OREANDA-NEWS. As a global technology leader with market-leading positions in surface solutions, manmade fibers and drive systems, Oerlikon enables customers in a broad range of industries, such as aviation, automotive, energy, tooling, apparels and industrial textiles, to develop state-of-the-art materials and products of the future. Oerlikon will leverage opportunities arising from global megatrends such as the increasing demand for greater productivity, energy efficiency, the minimized use of scarce resources and the creation of breakthrough applications and manufacturing solutions.

Prof. Dr. Michael Suss, Chairman of the Board of Directors of Oerlikon, commented: “The objective of the Group is to develop Oerlikon to become an undisputed leader in surface solutions and advanced materials, with improved profitability. Our long-term focus on attractive growth markets will allow us to allocate our capital in the most effective ways and optimize returns for our stakeholders.”

Dr. Brice Koch, CEO of the Oerlikon Group, added: “Our businesses address attractive markets in which we have invaluable and well-established competitive advantages in terms of technologies, expertise and customer relations. We see great potential in surface solutions, where there is a growing demand from customers for lighter materials, more durable properties and increased performance. On the other hand, we are aligning our manmade fibers and drive systems businesses to current market dynamics and making them ready for the moment the markets regain their momentum. The priorities will allow Oerlikon to continue delivering unique customer value while also enabling the Group to efficiently and quickly respond to current key economic and market developments through more streamlined and focused businesses.”

Surface Solutions Segment – creating a global surface solutions and advanced materials powerhouse

Oerlikon’s core competencies in surface solutions and advanced materials enable customers to enhance their products through new material properties. Surface coatings can be ten times thinner than a human hair, and can add a specific functionality or property to a material, or be used to change or augment existing ones – significantly enhancing the material’s performance and thereby creating substantial value for customers.

Oerlikon has over 50 years of experience in developing engineered surface properties of solids and metal-based powder products for advanced industrial applications characterized by critical material requirements. The Surface Solutions Segment offers the most comprehensive technology portfolio for surface solutions and operates a large global network consisting of some 150 sites in 36 countries, of which over 140 are coating centers. Through its brands Oerlikon Balzers and Oerlikon Metco, the company is a market leader in the service-driven physical vapor deposition (PVD) thin film business and thermal spray business. In addition, the company offers equipment technology for coatings and structural applications, as well as industrial components that are primarily used in the aviation and automotive industries. A further key strength of the Segment is its environmentally friendly technologies and solutions.

Oerlikon aims to further strengthen its leading offering in surface solutions, advanced materials, components engineering and manufacturing technologies. The company will pursue investment opportunities, using its strong balance sheet to fund organic and inorganic growth into new materials, technologies, services, industries and markets. One promising area is metal-based additive manufacturing (AM). Although at an early stage of the market cycle, it is growing fast in the areas of technology development and industrial application. Oerlikon sees great opportunities in working together with partners to develop next-generation materials designed for AM production processes, and to provide novel and superior solutions for products that require customization. The Group has already started to expand its product portfolio with innovative superalloy powders optimized for state-of-the-art applications for all laser-based and electron beam AM processes. Moreover, it has further expanded its materials engineering capacity, research and development (R&D) and R&D partnerships to support customers producing components using advanced processes.

Manmade Fibers Segment – structural adaptation to successfully manage market cycle

The Manmade Fibers Segment is a global market leader in polymer processing and plant engineering for the production of chemical fibers. The Segment holds a market share of approximately 50 % and 22 of the 25 largest manmade-fiber producers in the world, which account for more than 60 % of filament and fiber production, are customers of the Segment. Despite current market normalization, the market fundamentals for chemical fibers are attractive, supported by strong sustainable structural growth and demand. The Segment addresses a market of CHF 2.2 billion and benefits from growth in filament, technical textiles, geotextiles and carpet yarn (BCF) applications. Additional opportunities are seen in new applications such as nonwoven technologies used in the area of water and air filtration, and more energy-efficient and resource-effective production solutions such as recycling technologies. The Segment recently announced the formation of a joint venture with the Chinese company Huitong, enabling the Segment, as the only company in the world, to offer from a single source comprehensive industrial solutions, from the polymerization to the finished end products in the chemical fiber spinning or PET packaging industry.

While the Manmade Fibers Segment is well-positioned to benefit from an increasing market demand in the future, the current sharp downturn in the industry, especially in China, and the ongoing weakness in the crude oil market have resulted in a need to adapt the Segment’s structure. The Segment will manage this cycle by lowering its cost base measurably by the end of 2016. These measures and operational excellence initiatives will generate important savings from improvements in productivity, and allow for an important margin contribution in a very demanding market environment. The market is not expected to recover until 2018, when China’s five-year plan is predicted to support new investments in polymer technologies; however, the Segment aims to gain an increase in market share during that period.

Drive Systems Segment – reorganization to allow for value-creating options

A portfolio review of the Drive Systems Segment has been completed and, as a result, the Segment will focus on the key product lines of gears, shifting solutions, planetary drives, power transfer units (PTU) and differentials, as well as e-drives and hybrids. The streamlined product range serve long-term growth markets in the automotive, transportation, agriculture and construction sectors, where the Segment enjoys a strong technology and market position and close customer relations. Further measures include a stronger focus on key accounts and high-value projects, extending the range of product applications into adjacent industries with similar needs, and the introduction of a focused factory concept with defined lead factories for each global product line. The planned Segment reorganization includes the resizing of the organization, reallocation of assets, enhancements of its logistics process and focused investments in its production process. The realignment and reorganization of the Segment will unleash future value creation options for the business.

Oerlikon reinforcing its platform to create value

The priorities identified aim to strengthen the businesses where Oerlikon holds leading positions in terms of technology or market share. Moreover, the measures will support the Group’s strong profitability. The reorganization measures initiated in the Manmade Fibers and Drive Systems Segments will significantly lower these Segments’ respective breakeven sales levels. Together with the other Group-wide operational excellence and supply chain optimization measures, they are expected to deliver gross savings of up to CHF 100 million for the Group starting in 2016. However, the 2015 Group results will be impacted by one-time costs for the structural adaptation and reorganization in the range of CHF 90 to 100 million. The reorganization of the Drive Systems Segment and the given current and medium-term weakness in the Segment’s end markets will also lead to a non-cash charge related to goodwill impairment of around CHF 470 million in the current financial year. This non-cash charge has no effect on Oerlikon’s dividend policy. The Group’s full-year guidance remains unchanged excluding the one-time costs.

About Oerlikon

Oerlikon (SIX: OERL) is a leading global technology Group, focusing on providing market-leading technologies and services for surface solutions, manmade fibers manufacturing, drive systems and vacuum pumps and components in growth markets. These cutting-edge technologies benefit customers by improving their product performance, productivity, efficient use of energy and resources, and also by contributing to a more sustainable environment. A Swiss company with over 100 years of tradition, Oerlikon has a global footprint of over 15 500 employees at more than 200 locations in 36 countries and sales of CHF 3.2 billion in 2014. The company invested CHF 121 million in R&D in 2014 and has over 1 300 specialists developing innovative and customer-oriented products and services.