of the market environment, investments in logistics and regional expansion, as well as a delay of cost structure improvement measures, EBIT margin declined to 8.3 % from 15.2 % a year ago. The new Vacuum Segment CEO, Dr. Martin Füllenbach, started on October 15.
Segment Coating
| Q3 2012 | Q3 2011 | ∆ | 9M 2012 | 9M 2011 | ∆ | |
|---|---|---|---|---|---|---|
| Order intake | 126 | 120 | +5 % | 379 | 363 | +4 % |
| Order backlog | – | – | – | – | – | – |
| Sales (to third parties) | 126 | 120 | +5 % | 379 | 363 | +4 % |
| EBIT | 25 | 25 | 0 % | 79 | 74 | +7 % |
| EBIT margin | 20.0 % | 20.8 % | 20.7 % | 20.3 % |
Sales rose by 5 % in the third quarter due to solid growth in the tools markets in Japan, Germany and the United States. Automotive markets showed slowing demand affecting the components business but the markets for tools remained stable.
With an EBIT margin of 20.0 %, the Segment continued to deliver a high level of profitability. The focus on Operational Excellence and stronger sales have been the main drivers for this development. These results maintain the Coating Segment at Best-in-Class level.
The Segment, which currently operates 88 coating centers worldwide, continues to increase capacity in Germany, France, Thailand and the United States for the components business, and for tool coating in Turkey. With the new site in Malaysia, the expansion of the global footprint in new geographical markets is on-going.
Segment Advanced Technologies
| Q3 2012 | Q3 2011 | ∆ | 9M 2012 | 9M 2011 | ∆ | |
|---|---|---|---|---|---|---|
| Order intake | 28 | 20 | +40 % | 88 | 70 | +26 % |
| Order backlog | 33 | 22 | +50 % | 33 | 22 | +50 % |
| Sales (to third parties) | 20 | 23 | −13 % | 62 | 77 | −19 % |
| EBIT | −1 | 1 | n/a | −3 | 7 | n/a |
| EBIT margin | n/a | 4.2 % | n/a | 9.0 % |
Order intake (+40 %) and order backlog (+50 %) for the Advanced Technologies Segment increased significantly in the third quarter of 2012. Sales, however, were 13 % lower compared to Q3 2011 – the strongest quarter of last year. As overall demand in the semiconductor industry slows, customers have reported lower tool utilization in all market segments. Additionally some projects have been delayed. The Segment reported profitability (EBIT) close to break-even.
Solaris, the nanotechnology solution for clean energy, has received the technical qualification for special coatings of touch sensors and the first unit has been sold to Asia for the development of electronic displays. The first Hexagon, an advanced semiconductor packaging solution for high volume production, also qualified with a major customer for end-user products this quarter.
About Oerlikon:
Oerlikon (SIX: OERL) is a leading high-tech industrial group specializing in machine and plant engineering. The Company is a provider of innovative industrial solutions and cutting-edge technologies for textile manufacturing, drive, vacuum, thin film, coating, and advanced nanotechnology. A Swiss company with a tradition going back over 100 years, Oerlikon is a global player with more than 17 000 employees at over 150 locations in 38 countries and sales of CHF 4.2 billion in 2011. The Company invested in 2011 CHF 213 million in R&D, with over 1 200 specialists working on future products and services. In most areas, the operative businesses rank either first or second in their respective global markets.
Additional information
Oerlikon will present its results in German during its media conference call today starting at 10:00 a.m. CET. To participate, please dial the following numbers a few minutes before the start:
Switzerland +41 43 547 8001
Germany +49 69 2222 34066
UK +44 20 3450 9571
USA +1 646 254 3369
Confirmation Code: 1498293
The accompanying presentation can be viewed in parallel by opening the following link http://webmeeting.adobeconnect.com/e1498293. Please sign in as a guest.
During its analysts’ conference call beginning at 2:00 p.m. CET Oerlikon will present its results in English. To participate, please dial the following numbers a few minutes before the start:
Switzerland +41 43 547 8001
Germany +49 69 2999 3285
UK +44 20 7660 0009
USA +1 646 254 3374
Confirmation Code: 3742468
The accompanying presentation can be viewed in parallel by opening the following link http://webmeeting.adobeconnect.com/e3742468. Please sign in as a guest.
Please find the media release including a full set of tables at www.oerlikon.com/pressreleases and www.oerlikon.com/ir
Disclaimer:
OC Oerlikon Corporation AG, Pfäffikon (together with its affiliates hereinafter referred to as “Oerlikon”) has made great efforts to include accurate and up-to-date information in this document. However, Oerlikon makes no representation or warranties, expressed or implied, as to the truth, accuracy or completeness of the information provided in this document and Oerlikon disclaims any liability whatsoever for the use of it.
This document (including all statements made therein) is based on estimates, assumptions and other information currently available to the management of Oerlikon. This document contains certain statements related to the future business and financial performance or future events involving Oerlikon that may constitute forward-looking statements. The forward-looking statements contained herein could be substantially impacted by risks, influences and other factors (many of which are not foreseeable at present and/or are beyond Oerlikon`s control), so that actual results, including Oerlikon`s financial results and results of operation, may vary materially from and be worse than those (expressly or implicitly) anticipated, expected or projected in the forward-looking statements. There can be no assurance and no representation or warranty, express or implied, is given that such forward-looking statements will be realized. Oerlikon is under no obligation to (and expressly disclaims any obligation to) update or otherwise review its forward-looking statements, whether as a result of new information, future events, or otherwise.
This document, including any and all information contained therein, is not intended as, and may not be construed as, an offer or solicitation by Oerlikon for the purchase or disposal, trading or any transaction in any Oerlikon securities. Investors must not rely on this information for investment decisions and are solely responsible for forming their own investment decisions.
