SFS achieved a significant improvement in the second half of the year

News – 5 March 2021

The year 2020 posed major challenges to the SFS Group: it was marked by the COVID-19 pandemic and the measures taken to contain the outbreak. The tremendous commitment and flexibility of its employees helped SFS to overcome these challenges. After a steep decline in demand in the first half of the year, a significant recovery took place in several end markets and regions from the summer months. Full year sales amounted to CHF 1,704.9 million, a slight decline of 4.3% from the previous year. SFS achieved an EBIT margin of 13.3%, unchanged from the prior-year level. Net income amounted to CHF 184.8 million.

The COVID-19 pandemic posed considerable challenges to the SFS Group and its employees. In contrast to previous economic crises, the focus in the past financial year additionally was on protecting the health of employees and their environment. The Group had to cope with extreme fluctuations in demand and reduce its cost base, but also maintain flexibility and supply capability. This demand-side volatility is evident in a comparison of results for the first and second half of 2020: in the second half, consolidated sales rose by 20.4% compared with the first half of the year. This development was supported by the company's well-balanced market and regional presence, the diversified sales channels and the clear focus on customer needs and innovation trends. SFS successfully defended its competitive position and remains well positioned amid the pandemic.

Despite an organic decline of –10.4% in sales in the first half of the year compared with the same period of the previous year, SFS was able to narrow the year-on-year decline in organic sales for 2020 as a whole to –3.2%. Consolidation effects contributed 3.0% to full-year sales, while currency translation effects had a negative effect of –4.1%. Gross sales for the financial year 2020 amounted to CHF 1,704.9 million.

Significantly higher profitability in the second half of the year
Thanks to the sustained recovery in demand and positive seasonal effects in the second half of the year, production capacity utilization improved significantly. Higher capacity utilization, strict cost management and positive mix effects lifted the operating profit margin for the second half of the year to 16.8% of net sales. November and December were particularly strong months. Full-year operating profit (EBIT) amounted to CHF 227.4 million, which corresponds to an unchanged EBIT margin of 13.3% compared with the previous year. Net income fell to CHF 184.8 million (previous year: CHF 206.5 million), which also reflects the absence of the positive one-off tax effects from the prior-year period.

Strategy tested by COVID-19 pandemic
The COVID-19 pandemic put the effectiveness of SFS's business strategy to the test. The strategic alignment has proven to be robust and correct:

• For SFS, close customer relationships are essential for the successful realization of its value proposition. In keeping with the ‘local for local’ strategy, the company is steadily building up its global development and production platform. SFS and its customers benefit from superior supply reliability thanks to short and robust supply chains.
• Thanks to its balanced focus on different end markets, regions and sales channels, SFS successfully cushioned the consequences of the decline in demand.
• With its increased focus on the medical device industry – a market that is growing worldwide – SFS is attractively positioned for the future.
• Thanks to its good profitability and solid balance sheet, the company has the means and the ability to pursue its long-term strategy and to make the associated investments even in such a crisis.

Investments in future growth continued
A large part of the investments went into expanding the production infrastructure of the Automotive and Medical divisions in order to realize growth projects. At CHF 104.1 million, the investment volume remained at a similar level as in the previous year (CHF 116.7 million).

Engineered Components segment – a challenging year
Business at the Engineered Component segment was clearly impacted by the COVID-19 pandemic. Segment sales increased sharply by 36.3% in the second half of the year compared with the first half of the year. Full-year sales amounted to CHF 898.3 million, which corresponds to a decline of –6.1% compared with the previous year. Negative currency effects of –4.7% were partially offset by positive consolidation effects of 2.6%. Due to the steady improvement in capacity utilization as of summer, the operating profit margin increased to 20.2%. This resulted in an EBIT margin of 15.5% for the year as a whole (previous year: 17.0%, adjusted).

Fastening Systems segment – performance improved
Sales in the Fastening System segment for the period under review amounted to CHF 489.7 million, corresponding to a decline of –1.7% compared with 2019. Positive consolidation effects arising from the acquisition of Triangle Fasteners Corporation Inc. in the spring of 2019 and MBE Moderne Befestigungselemente GmbH at the start of 2020 contributed 6.0% to reported sales. Negative currency effects lowered reported sales by –5.3%. During the second half of the year, the segment benefited from improved capacity utilization, continued strict cost management and the considerable efforts made in previous years to improve efficiency. Thanks to the positive momentum and the newly acquired companies, an adjusted EBIT margin of 11.5% (previous year: 9.2%) was achieved for the full year 2020.

Distributions & Logistics segment – stable development
The Distribution & Logistics segment's well-balanced sales channel mix and product portfolio helped to limit the negative impact of the pandemic on its business operations. The segment generated sales of CHF 316.9 million for the full year, representing a decline of –2.8% compared with the prior year. Currency translation had a negative effect of –0.6%.Overall stable demand, swift action taken to temporarily adjust capacity, the good results from the e-shop and strict cost management had a positive impact on profitability. EBIT for the year under review showed an increase of 9.4% to CHF 28.7 million compared to the previous year period.

Change in the CFO position
In the interests of early and diligent planning, the Board of Directors of the SFS Group appointed Volker Dostmann at the end of April 2020 to succeed Rolf Frei as CFO. Volker Dostmann joined the Group Executive Board on 1 November 2020 and will assume the function of CFO at the Annual General Meeting on 22 April 2021.

The Board of Directors and Group Executive Board thank Rolf Frei for his many years of successful service and his steadfast loyalty to the company. Over the years, he has played an important role in the successful development of SFS Group through his vast expertise, his tireless efforts, his consistent focus on customer needs and his personal touch.

Proposal to elect Manuela Suter to the Board of Directors
At the Annual General Meeting 2021, the Board of Directors of SFS Group will propose the election of Manuela Suter, currently CFO of Bucher Industries and a member of its Executive Board, for election to the Board of Directors. With her many years of experience in multi-divisional, international and listed industrial companies, the Board of Directors is confident she will be a valuable addition to the Board.

Payout to shareholders
In view of the robust earnings, the very solid balance sheet and the cautiously optimistic outlook for future business activity, the Board of Directors will propose an unchanged dividend of CHF 1.80 per share to the Annual General Meeting. Last year’s dividend was reduced by 10% compared with the payout in 2019, as a sign of solidarity with the company and its employees during the first wave of the COVID-19 pandemic.

Outlook for the financial year 2021
In the current financial year, attention will remain focused on protecting the health of the employees and managing the effects of the COVID-19 pandemic on the course of business. Investments in the selective expansion of production capacity and thus the implementation of growth projects will continue. In February 2021, for example, construction began on an additional production hall at the Heerbrugg site (Switzerland) to realize growth projects in the Automotive division. Another strategic priority is the expansion of the global production platform for medical device applications.

For the financial year 2021 SFS expects to return to organic growth and achieve an EBIT margin in the range of the previous year. This outlook is based on the assumption of an ongoing recovery of the global economy and no further global waves of COVID-19 infections leading to a deterioration of the economic conditions.

Link to the Annual Report 2020