Swiss Oerlikon Group and its Manmade Fibers Segment 2015
At constant exchange rates, Group order intake increased by 1.6 % and sales came in at around prior year’s level. Currency impact on top-line was around 6 %. Including currency impacts, order intake was lower by 4.2 % (CHF 2 537million) and sales by 5.5 % (CHF 2 671million). The ratio of the service revenues to total Group sales increased to 33.6 %
In 2015, the Surface Solutions Segment generated 46 % of Group sales, the Manmade Fibers Segment 30 %, and the Drive Systems Segment 24 %. Regionally, Europe accounted for the largest proportion of Group sales, with 38.3 % (CHF 1 023 million), reflecting a 2.4 % increase compared to 2014. Asia followed with 37.7 % (CHF 1 007 million), representing a reduction of 10.7 % versus 2014, and North America contributed 19.5 % (CHF 520 million), a decline of 5.8 % compared to 2014. Sales in other regions accounted for 4.5 % (CHF 121 million).
In November 2015, Oerlikon announced that it would be focusing on attractive growth markets in surface solutions and advanced materials – businesses in which the Group has invaluable and well-established competitive advantages in terms of technologies, expertise and customer relationships. The surface solutions business will be strengthened and expanded, and Oerlikon aims to use its strong balance sheet to fund organic and inorganic growth into new materials, technologies, services, industries and markets. One promising area is metal-based additive manufacturing (AM).
The Group is also aligning the manmade fibers and drive systems businesses with current market dynamics. The Manmade Fibers Segment will build on its leading technology position, while adapting its operating model to near-term market realities. The Drive Systems Segment will focus on selected growth markets and reorganize to allow for future value-creating options. The measures initiated at the Manmade Fibers and Drive Systems Segments will significantly lower these Segments’ breakeven sales levels, and together with Group-wide operational excellence measures, gross savings of up to CHF 100 million are expected.
Despite lower sales, Oerlikon was able to achieve a strong normalized EBITDA margin of 16.9 % (CHF 450 million), excluding restructuring costs. Including the one-off restructuring impacts, EBITDA stood at CHF 338 million, correlating to an EBITDA margin of 12.7 % (2014 restated EBITDA: CHF 475 million, margin: 16.8 %). EBIT for 2015, due to the restructuring and impairment charges, was minus CHF 306 million (2014 restated1 EBIT: CHF 323 million). Excluding impairments, restructuring costs, amortization of acquired intangibles (from Metco, net of tax) and results from discontinued operations, the normalized net result was at CHF 207 million in 2015, which reflects an underlying earnings per share of CHF 0.61. Following the inclusions of all the above-mentioned charges, reported net result for 2015 was minus CHF 418 million, and earnings per share were minus CHF 1.24.
Cash flow from operating activities before changes in net current assets remained strong at CHF 393 million. Excluding the restructuring and impairment effects, the Group’s normalised return on capital employed (ROCE) amounted to 11.1 %.
The Manmade Fibers Segment was exposed to major challenges in 2015, primarily caused by the speed and extent of the economic slowdown in China, the Chinese government’s review of its 13th five-year plan (2016-2020), low oil prices and sluggish global economy. The consequences impacted China’s textile sector and extended equipment overcapacity, which resulted in order postponements and weak demand.
At constant exchange rates, order intake declined by 12.3 % to CHF 790 million (2014: CHF 901 million), and sales was lower by 20.6 % to CHF 852 million (2014: CHF 1 073 million). Excluding restructuring costs, normalized EBITDA was CHF 128 million, or 16.1 % of sales. Including the restructuring costs, EBITDA stood at CHF 85 million in 2015, corresponding to a margin of 10.6 % (2014: CHF 217 million representing a margin of 20.3 %). Normalized EBIT in 2015 was CHF 110 million, or 13.8 % of sales (normalized EBIT in 2014: CHF 199 million, margin: 18.6 %). Including the restructuring costs, EBIT was CHF 67 million.
“In 2015, the Manmade Fibers Segment saw a sharp industry downturn driven primarily by China. The Segment initiated decisive operational and structural measures, which will support the lowering of its cost base substantially by the end of 2016. The measures led to restructuring costs of CHF 43 million in 2015,” stated Group CFO Jürg Fedier. In 2015, the Segment strengthened its technology portfolio with a new version of the Plant Operation Center (POC), a complete software solution that manages the entire spinning and texturing production process. It also introduced RoTac3, the eco-friendly and energy-efficient component for yarn tangling, and EvoTape, which enables greater process stability in efficient tape extrusion for the production of carpets, agricultural textiles and geotextiles. New additions to the successful WINGS line of products (Winding INtegrated Godet Solution) included WINGS FDY PLUS that allows for a larger operation window and higher package weights. The Segment also reinforced its position in the polycondensation market through a joint venture with Huitong Chemical in China, creating a company that can offer comprehensive industrial solutions, from continuous polycondensation to finished end products in chemical-fiber spinning or PET bottle-grade material.
TextileFuture is maintaining its statement to question the future of the manmade fibers segment within Oerlikon Group!