Annual Results 2010: Conzzeta: marked improvement in revenues and profits

In 2010, there was a marked recovery in demand for capital goods and industrial products, bringing a tangible improvement in the economic environment of the Group. This enabled the Conzzeta Group to increase consolidated net revenues to CHF 1 051.9 million, a rise of 10.1% over the previous year (previous year: CHF 955.2 million). After adjustment for negative currency translation effects of 3.6% and divestment effects of 1%, the growth amounted to 14.7%.

All the industrial business units generated increased sales. The strongest sales growth was recorded in the machinery and systems engineering businesses, which were hardest hit by the slump in demand the previous year due to the economic crisis. Developments in the different market regions were variable. In Europe and in North America, the recovery was mostly slow and varied from region to region. By contrast, Asia and other growth markets saw an early return to high growth dynamics. With sales growth of 53.9% to CHF 242.1 million, the Asia and Pacific market region increased in importance for the Group. The region’s share in overall Group revenues grew to 23% (previous year: 16.5%).

The Group’s economic environment was affected by changes in the exchange rate situation. The parity of the Swiss franc against the weak euro and US dollar had a particular impact on companies exporting from a Swiss base, with a negative overall impact on consolidated revenues and the Group result.

The combined effect of volume growth and the previous year’s measures to reduce the cost level enabled the Conzzeta Group to make a clear return to operating profit. The operating result (EBIT) improved by CHF 58.3 million to CHF 56.9 million (previous year: CHF –1.4 million). This equates to an operating margin of 5.3%.

The Group result of CHF 51.5 million (previous year: CHF 3.3 million) contains an extraordinary profit from the sale business activities and properties. The cash flow from operating and investment activities (free cash flow) was CHF 17.6 million (CHF 141.8 million). Cash, cash equivalents and securities held by the Group increased by CHF 54.9 million to CHF 510.9 million (previous year: CHF 456.0 million).

The Group is solidly financed, with an equity ratio of 76.3% (previous year: 78.0%). In view of the improved economic situation, the Board of Directors is proposing to the Annual General Meeting of Shareholders, to be held on April 28, 2011, that the dividend be increased by one third to CHF 40.00 (previous year: CHF 30.00) per bearer share and CHF 8.00 (previous year: CHF 6.00) per registered share.

Business units
The Sheet Metal Processing Systems business unit (Bystronic) increased net revenues by 15.4% to CHF 410.9 million (previous year: CHF 356.1 million). Adjusted for currency translation effects, the increase was 19.3%. While Asia experienced a strong growth trend early in the year, the recovery in Europe and the USA was hesitant and did not gain momentum until the second half of 2010. The gains were particularly marked in the growth markets of Asia and South America, in whose development Bystronic has invested in recent years and which generate an increasing portion of the business unit’s sales. Thanks to the improved order situation, all Bystronic Group companies were able to end short-time working. The “Best choice.” campaign, running in more than 40 countries in 2010, increased awareness of Bystronic as a supplier close to the customer who provides complete systems for cutting and bending sheet materials, strengthening both the brand and employee motivation.

The Glass Processing Systems business unit (Bystronic glass) increased sales by 15% to CHF 167.5 million (previous year: CHF 145.6 million). In local currencies, the increase was 21.1% compared with the previous year. The growth was generated largely in the Asian market, where sales increased strongly in the architectural glass segment, boosted by major orders. Demand for vehicle glass processing machinery from the automotive industry also recovered. But there was little growth impetus from the European and American markets, where business was partly affected by the adverse exchange rate situation. In Europe, demand began to pick up towards the end of the year. On the whole, competitive pressure in the market is still at a high level. The business unit tightened costs and invested in product development, also in 2010.

The Automation Systems business unit (ixmation) closed the reporting year with sales of CHF 56.4 million (previous year: CHF 56.1 million). When currency translation effects and the divestment of production automation activities in the previous year are taken into account, this equates to sales growth of 13.9%. In the first half of 2010, customers, particularly in the automotive sector and the USA, were hesitant about investing, but the situation improved in the second half. In the USA, orders were received above all in the medical technology and alternative energy segments. Capacity was well utilized at the plant in Malaysia, where a new production and office building was inaugurated in September 2010. The plant in China carried out a number of orders for the automotive industry. ixmation's international presence enabled it to execute an increasing number of repeat orders for globally active companies.

