Georg Fischer generated sales of CHF 1,837 million during the first half-year of 2013, slightly lower than in the previous year. Adjusted for currency effects, divestments and acquisitions, the figure is equivalent to last year?s first half. Market share gains as well as growth in Asia and America did compensate the further deterioration of demand in Europe.
The operating result (EBIT) reached CHF 118 million, 3 % above the previous year, despite the low utilisation of several European plants as well as the provisions taken for cost reduction measures. The return on sales (ROS) stood at 6.4 % and the return on invested capital (ROIC) at 14.5 % compared to 6.2 % and 14.8 % respectively during the first semester of 2012. All three divisions reached a double-digit ROIC, well above their cost of capital.
Net profit slightly increased to CHF 83 million against CHF 81 million. Free cash flow before acquisitions reached CHF 7 million, a clear improvement of CHF 68 million over the previous year?s first half. For the secondhalf-year of 2013, a substantially positive free cash flow is expected.
Headcount went down from 13,800 to 13,400 whereby a decrease of 700 employees in Europe has been partially compensated by an increase of the workforce in the growing markets of Asia and the US. The net foreign currency exposure has been steadily decreased and accounts for circa 5 % of the global turnover, but is now limited to the USD.
Footprint adaptation in line with strategy
Georg Fischer is acquiring Hakan Plastik, a leading piping systems company in Turkey with a turnover exceeding CHF 100 million. The acquisition gives GF Piping Systems a much stronger presence in the promising growth area of the Middle East and Eastern Europe and brings a large array of complement-ary products to be sold in the whole region. Closing has happened on July 16, 2013.
The cost structure in Europe is being adapted to demand, specially at GF Automotive. As announced at the beginning of the year, a cost reduction plan of CHF 25 million is being implemented. All measures have been taken and provisions thereof booked in the first half-year. Their full effect will be visible in the second half-year and in 2014.
GF Piping Systems increased sales to CHF 665 million, 3 % above the first semester of 2012. An unusually long winter dampened construction and investment across Europe and parts of the US specially until April. However GF Piping Systems was able to make up for it thereafter and benefited moreover from the May 2012 acquisition of IPP, Dallas (USA).
Sales in Asia and America went up again significantly and together accounted for almost 55 % of the turnover during the first semester against 50 % last year. The water treatment demand is steadily growing. Semiconductor applications picked up again and the key building technology markets of GF Piping Systems continued to perform well.
The operating result reached CHF 67 million, at the same level of last year despite a low utilisation at several European plants.
The GF Automotive sales figures went down, primarily as the result of the divestment in November 2012 of two aluminium sand-casting operations. The division had to contend with challenging market conditions in Europe. Both car and truck production decreased again by 10 % during the first semester.
The division has however almost maintained its level of sales, excluding divestments. High growth in China but also market share gains in Europe were certainly key ingredients thereof. These gains stem from the expertise of GF Automotive in designing lighter components and its strong position with successful car and truck manufacturers.
The operating result stood at CHF 35 million, basically at the level of the previous year despite provisions made for cost reduction measures in Europe. In the truck market, a slight upswing is expected in the months to come as EURO 6 norms come into force as of the beginning of 2014. For passenger cars, the present low level of production is probably here to stay for the foreseeable future. Looking forward, major orders have been booked in the first half-year at car and truck manufactures in Europe, thanks to the competitive weight-reduction offering of GF Automotive. They will help increase plant load in the months and years to come.
In China, demand is steadily going up and the division also secured large orders. It is therefore adding capacity to its two plants with the objective of increasing its turnover in the country by 50 % in the next three years.
GF AgieCharmilles has increased its order intake by 5 % during the first half-year in a stagnating market environment. This is mainly thanks to high growth in Asia and America where major contracts have been booked in the smart phone and aeronautics markets. Sales in local currencies also went up by 5 % to CHF 420 million. The operational profit increased by circa 30 % to CHF 22 million. The backlog grew significantly, securing a good plant load for the months ahead.
Several novelties will be shown at the EMO 2013 in Hannover which specifically address the needs of our customers in the less cyclical market segments we concentrate on, such as medical, aeronautics sectors as well as information and communication technology.
Switch from IFRS to Swiss GAAP FER
Georg Fischer has changed its accounting standard from IFRS to Swiss GAAP FER as from fiscal year 2013 on. The previous year?s figures have all been adapted in order to ensure a correct comparison with 2013.
As a consequence of the change, results in the income statement have slightly improved, primarily because acquisition related charges are omitted according to Swiss GAAP FER. In the balance sheet, the biggest change concerns goodwill which has been offset with equity. This leads together with other effects to a reduction of total assets and equity at the amount of CHF 262 million. The equity stands nevertheless at a solid 36 %.
Outlook: Confident for the second half-year of 2013
Market conditions are certainly still volatile making predictions challenging to formulate. Nevertheless, barring unforeseen circumstances and despite a traditionally weaker second half-year, we expect to reach during the second semester of 2013 similar figures as in the first.
The backlog of GF AgieCharmilles is high, customers of GF Piping Systems are now implementing projects which were delayed by poor weather conditions and the growth at GF Automotive in China and in the truck business has a good chance to at least partly compensate the shortfall in the European passenger car sector.
Furthermore, the acquisition of Hakan Plastik in Turkey will bring additional turnover and profit during the second half-year. In addition, the results ofcost reduction measures across the corporation will start to show.
For the mid-term, Georg Fischer will keep course regarding the implementation of its strategy, in particular by continuing to adapt its global footprint and portfolio. The 2015 objectives of a 15 % ROIC and an 8 to 9 % ROS remain valid.
