Surface Solutions Business Sustained Operating Profitability
“In addition, we have launched a set of initiatives to improve sales effectiveness and our customer and market proximity, and to better capitalize on market opportunities. In the coming months, we will also be progressing toward a simpler and more agile organization to accelerate decision-making and business growth,” added Dr. Fischer.
Oerlikon Group second quarter review
The macroeconomic and geopolitical atmosphere in the second quarter of 2016 remained difficult, with uncertainty heightened at the end of the quarter following the vote in the UK to leave the European Union. In this environment, Oerlikon delivered an overall fair performance in the second quarter and for the half year.
The Surface Solutions Segment continued to see a gradual improvement in momentum in some of its markets, which is reflected in positive developments in the top line and profitability both quarter-on-quarter and year-on-year. This is a notable achievement, particularly considering the current challenging market climate, where the Segment saw optimization of working capital in the materials services business and a conservative investment attitude in the U.S. energy sector. The Manmade Fibers Segment still had to contend with declining demand in the China-driven filaments equipment market in the second quarter. Positive signs in the staple fibers and nonwovens markets continued though into the second quarter. By virtue of the nature of project businesses and the positive trend outside of the filaments equipment market, it is conceivable that the Segment might see an improvement in the second half of 2016. For the Drive Systems Segment, lingering weakness was seen in all four of its key sectors – agriculture, construction, transportation and energy/mining. However, the Segment succeeded in gaining new customers and new projects with existing customers, resulting in the positive quarter-on-quarter development in sales.
As a whole, Group orders for the second quarter decreased year-on-year by 7.0 % to CHF 594 million and sales by 16.3 % to CHF 577 million. At constant exchange rates, sales stood at CHF 562 million. Following the decline in the top line, the Group’s EBITDA came in lower year-on-year at CHF 80 million, or 13.9 % of sales. EBIT for Q2 2016 stood at CHF 36 million, correlating to a margin of 6.2 % (Q2 2015: CHF 81 million, 11.7 %). The second quarter performance resulted in the rolling 12-month Oerlikon Group return on capital employed (ROCE) of 6.9 % (normalized; excluding the restructuring and impairment effects in Q4 2015) versus 10.4 % (reported) in the same period in 2015.
Oerlikon Group half-year overview
For the first half of 2016, order intake decreased by 11.3% to CHF 1 181 million, while sales reduced by 15.3% to CHF1169 million year-on-year. EBITDA came in at CHF157 million, corresponding to a margin of 13.4 %, while EBIT stood at CHF68million, that is, 5.8 % of sales. Net income amounted to CHF43 million.
In the first six months of 2016, Oerlikon’s service business contributed to 36.1 % of total Group sales.
CHF 300 million Swiss bond fully repaid
On July 13, 2016, Oerlikon redeemed its matured CHF300million Swiss bond at nominal value. The bond, issued on June 13, 2012, with a coupon rate of 4.25 %, was repaid with liquid funds and the repayment reduces annual interest expenses by nearly CHF13million. Oerlikon continues to have an unlevered balance sheet.
Strategic divestment of Oerlikon’s vacuum business
As announced on July 15, 2016, the divestment of the Vacuum Segment to Atlas Copco has received all required regulatory approvals. The divestment, based on an enterprise value of CHF 525 million, was publicly disclosed in November 2015 and planned to close at the end of August 2016.
Oerlikon transforms organizational structure and adjusts the composition of the Executive Committee
As part of its strategy to become a global powerhouse in surface solutions and advanced materials, Oerlikon is taking a next step by forming a more market-focused and agile organization. The Oerlikon Group’s headquarters and the Surface Solutions Segment will be integrated into one single organization, and the focus on surface solutions markets and industries will be sharpened. Effective immediately, Dr. Roland Fisher takes on the added role of CEO of the Surface Solutions Segment, and the business units of the Segment will report directly to him. Dr. Roland Herb has been appointed Chief Commercial Officer of the surface solutions business, effective August 1, 2016, and is responsible for accelerating growth and strategic partnership with key customers. Following the organizational change, Dr. Herb has decided to relinquish his role as CEO of the Surface Solutions Segment and as a member of the Executive Committee. The leaner and aligned organization enables Oerlikon to increase the overall speed in decision making, more effectively respond to market needs, foster innovation and form a stronger basis for further development to drive growth. The new organization is expected to be in place effective January 2017.
The developments on the global economic and geopolitical scene and the ensuing impact on markets since the beginning of the year have been challenging and are expected to remain so. However, based on the company’s performance in the first half of 2016 and the initial positive signals in surface solutions, non-filaments and drive systems businesses, Oerlikon confirms its outlook for 2016. The Group will continue to focus on safeguarding its operating profitability, and expects to deliver order intake and sales between CHF 2.3 billion and CHF 2.5 billion and an EBITDA margin in the mid-teens for the full year 2016.OC Oerlikon Corporation AG, Pf?ffikon 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. Neither Oerlikon nor any of its directors, officers, employees or advisors, nor any other person connected or otherwise associated with Oerlikon, shall have any liability whatsoever for loss howsoever arising, directly or indirectly, from any use of this document.
The contents of this document, including all statements made therein, are 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 the actual results, including Oerlikon’s financial results and operational results, may vary materially from and differ from those, expressly or implicitly, provided in the forward-looking statements, be they anticipated, expected or projected. Oerlikon does not give any assurance, representation or warranty, expressed or implied, that such forward-looking statements will be realized. Oerlikon is under no obligation to, and explicitly 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 of, 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.
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