Schlatter Group in the 2015 financial year

OREANDA-NEWS. While the effects of the economic and financial crisis continue to be felt in the European core markets for wire products, capital spending projects are picking up again in the north of the EU. But the next few years are not expected to bring an actual upturn in these regions. Demand is expected to be slightly stronger in south-east Asia, some countries in Central America, and the emerging markets in general. Innovative new plant designs in the field of industrial mesh enabled Schlatter to benefit from the improved momentum in the US economy.

In Brazil, the most important South American market, the new installations segment had come to a standstill in 2014, and as yet there are no signs of recovery. In Russia the fall of the rouble and the politically unstable environment made companies very reluctant to undertake capital investment. In the past China played a subordinate role in the wire product area, but despite slackening economic growth, the continuing development of the construction industry in this market may well open up new opportunities in the next few years. In the short to medium term, however, China has greater growth potential in the field of installations for the production of industrial mesh. In 2016 Schlatter will selectively invest additional funds and resources in developing mesh production in markets where we have previously had only a low-key presence.

While the market for mobile rail welding systems proved quiescent, markets in related areas – swivel plate welding machines in particular – strengthened in the first half of 2015. The Schlatter Group still rates the overall rail welding market as satisfactory, and new sales opportunities continue to present themselves in the emerging markets.

The fall in demand in the weaving market in 2015 was much sharper than expected. The market is on a volatile, declining trend as paper mills continue their consolidation process. Capital investment is generally restricted to retrofitting work and the replacement of old equipment. The Schlatter Group is therefore not expecting a fundamental recovery to take place in 2016.

Business in the spare parts and services field posted stable performance, contributing around 30 percent of net group earnings. With an enormous number of installations all over the world, Schlatter has great potential that we intend to exploit. We have developed a package of measures that will be implemented in 2016.

Sites and segments

The Schlieren and M?nster sites both slipped back into the red in 2015. The Schlieren site suffered particularly from the massive overvaluation of the Swiss franc against the euro and other currencies, and from the effects of the collapse in steel prices on investment activity in the reinforcing wire mesh market. The M?nster site, conversely, was hit hard by the sharp decline in the market for paper-machine clothing.

In the welding segment, order intake fell to CHF 58.4 million (2014: CHF 88.0 million), and net earnings declined to CHF 66.7 million (2014: CHF 69.8 million). In currency-adjusted terms, order intake would have been CHF 65.1 million, with net earnings of CHF 73.1 million. The welding segment posted a negative operating result (EBIT) of CHF ?4.9 million in the year under review (2014: CHF +0.1 million). The 2015 operating result includes one-time costs of CHF 2.8 million that will not be incurred again in 2016. At the Schlieren site a comprehensive package of operating measures was initiated in response to the abrupt weakness of the euro at the beginning of the year to counteract currency dislocations. These measures affect all the company's divisions.

The weaving segment generated order intake of CHF 14.5 million in the 2015 financial year (2014: CHF 16.7 million), Net earnings declined to CHF 16.5 million (2014: CHF 19.6 million). In currency-adjusted terms, order intake would have stood at CHF 17.5 million, with net earnings of CHF 18.7 million. The segment posted an operating result (EBIT) of CHF ?1.0 million in 2015 (2014: CHF +0.6 million). Restructuring provisions reduced the operating result by CHF 0.4 million in 2015. At the M?nster site a programme to cut costs and raise productivity was also launched in the second half of the year, creating the preconditions for achieving another break-even result in 2016.

The Board of Directors and management of Schlatter Industries have been conducting an in-depth study of the effects of the strong Swiss franc on the location issue, involving a detailed analysis of Switzerland's qualities as a business location. We have reached the conclusion that the Schlatter Group's employees in Switzerland are a resource in terms of knowledge and experience that gives us a significant competitive advantage, and the geographical separation of project planning, technology and assembly in plant construction would make no sense. The Schlatter Group is therefore retaining the Schlieren site in Switzerland as the location for operations in the welding segment.

Last year, furthermore, Schlatter launched a procurement programme to speed up the transfer of purchasing to the eurozone – and labour-intensive work is being placed with strategic partners in eastern Europe. Cooperation between the Schlieren and M?nster sites is being further intensified in order to make the value chain even more efficient, and the procedures for processing customer orders in Schlieren is being revised to increase productivity and reduce throughput times.

Positioning strengthened by product development

In the past year the Schlatter Group adopted a rapid innovation rhythm in product development, increasing the financial resources allocated to it by 28 percent to CHF 6.3 million. The Schlatter Group today is considerably better positioned in terms of its products and services than in the previous year. Although 2016 is not expected to bring any fundamental change in the market environment, Schlatter's market positioning and new product launches should nonetheless enable us to increase market shares.

In September 2015 Schlatter instituted an in-house trade fair on the Schlieren site to introduce our new plant concepts to existing and potential customers. Customer feedback on the event was extremely positive, and orders have already been placed.

