Thanks to extensive measures robust profitability defended
The downturn in demand beginning in the second quarter and the ensuing decline in capacity utilization rates had a material impact on profitability. Thanks to its fundamentally good margins and the early and resolute implementation of countermeasures, SFS was able to generate solid operating profits amid this extraordinary situation. EBIT amounted to CHF 71.0 million, which corresponds to an EBIT margin of 9.2% (prior-year period, adjusted: 12.6%), and the EBITDA margin came in at 15.5% (prior-year period: 17.6%). Group net income amounted to CHF 53.9 million.
SFS is in a very sound financial situation with a high equity ratio of 72.7% and has ample liquidity, which benefits its sustainable corporate development.
Investments made to realize growth projects
Capital expenditure focused on innovation projects and production capacity to implement growth projects. Capital expenditure for the first-half year amounted to CHF 56.6 million, which corresponds to 7.3% of sales (prior-year period: 6.5%). In order to continue to implement customer projects and the associated growth in the Industrial and Medical divisions, SFS is investing in significant site expansions in Switzerland and the US. This increased the investment rate by 230 basis points.
Engineered Components Segment (EC) – Divisional performance varied
The various end markets targeted by the EC segment showed clearly divergent developments. Demand in the Electronics and Medical divisions was less affected than the other divisions and both achieved positive sales growth. The Automotive and Industrial divisions were confronted with major customers’ temporary plant shutdowns and in some cases with sharply lower order inflows. Total segment sales amounted to CHF 380.1 million, which corresponds to a decline of –16.3% versus the prior-year period. Consolidation effects had a positive effect of 1.3% on sales, while the currency translation effect lowered reported sales by –4.1%. The EC segment's positioning in its target markets remains solid, as reflected in the ongoing commitment of its customers to growth projects. Against this background, the EC segment generated an EBIT of CHF 35.1 million, which corresponds to an EBIT margin of 9.1% (prior-year period, adjusted: 16.1%).
Fastening Systems Segment (FS) – Continued expansion of market reach
Investments to expand the segment's reach, namely the acquisition of Triangle Fastener Corporation, Inc (TFC) and MBE Moderne Befestigungselemente GmbH (MBE), had a positive effect on the segment’s results. The restrictions imposed on the construction industry to limit the spread of the pandemic were comparatively less drastic than on the key markets addressed by the Riveting division. Therefore, the resulting decline in demand was clearly greater in magnitude in the Riveting division, than in the Construction division. Segment sales for the first half of 2020 amounted to CHF 234.0 million, which corresponds to a decline of –5.8% versus the prior-year period. Changes in the scope of consolidation had a positive effect of 9.5% on reported sales. The currency effect was –5.3%. The EBIT margin of 9.5% was slightly higher than the 9.4% margin reported for the prior-year period.
Distribution & Logistics Segment (D&L) – Positive development in a difficult environment achieved
The D&L segment profited in the first half from its balanced positioning in terms of customer segments and product categories. Sales of construction and personal protective equipment products showed the most positive trends. The segment's multi-channel sales approach proved to be an important strategic cornerstone. Sales through its online shop was a valuable alternative to the segment's other sales channels during the lockdown period. Segment sales of CHF 159.6 million were –3.4% below the figure from the first half of 2019. Currency translation had a negative effect of 0.8% on reported sales. First-half EBIT of CHF 14.5 million and the corresponding EBIT margin of 8.9% exceeded the prior-year figures (prior-year period, adjusted: 7.9%).
Slight improvement in demand expected in the second half year
Due to the unclear further course of the COVID-19 pandemic and the still volatile political and economic environment, it is difficult to assess further business development. SFS expects slightly higher sales in the second half of the year, with an approximately comparable EBIT margin for the first half of 2020. This assessment is based on currently available information and the assumption that no second massive global wave of COVID-19 pandemic further affects economic development.
Management will continue to focus on protecting the health of employees, ensuring the company’s supply capabilities, keeping costs under control and pushing innovation projects forward.
Link to the Half-Year Report 2020