The Rupp Report: Oerlikon Recovering

The Oerlikon Group delivered good results in 2013, despite a challenging environment in major end-markets. Order intake grew by 3.2 percent; sales remained at prior year level (- 0.8 percent). An EBIT [earnings before interest and taxes] margin of 12.7 percent confirmed Oerlikon’s profitability level … . Oerlikon’s Man-made fibers and coating segments delivered record margins and continued to operate on Best-in-Class levels. Strong operational performance and the proceeds from the divestments improved net liquidity to CHF [Swiss francs] 981 million (2012: CHF 339 million) and equity ratio to 51 percent. Oerlikon CEO Dr. Brice Koch said: ‘Based on strong performance in 2013, we can now accelerate profitable growth, both organically and inorganically, in line with a disciplined execution of our strategic agenda. The recent signing of the acquisition of Sulzer Metco is a first key milestone in this direction.’”
 
Order intake grew by 3.2 percent to CHF 2,893 million compared to CHF 2,802 million in 2012, with all Segments, except the Advanced Technologies Segment, reporting higher orders. As expected, Group sales of CHF 2,883 million were at prior year’s level (-0.8 percent, CHF 2,906 million). Sales increased in all Segments except the Drive Systems Segment. The regional sales split remained largely unchanged with Asia accounting for 44 percent of the Group’s total sales, Europe for 34 percent and North America for 17 percent (others: 5 percent).
 
EBITDA [earnings before interest, taxes, depreciation and amortization] amounted to CHF 492 million compared to CHF 508 million on a like-for-like basis a year ago (2012 reported: CHF 547 million), resulting in an EBITDA margin of 17.1 percent. EBIT amounted to CHF 366 million compared to CHF 382 million on a like-for-like basis a year ago (2012 reported: CHF 421 million). [The EBIT margin is 12.7 percent.]
 
The result from continuing operations grew by 18.8 percent to CHF 259 million compared to CHF 218 million a year ago. Including various non-cash, accounting effects from the divestments in 2013, and net income was CHF 201 million (FY 2012: CHF 380 million).

On July 4, 2013, Oerlikon announced the completion of the divestment of the Natural Fibers and Textile Components Business Units. This concluded the strategic transformation of the business activities in focusing on comprehensive solutions and services for the production of chemical filament yarns, carpet yarns, synthetic staple fibers and nonwovens.

With the exit from the natural fibers businesses, Oerlikon’s Manmade Fibers Segment had to manage the complex carve-out process divesting two Business Units (Natural Fibers/Textile Components) with sales of around CHF 1.0 billion (2012) and some 3,800 employees. At the same time, the remaining Manmade Fibers Segment structure required an alignment to the new Segment size, ensuring the fulfillment of the service agreements with the Jinsheng Group of China [which acquired the two divested businesses].

The Manmade Fibers Segment further increased its operational performance to a historical high. Sales in 2013 increased by 2.4 percent to CHF 1,130 million compared to CHF 1,103 million a year ago. The market for manmade fiber equipment and plant engineering posted ongoing strong demand, supported by underlying long-term growth drivers and fueled by continued Innovation from Oerlikon Barmag and Oerlikon Neumag.

The successful execution of operational excellence initiatives resulting in the increased efficiency of the existing production setup and a favorable product mix with strong demand for carpet yarn (BCF: bulked continuous filament) equipment were the reasons behind the profitability performance. The strong underlying performance of the Manmade Fibers Segment more than compensated for some of the negative synergies related to the divestment of the Natural Fibers and Textile Components Business Units.

Investments in research and development (R&D) continued to be strong, increasing by 15.1 percent from CHF 106 million to CHF 122 million. With this Oerlikon invests 4 percent of its revenues in products and services of the future.

As at the reporting date [Feb. 25, 2014], the Group had equity (attributable to shareholders of the parent) of CHF 2072 million, increasing the equity ratio to 51 percent compared with 45 percent at the end of 2012. Net liquidity grew to CHF 981 million (2012: CHF 339 million).

Asia and predominantly China remained the Segment’s primary market. Asia represented 74 percent of Segment sales and reported growth of 1 percent. Due to high demand for BCF equipment, sales in North America posted the strongest growth for the year (+129 percent), accounting for 10 percent of total Segment sales. Sales in Europe represented 12 percent after an increase of 2 percent in 2013. Other regions accounted for the remaining 4 percent of the Segment sales.