The Foam Materials business unit (FoamPartner) increased sales to CHF 127.9 million in 2010, an increase of 9.5% compared with the previous year (CHF 116.8 million). Adjusted for negative currency translation effects, the business unit posted a 13.8% increase compared with the previous year. Technical foams (industry, packaging and automotive) generated marked sales growth, although the performance in the first half year was better than in the second. In Europe, the German market recovered well. There was also clear volume growth in China and the USA, where the customer base was expanded in the reporting year. The comfort product segment (mattress and pillow cores) closed 2010 at the same level as the previous year. The strength of the Swiss franc hindered exports from Switzerland and intensified the competitive struggle in the Swiss market, particularly in the case of simpler products. On the procurement front, FoamPartner had to absorb a price rise on key raw materials for foam production, resulting from increased demand on the one hand and higher crude oil prices on the other.

The Sporting Goods business unit (Mammut Sports Group) increased sales in the reporting year by 2.8% to CHF 221.2 million (previous year: CHF 215.3 million). After adjustments to account for the sale of the Toko ski wax and care products business to the Norwegian Swix Sport AS with effect from September 1, 2010, as well as the effects of currency translation, the growth in sales equated to 6.7%. The Mammut Sports Group, now focused on the Mammut brand, was able to hold its own in the growing outdoor market. The company recorded particularly strong gains in the Japanese and Korean markets, as well as in Germany and Italy. Sales in the home market of Switzerland, where Mammut has a very high market share, could not be maintained at the previous year’s level. The footwear product group, the new backpack collection, climbing harnesses and the clothing lines all developed well. The presentation of the new Eiger Extreme collection, which goes on sale in autumn 2011, was well received by the retail trade.

The Graphic Coatings business unit (Schmid Rhyner) increased net revenues in the reporting year by 7.9% to CHF 46.6 million (previous year: CH 43.2 million). Schmid Rhyner returned to growth in almost all its key markets, with just a few remaining at the previous year’s level. The business unit recorded above-average gains in Asia and South America. There was also healthy growth in North America. The shortage of primary materials for varnish manufacture and resulting rises in material prices represented a considerable challenge for Schmid Rhyner. Despite these developments, the business unit was able to maintain security of supply and deliver on time throughout 2010.

The Real Estate business unit (Plazza Immobilien) generated revenue of CHF 20.9 million in 2010 (previous year: CHF 21.4 million). The decline of 2.3% was largely due to lower rental income, following the sale of two properties the previous year. Rental income remained stable in the Swiss residential property market. The development plan for a residential estate with around 200 apartments on a former industrial site belonging to Conzzeta in Wallisellen was made available for public inspection. The municipality will probably vote on the plan during 2011.

Trends and outlook
In spite of the prevailing uncertainties in the business environment, Conzzeta can look forward to 2011 with some confidence, thanks to the sustained level of demand from customers. The risks and uncertainties include the monetary imbalances and high level of indebtedness affecting various countries, as well as the political instability in key regions. The economic impact of the devastating earthquake in Japan on March 11, 2011, are still unclear. Regarding the currency situation, it is to be expected that the Swiss franc will maintain its strength against the euro and US dollar, as in 2010.

Overall, there has been a significant recovery in the Group’s market environment. This applies to industrial products as well as machinery and systems engineering, where incoming orders continued to rise over the course of the 2010 business year, creating a stronger starting position for 2011. The outdoor market and the Swiss residential property market are also expected to benefit from a favorable development in the current year.

Conzzeta aims to take advantage of growth opportunities. However, despite all the positive signs, the economic environment is still fragile and Conzzeta will continue to proceed with caution when it comes to costs and investments in expansion projects. The goal is to increase the competitiveness in international markets and strengthen the Group’s presence in emerging markets.

For further information, please contact: Carlo Menotti, Head of Corporate Services phone +41 44 468 24 84 media@conzzeta.ch