Changes on the Board of Directors and continuity in Group Management

Peter M?ller has decided to step down from the Board of Directors of Schlatter Industries AG, effective on the date of the next Ordinary General Meeting. The Board of Directors very much regrets this, and we offer him our heartfelt thanks for his dedicated and valuable work over the last ten years.

Two new members of the Board of Directors of Schlatter Industries AG will be elected at the Ordinary General Meeting. The nominees are Nicolas Mathys, co-founder and partner of Zug Finance AG, Baar, and Michael Hauser, CEO of Tornos, another listed Swiss machine tool manufacturing company. Nicolas Mathys has been a significant Schlatter Group shareholder for many years, while Michael Hauser has many years' industrial experience in the field of mechanical and system engineering. The Board of Directors is convinced that these two personalities will provide fresh impetus for the Schlatter Group's continued long-term development.

There were no changes to the membership of Group Management in the 2015 financial year.

Outlook

The Schlatter Group initiated measures to respond to the changed market environment at an early stage. Although the exchange rate situation between the euro and the Swiss franc remains a factor, it is far more important to the Schlatter Group to be able to increase volumes in plant construction and after-sales service. We accordingly invested substantial funds in the implementation of our development and products roadmap in 2015, and this should have positive effects in 2016. Schlatter has also initiated a sales campaign in order to increase net earnings. This entails a number of measures, including the establishment of additional sales resources in the emerging markets and the opening of a sales and service facility in China. In addition a comprehensive package of measures has been devised to intensify service business. For the current financial year the Board of Directors and Group Management are again aiming to achieve a break-even result.

Annual General Meeting 2016

The Board of Directors will recommend to the General Meeting on 3 May 2016 that the company should not make a dividend payment for the 2015 financial year.

The full 2015 Annual Report can be downloaded from the Schlatter Group website: http://www.schlattergroup.com/en/investor-relations/downloads/gb2015.pdf

Key figures of the Schlatter Group

		2015	2014
Net sales	CHF million	83.2	89.5
Change compared to previous year	%	–7.0	–7.7
Operating result (EBIT)	CHF million	–5.9	0.7
in % of net sales	%	–7.1	0.8
Net result	CHF million	–6.9	–0.2
in % of net sales	%	–8.3	–0.2
Order intake	CHF million	72.9	104.7
Order backlog	CHF million	31.9	42.2
Headcount at period end	FTEs	310	313
Average headcount	FTEs	314	309
Net sales per employee	CHF 1,000	265	290
Interest-bearing liabilities	CHF million	0.6	11.3
Net financial position (debt)1	CHF million	2.1	–7.9
Gearing2	%	0.0	57.1
Free cash flow3	CHF million	–5.4	–4.6
Current assets	CHF million	39.8	38.0
Non-current assets	CHF million	9.3	11.2
Liabilities	CHF million	27.5	35.3
Equity	CHF million	21.6	13.9
Equity ratio	%	44.0	28.2
Return on equity (ROE)4	%	–38.7	–1.3
Key share figures
Share capital as of December 31	CHF 1,000	17,675	13,465
Total registered shares	Anzahl	1,104,704	426,250
of which entitled to dividend payments	Anzahl	1,104,704	426,081
Net result per registered share5	CHF	–6.22	–0.42
Equity per registered share5	CHF	19.55	32.54
Dividend per registered share	CHF	06	0
Payout ratio	%	06	0
Share price development
High	CHF	77.18	159.00
Low	CHF	28.30	108.00
Year-end	CHF	30.00	140.00
Market capitalization
High	CHF million	85.3	67.8
Low	CHF million	31.3	46.0
Year-end	CHF million	33.1	59.7

¹ Net financial position (debt): cash and cash equivalents less interest-bearing liabilities

² Gearing: net financial position divided by equity

³ Cash flow from operating activities less purchase of tangible fixed assets and intangible assets, plus sale of tangible fixed assets and intangible assets

⁴ Net result divided by average equity

⁵ Determined on the basis of dividend-entitled shares

⁶ In accordance with the proposal to the Annual General Meeting of May 3, 2016

 

Schlatter Group (www.schlattergroup.com)

The Schlatter Group is one of the leading specialists in plant engineering for resistance welding systems as well as weaving and finishing equipment for the production of paper machine clothing, wire fabrics and wire mesh. Thanks to its many years of experience in the field of plant technology, its innovative strength and its reliable service, the Schlatter Group – which is listed on the Swiss Reporting Standard of SIX Swiss Exchange – guarantees its customers a range of powerful and high-quality production equipment.

This media information contains certain forward-looking statements including statements using the words "believes", "assumes", "expects" or formulations of a similar kind. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which could lead to substantial differences between the actual future results, the financial situation, the development or performance of the Company and those either expressed or implied by such statements. Such factors include, among other things: competition from other companies, the effects and risks of new technologies, the Company's continuing capital requirements, financing costs, delays in the integration of acquisitions, changes in the operating expenses, the Company's ability to recruit and retain qualified employees, unfavorable changes in the applicable tax laws, and other factors identified in this communication. In view of these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company accepts no obligation to continue to report or update such forward-looking statements or adjust them to future events or developments.