Orell Füssli: Half-year results 1/2009: Industrial business and production delays depress results at Orell Füssli

The Atlantic Zeiser Division’s export-dominated machine manufacturing business was severely affected by the disruption to the international capital goods markets. Sales of CHF 33.6 million were 33.4% lower than in the same period of the previous year (-28.5% in local currencies). This resulted in a half-year loss (EBIT) of CHF -5.8 million. The cost- cutting action taken will already have some impact in the second half and come fully into effect in 2010. Costs have been lowered and a substantial reduction in the workforce has been avoided by the introduction of short-time working, thus maintaining the ability to respond to a later upswing. The still young digital inkjet business unit is developing well and performance is ahead of the previous year. Atlantic Zeiser expects the sales trend to stabilise and the course of business to improve in the second half, but foresees a negative outcome for the 2009 financial year.

The Orell Füssli Security Printing Division suffered a decline in sales to CHF 38.9 million (-14.5% compared with the previous year) and in operating earnings to CHF 4.5 million (-62.9% compared with the previous year). Suppliers’ technological problems delayed the completion of major banknote orders, thus postponing substantial sales and profit potential until 2010. Order books are still well stocked. Orell Füssli Security Printing expects an improvement in the second half, but the shortfalls in the first six months will not be recouped in annual results.

The Orell Füssli Book Retailing Division posted a slight increase in sales to CHF 54.9 million up to mid-year (+1.4% compared with the previous year). The newly opened branches contributed to growth, but sales were -3.9% lower after adjustment for the increase in selling space, reflecting the recessionary market environment in Switzerland. The start- up costs for the new branches are depressing margins and resulted in negative operating earnings of CHF -2.9 million. Orell Füssli Book Retailing expects to post annual results at the previous year’s level due to cost-cutting action and the traditionally stronger performance in the second half of the year.

Sales and operating earnings by the publishing segment are slightly below the previous year’s figures in terms of both half-year results and the expected annual outcome.

Outlook

Orell Füssli expects the international capital goods market to remain very weak throughout 2009 and the recessionary market environment to persist in Switzerland. The action initiated in the industrial sector and book retailing is expected to have a positive impact on results in the second half of the year. There are also signs of improved results in the second half in the security printing sector, where demand is strong. Orell Füssli expects a rising trend in sales and EBIT in the second half of 2009 and positive annual operating results, albeit substantially below the previous year’s figures.