Zehnder Group: Sales and operating result substantially higher

Strong sales growth
In the reporting period Group-wide sales totalled EUR 242.8 million, a marked increase of 11.6 % compared to the first half of 2010 (EUR 217.5 million). Acquisition, divestment and exchange-rate adjusted, sales rose by 12.0 %. In Europe, sales revenues for the radiator segment were up 7 % (exchange-rate adjusted it was 6 %), whereas the ventilation segment achieved an extremely satisfactory increase of 20 % (divestment and exchange-rate adjusted it was 23 %).

Sales outside Europe were equally pleasing. In North America sales were up 11 % (exchange-rate adjusted 18 %) and in China even 33 % (acquisition and exchange-rate adjusted it was 18 %).

In Zehnder Group’s largest markets, France, Germany and Switzerland, sales revenues in the reporting period again surpassed those of the previous year. After setbacks in 2010, both the UK and Ireland reported renewed sales growth. Thanks to substantial expansion of the ventilation segment in Italy, sales improved slightly. After a steep decline in the Netherlands in the previous year, some growth was reported for the period under review. Above average sales growth was reached in Poland and Russia, the Group’s two key markets in Eastern Europe. The market environment in Spain continued to be extremely challenging: despite increased market share, absolute sales figures declined.

The ventilation segment’s share of total sales rose further to 34 % (31 % in the first six months of 2010) and thus, for the first time, it accounted for more than one third of Group- wide sales.

Operating result improved noticeably
The operating result (EBIT) for the first six months of 2011 reached EUR 22.1 million, 15.6 % higher than in the previous year (EUR 19.1 million). This resulted in an EBIT margin of 9.1 % compared to 8.8 % in 2010. As Zehnder Group reports in euros, production and structural costs in Switzerland which are recognized in Swiss francs impacted negatively on the operating margin. In most markets, it was possible to offset the higher cost of raw materials through price increases.

Marketing and sales activities were stepped up, which impacted adversely on the other operating expenses. In particular, the ventilation segment’s sales organization was expanded further. Moreover, the harmonization of the Group’s business model in Europe, which included the introduction of SAP, led to higher expenses in the short term. In the medium term, however, these strategic measures will not only strengthen profitability noticeably but also sustainably.

Negative financial result
The financial result of minus EUR 2.2 million (plus EUR 1.6 million in the previous year) is primarily attributable to non-realized foreign exchange losses on liquid assets and loans to subsidiaries. Thus, despite the clearly improved operating result, consolidated net income fell slightly to EUR 15.1 million (EUR 16.4 million in the previous year), which is still a very acceptable 6.2 % of sales.

Higher investments – continuing healthy financial situation
Investments in innovation and development were strengthened further in both the radiator and the ventilation segments. In the first six months of 2011 Zehnder Group invested some EUR 11 million in fixed assets (EUR 10 million in the first half of 2010). As in the previous year, the focus was primarily on continued optimization and expansion of production facilities.

The lower cash flow from operating activities totalling EUR 4.3 million (EUR 20.7 million in the first six months of 2010) can primarily be put down to temporarily higher inventories of raw materials. Net liquidity fell from EUR 42.9 million to EUR 31.1 million.

Zehnder Group’s financial situation continues to be extremely robust. At the end of June 2011, consolidated equity including minority interests amounted to EUR 226.4 million (at the end of December 2010 it totalled EUR 217.4 million). The equity ratio of 58 % remained at the same high level as at the end of 2010. The approved nominal value repayment undertaken in August 2011 will impact on liquid assets as well as on equity.

More employees
At the end of June 2011 Zehnder Group had 3,234 employees or 10 % more than at the end of 2010. The increase is primarily attributable to temporary personnel, in order to cope with the Group’s seasonal higher capacity demand. However, it also reflects the expansion of the sales organization for the ventilation segment.

Forecast for entire year still optimistic
In the past and for seasonal reasons, Zehnder Group’s sales were always higher in the second half of the year than in the first six months. However, given the many uncertainties in the global economy, this pattern may no longer apply. It is difficult to make a reliable forecast in such a challenging environment – first of all because of the short-term high volatility of foreign exchange developments and the national debt crises in both Europe and the United States, but also because of the short-term nature of Zehnder Group’s business operations.

In view of the Group’s strategic focus and the measures implemented with regard to its business operations, Group executive committee looks to the second half of the year with confidence. Additionally, the steep rise in the cost of materials seems to have slowed down somewhat. Group executive committee still anticipates some sales growth for the radiator segment and a strong increase in the ventilation segment. For the entire year it expects sales in excess of EUR 500 million and a double-digit EBIT margin at the prior year’s level.

Contact
Zehnder Group AG Moortalstrasse 1 5722 Gränichen Tel. 062 855 15 00 Fax 062 855 15 15 info@zehndergroup.com