27 % increase in Group Q2 order intake year-on-year
- 37 % increase in Group Q2 sales year-on-year
- Surface Solutions Segment achieves double-digit growth
- Manmade Fibers Segment records strong growth in Q2 orders, sales and EBITDA margin
- Drive Systems Segment to be divested to Dana Inc. and reported as discontinued operations
- Group EBITDA margin improves in the second quarter
- Group net income for first half of 2018 increases by 136 % to CHF 111 million year-on-year
- Full-year guidance for 2018 continued operations raised
In the first half of 2018, the Group’s order intake increased year-on-year by 35.4 % to CHF 1 434 million, while sales came in 38.5 % higher than the prior year, reaching CHF 1 269 million. With the top-line increase, the EBITDA for the half year amounted to CHF 208 million, corresponding to a margin of 16.4 %. EBIT stood at CHF 128 million, or 10.1 % of sales. Net income for the first half of the year increased significantly by 136.2 % year-on-year to CHF 111 million. In the first six months of 2018, Oerlikon’s service business contributed to 39.0 % of total Group sales.
As of June 30, 2018, Oerlikon had equity (attributable to shareholders of the parent) of CHF 1 945 million, representing an equity ratio of 43 % (2017: 45 %). Net cash amounted to CHF 363 million (2017: CHF 499 million) and the cash flow from operating activities increased by 74.8 % for the first half of 2018 to CHF 194 million, compared to CHF 111 million in 2017.
Delivering on strategy: divestiture of Drive Systems Segment
A definite agreement has been signed for the sale of Drive Systems Segment to Dana Incorporated for an enterprise value of CHF 600 million. The transaction is expected to close in late 2018 or the first quarter of 2019, pending customary approvals and closing conditions. In the second quarter, the Drive Systems Segment delivered a notable increase in orders and sales (over 20 %) by securing new business in all its end markets, particularly considerable growth was registered in the China and India transportation market. The Segment achieved an EBITDA margin of over 12 %, marking the fifth consecutive quarter of double-digit operating profitability.
2018 outlook raised
Global economy is still expected to grow for the rest of 2018, albeit at a slower pace and with risks mounting, triggered by sentiment shifts following escalating trade tensions and geopolitical uncertainties. However, based on the strong set of results in the first half of 2018, Oerlikon is confident that it will be able to sustain growth and is thus raising its outlook for the year. For the full year 2018 continued operations, Group order intake is expected to exceed CHF 2.6 billion, sales to be around CHF 2.6 billion, and Group EBITDA margin to exceed 15.5 %, after accounting for increased operating expenses from higher investments, particularly in AM, and impacts from the divestment of the Drive Systems Segment.
Segment overview
The Segment further advanced its business and delivered another quarter of strong results. Consistent sales growth was achieved in almost all end markets, such as tooling and automotive and across all regions. In the automotive market, Oerlikon’s SUMEBore™ coating product, which improves engines’ performance while reducing emissions, scored a major win with a global leading market player. In the aerospace industry, a higher level of demand was noted, while the upward trend in general industries continued into the second quarter. Europe remained the largest market for the Segment (46 %), followed by Asia (29 %) and North America (21 %), where noticeable increase in demand was registered in the second quarter.
Considering increased operating expenses from higher investments, especially in the AM business and for technology acquisitions, the Segment managed to obtain an EBITDA margin for Q2 2018 of over 20 %, representing an improvement in operating profitability as compared to the two previous quarters (Q4 2017: 18.2 %; Q1 2018: 19.1%). EBIT for Q2 2018 stood at CHF 45 million (Q2 2017: CHF 40 million) and the EBIT margin was 11.4 % (Q2 2017: 11.6 %).
In the second quarter, the Segment strengthened its footprint for customers, with the opening of its largest coating center for tools in Europe in Bielefeld, Germany, and a new production plant in Nagoya, Japan, specifically for automotive customers. In addition, a new European shared services center for the Segment has been announced. The center will be set up in Warsaw, Poland, enabling further efficiencies in resources and improvements in productivity.
In order to further expand its AM offering in the medical market, the Segment acquired DiSanto Technology Inc. (DTI) from GE Additive. DTI, based in Shelton, Connecticut, USA, offers manufacturing and engineering services for surgical implant and instrument systems, specializing in the orthopedic and spine markets. Furthermore, the Segment expanded its partnership network and is collaborating with RUAG and Lufthansa Technik to develop AM components for aerospace and with IABG, a leading European provider of services such as technological testing, analysis and consulting, to accelerate the qualification and certification of AM components and to establish new standards for AM.
The Manmade Fibers Segment continued its success streak, significantly boosting orders and sales in the second quarter. The filament equipment market, led primarily by China, was the main contributor to the excellent top-line improvement, and was strongly supported by business wins for texturing, carpet yarn (bulked continuous filament, BCF) and polymer processing equipment and systems. In the second quarter, Segment sales doubled in China, and tripled in India and North America as compared to the same period in the previous year.
The Segment significantly improved operating profitability with an EBITDA margin for Q2 2018 of 11.8 %, while continuing to ramp up production capacities to manage the significant increase in orders. EBIT for Q2 2018 stood at CHF 26 million (Q2 2017: CHF -2 million) and the EBIT margin was 9.5 % (Q2 2017: -1.2 %).
In the second quarter, the Segment acquired AC-Automation, an engineering company based in Germany, enabling the Segment to integrate additional large-scale plant automation solutions for customers in the textile industry. The Segment also announced the divestment of its technology solutions for tape and monofilament plants to the Austrian Starlinger Group, allowing the Segment to focus on its filament, staple fibre and nonwovens businesses. For its nonwovens business, the Segment has received a new order from Germany and foresees a promising pipeline, especially in Europe and Asia.
Oerlikon engineers materials, equipment and surfaces and provides expert services to enable customers to have high-performance products and systems with extended lifespans. Drawing on its key technological competencies and strong financial foundation, the Group is sustaining mid-term growth by executing three strategic drivers: addressing attractive growth markets, securing structural growth, and expanding through targeted mergers and acquisitions. A leading global technology and engineering Group, Oerlikon operates its business in two Segments – Surface Solutions and Manmade Fibers – and has a global footprint of over 9500 employees at 171 locations in 37 countries. In 2017, Oerlikon generated CHF 2.1 billion in restated sales and invested around CHF 100 million in R&D.