OREANDA-NEWS. Comprehensive, rapidly implemented measures to counter the overvaluation of the Swiss Franc against the euro and other currencies have been showing the intended effect in the first half of 2016. The concerted development efforts made in past years in all product areas are having a positive impact on the Group’s market performance: Schlatter has gained market share through the launch of new products. The market environment remains volatile, but the sharp increase in orders received in the first half of 2016 will keep capacity utilization high in both Schlieren and M?nster beyond the year-end. The company continues to expect a break-even result for the 2016 financial year.

Markets

Equipment for the production of reinforcing and industrial wire mesh

The recovery of steel prices in the first half of 2016 had a positive effect on the investment activity of mesh producers. While investment projects are once again picking up in the northern EU countries, the southern European markets are still sluggish. Demand is expected to be slightly stronger in south-east Asia as well as in certain Central American countries and in the emerging markets. Brazil, the most important South American market, has seen hardly any capital investment in new plants since 2014. In Russia, the depreciation of the rouble and the politically unstable environment are keeping capital investment at a low level.

Rail welding

The market for stationary and mobile rail-welding systems was subdued in the first half of 2016. While the overall market for stationary rail welding is still regarded as satisfactory and a number of projects offer potential, companies are reluctant to invest in mobile systems.

Weaving

Following the unexpectedly sharp fall in demand in the weaving market for paper clothing machines in 2015, Schlatter secured a number of new plant projects in the first half of 2016 that had previously been postponed for long periods. In the medium term, however, business on this market will remain sluggish and volatile, as paper mills are continuing with their consolidation process. Capital investment is generally restricted to retrofitting work and the replacement of old equipment.

Welding Segment

Order intake in the welding segment in the first half of 2016 was up 74 percent to CHF 49.8 million (1st half of 2015: CHF 28.7 million). At CHF 31.2 million, net sales were close to the prior year's figure of CHF 33.2 million. The order backlog stood at CHF 43.8 million as at 30 June 2016 (31 December 2015: CHF 25.2 million). The welding segment posted an operating result (EBIT) for the reporting period of CHF 0.3 million (1st half of 2015: CHF –2.7 million).

In the Wire product area, Schlatter was able to benefit from the slight market recovery thanks to its development of new plant concepts for the production of reinforcing wire mesh. The high pace of innovation in product development was maintained in the first half of 2016, and the financial resources committed to it remained at the prior year's level.

Weaving Segment

The weaving segment generated new orders to the value of CHF 15.5 million in the first half of 2016 (1st half of 2015: CHF 9.4 million). Net sales came to CHF 8.6 million (1st half of 2015: CHF 9.0 million). As at 30 June 2016 the order backlog stood at CHF 13.8 million (31 December 2015: CHF 6.6 million). The segment reported an operating result (EBIT) of CHF 0.1 million for the period under review (1st half of 2015: CHF 0.2 million).

The investment backlog in the paper clothing machines field has been partly eliminated, and a number of new plants were sold. Schlatter expects significantly fewer new orders in the second half of 2016. The modernization of old equipment remains an important source of revenue and activity. The wire-weaving machines area, sales expectations were met.

Outlook

The successful innovation initiative of the last two years and the improved market environment are helping to boost business at the Schlatter Group. Schlatter is well positioned for the second half of the year, even though the currency situation remains challenging. Order intake was at an unusually high level in the first half of the year, but can be expected to return to normal in the second. The marketing drive, which included the establishment of additional sales resources in the emerging markets and the opening of a sales and service facility in China, is being implemented on schedule, as is the package of measures to expand the service business. Other focal points include efficiency drives to reduce throughput times in customer projects and make the organization more flexible. The Board of Directors and Group Management continue to expect a break-even result for the current financial year.