SFS increased sales and net income in the financial year 2019

News – 6 March 2020

SFS Group coped well with the challenges of the financial year 2019. This was achieved thanks to strong innovation power on the one hand – true to its claim of “Inventing success together” – and thanks to its balanced target market portfolio on the other hand. Sales grew by 2.5% to CHF 1,781.4 million. The adjusted EBIT margin of 13.4% was better than projected. Full-year results were driven by a significant improvement during the second half. Consolidated net profit rose by 6.5% to CHF 206.5 million.

SFS Group’s financial year 2019 was marked by considerable challenges, such as weak demand from customers in the automotive and electronics markets. Over the course of the year this weakness spread to related market segments, while trade conflicts and political tension put an additional strain on business. Against this backdrop, we can affirm that the SFS Group coped well with the financial year 2019. That was clearly reflected in the significant improvement of its performance during the second half of the year. SFS profited from its presence across a balanced range of different markets and from its clear focus on customer needs and innovation trends. The company is well positioned and successfully defended its competitive position. This was evident in the ramp-up of major projects, in particular during the second half. Thanks to these projects, SFS returned to organic growth as expected. Sales in the second half were 3.5% above the figure of the prior-year period. Organic growth accounted for 1.1% of that growth. Organic sales growth in the first half of 2019 was still negative at –2.4%.

Consolidated third party sales for the full financial year of 2019 amounted to CHF 1,781.4 million. This corresponds to an increase of 2.5% from the previous financial year. Changes in the scope of consolidation had a positive effect of 4.4% on sales growth. Foreign currency translation had a negative effect of –1.3%. Organic sales growth for the full year was slightly negative at –0.6%.

Share of sales from Americas region significantly increased
SFS Group’s targeted markets are broadly based geographically. Sales in Asia, Europe and Switzerland were slightly lower, pressured on the one hand by negative currency effects and on the other hand by decreasing momentum. The sharp increase in sales from the Americas region is attributable to the acquisition of Triangle Fastener Corporation (TFC) and to the organic growth of successful products and services for the construction industry and, in particular, the medical device industry. Total sales in the Americas rose by 25.0% (organic 5.0%) and accounted for 21.6% of consolidated sales.

Operating profit improved in the second half
With an adjusted EBIT margin of 14.2%, SFS Group managed to significantly improve its operating performance in the second half. Compared to the first-half EBIT margin, this represented an increase of 160 basis points. Higher profitability was fueled by sales growth in the Engineered Components segment, by measures taken to strengthen the profitability and by positive seasonal effects. Adjusted operating profit amounted to CHF 239.1 million (previous year: CHF 243.1 million). The corresponding adjusted EBIT margin of 13.4% is better than the guidance given at mid-year 2019. Reported operating profit amounted to CHF 236.3 million. The difference in the adjusted figure is attributed to non-recurring effects. Consolidated net profit was positively impacted by a one-term effect of CHF 17.2 million arising from the capitalization of deferred tax assets. Group net profit of CHF 206.5 million (previous year: CHF 193.9 million) corresponds to 11.6% of Group sales.

Erfolgsrechnung FY19

Engineered Components segment – solid performance in a challenging year
Reported sales in the Engineered Components segment (EC) amounted to CHF 957.1 mil-lion (previous year: CHF 967.0 million). Taking the negative currency translation effect of –1.2% into consideration, organic sales growth was slightly positive at 0.2%. The Medical division displayed steady and dynamic growth throughout the year, whereas the other divisions experienced subdued demand. In the financial year 2019, the EC segment generated an adjusted operating profit of CHF 164.1 million, which corresponds to an adjusted EBIT margin of 17.0% (previous year: 18.2%). A sharp improvement in the second half highlighted the segment's operating performance. Its adjusted EBIT margin widened by 170 basis points during the second half compared to the first half and stood at 17.8%.

Kennzahlen EC FY19

Fastening Systems segment – market position strengthened
In the Fastening Systems segment (FS), the Construction division benefited from a stable market environment. Its position in the US market was significantly strengthened through the acquisition of TFC. The Riveting division had to contend with headwinds from the automotive industry in Germany and the UK. Segment sales amounted to CHF 498.3 million (previous year: CHF 437.1 million), which corresponds to an increase of 14.0% compared to the previous year. Changes in the scope of consolidation had a positive effect of 18.5% on the Construction division’s sales growth. Organic sales growth was slightly negative at –2.1%. Foreign currency translation had a negative impact of –2.4%. Segment operating profit amounted to CHF 47.1 million, which corresponds to an increase of 6.7% compared to the previous year. The full-year EBIT margin came in at 9.2% (previous year: 9.8%).

Kennzahlen FS FY19

Distributions & Logistics segment – profitability improved
The Distribution & Logistics (D&L) segment generated full-year sales of CHF 326.0 million (previous year: CHF 334.5 million), an organic decline of –0.8% from the previous year. Changes in scope of consolidation and foreign-currency translation had a negative effect on sales of –1.7%. The segment continued to improve its profitability despite the challenging economic environment. The D&L segment generated an adjusted operating profit (EBIT) of CHF 26.2 million, which corresponds to an EBIT margin of 7.9% (previous year: 7.6%).

Kennzahlen D&L FY19

Payout to shareholders
In view of the robust earnings, the very solid balance sheet and the guardedly optimistic outlook for future business activity, the Board of Directors will propose a dividend of CHF 2.10 per share (previous year: CHF 2.00) at the Annual General Meeting.

Outlook for the 2020 financial year
Looking ahead to the 2020 financial year, SFS expects subdued demand in key markets, such as the automotive industry. Management also expects the political and economic environment to remain volatile. Thanks to its strong market position and attractive project pipeline, SFS is guiding for a 0–2% increase in sales in local currencies and including changes in the scope of consolidation. Amid the challenging environment, SFS expects the EBIT margin for the 2020 financial year to range between 12–14%. This forecast is based on the assumption that economic conditions do not worsen significantly.

It is still too early to provide an accurate assessment of the full impact of the COVID-19 virus.

Due to a shift in SFS’s sales mix and a downturn in global economic activity, we have set a new comparable mid-term sales growth target of 3–6%. Our mid-term EBIT margin target is 13–16%.

Link to the Annual Report 2019