During the 2020 financial year, sales of the Zehnder Group (SIX: ZEHN), a leading international provider of complete solutions for a healthy indoor climate, fell by 4 % to EUR 617.7 million as a result of COVID-19. Despite this, the immediate countermeasures that were launched and the consistent steps the Group continued to take with the aim of enhancing profitability made it possible to increase the operating result (EBIT) by 20% to EUR 50.5 million. Net profit rose by 25% to EUR 39.9 million. The Board of Directors proposes a dividend of CHF 1.25 per registered share A and is planning to launch a share buyback programme in the coming weeks for up to 5% of registered shares A over a maximum period of three years.
Growth in the ventilation business in Europe and North America
After the Zehnder Group recorded a 9% decline in sales in the first half of 2020 due to COVID-19, it was able to make up for this to some extent in the second half of the year with sales growth of 1%. For the year as a whole, sales fell by 4% (–4% organically[1]) to EUR 617.7 million (previous year: EUR 644.4 million). This reduction is attributable to the radiator business, where revenues dropped by 11% (–10% organically) to EUR 293.6 million. The ventilation business area grew by 3% (+3% organically) to EUR 324.0 million and now accounts for 52% of total sales (previous year: 49%).
84% of total sales (previous year: 82%), or EUR 517.2 million (previous year: EUR 531.1 million), came from the Europe segment, which recorded a sales decrease of 3% (–3% organically). Sales of EUR 269.4 million (previous year: EUR 259.0 million) were generated in the ventilation business area, which equates to a growth of 4% (+4% organically). All three product lines – residential ventilation, heat exchangers and clean air solutions – developed positively. Sales in Europe’s radiator business area decreased in 2020 by 9% (–9% organically) to EUR 247.8 million (previous year: EUR 272.1 million). Sales for both the radiator product line and the heating and cooling ceiling system product line experienced a decline.
The China & North America segment comprised 16% (previous year: 18%) of the consolidated sales in the reporting year, amounting to EUR 100.5 million (previous year: EUR 113.3 million). This represents a fall in sales of 11% (–10% organically).
Increase in EBIT margin from 6.5% to 8.2%
The consistent steps the Group continued to take with the aim of enhancing profitability and the measures it took to minimise the negative effect of the decline in sales caused by COVID-19 enabled the Zehnder Group to increase its operating result (EBIT) by a considerable 20% to EUR 50.5 million (previous year: EUR 42.1 million) in the reporting year. The EBIT margin increased by 1.7 percentage points to 8.2% (previous year: 6.5%). As a result, the Group achieved its medium-term goal of an EBIT margin of 8%, which it had set in 2018.
In the Europe segment, EBIT rose from EUR 31.7 million in the previous year to EUR 41.6 million. Progress in purchasing activities and further increases in efficiency contributed to this. Effective countermeasures enabled the Group to offset the impact of the decline in sales on the operating result as well as costs related to targeted staffing measures in the areas hardest hit by the pandemic. These measures included reducing the salaries of the members of the Board of Directors and Group Executive Committee by 10% for six months, cutting back on temporary staff, reducing employees’ holiday and overtime entitlements, and temporarily introducing short-time work at various sites. Major cost savings were also achieved by postponing projects and significantly reducing travel and marketing activities. Strategically important projects, such as those relating to digitalisation and product development, continued as planned.
The EBIT figure achieved in the China & North America segment fell from EUR 10.4 million to EUR 8.9 million. In China, it was not possible to fully offset the impact of the decline in sales by making cost savings. In addition, a one-off impairment adjustment was made for radiator production equipment due to the continuing decline in the radiator business, which was even more pronounced in 2020. In North America, the plant in Buffalo, NY (USA), made further progress. This included moving the final assembly stage of selected ventilation products from Europe to Buffalo.
The net profit of the Zehnder Group increased by 25% to EUR 39.9 million (previous year: EUR 31.9 million).
Investments in future growth and increasing efficiency
In the reporting year, expenditure on research and development amounted to EUR 18.2 million (previous year: EUR 18.4 million). The focus was on development projects in the ventilation area, which aim to generate growth over the medium term. The new products launched in 2020 include the Zehnder ComfoFlow basic residential ventilation system for multi-family residences, which was introduced in Switzerland, the new passive house-certified Zehnder ComfoAir 225 comfort ventilation unit launched in Germany and Luxembourg and the ERVD Intelligence ventilation unit series, which is being distributed in China under the NATHER 兰舍 brand. In the radiator business area an electric radiator range was introduced exclusively for a key customer in the DIY (do-it-yourself) area in France. Together with around 200 other household objects of various brands, the radiators can be controlled on demand from home or remotely using a smart home box and app. Germany and Switzerland saw the introduction of the modular, flexible Zehnder Fleximo activation modules. These transform any conventional metal ceiling into a high-quality heating and cooling ceiling.
Amounting to EUR 16.6 million, investments in property, plant and equipment and intangible assets were considerably lower than in the previous year (EUR 26.0 million). Following the outbreak of the coronavirus pandemic, planned projects were reassessed and, in some cases, postponed or withdrawn altogether as a precautionary measure to safeguard liquidity. In the Europe segment, the amount invested was EUR 13.2 million (previous year: EUR 17.8 million). The focus was on increasing efficiency in radiator production, expanding capacity for heat exchanger production, the new solar installation put in place on the roof of the ventilation plant in Zwolle (Netherlands) and preparations for the new Center of Climate in Lahr (Germany). In the China & North America segment, investments worth EUR 3.4 million (previous year: EUR 8.2 million) were made in property, plant and equipment. A large share of this went into completing the new factory for ventilation units in the city of Pinghu (China), which opened its doors in June.
High cash flow from operating activities and solid balance sheet
Cash flow from operating activities amounted to a remarkable EUR 95.3 million in the reporting period (previous year: EUR 43.1 million). In China, trade accounts receivable fell by around EUR 11 million, as key accounts settled their liabilities in a timely manner and sales volumes decreased in 2020 due to COVID-19. Net liquidity1 grew from EUR 25.5 million to EUR 96.4 million. In 2020, the Zehnder Group also took out a syndicated credit facility of EUR 100 million with a term of three years. As well as including an extension option, it will also be possible to increase the facility by EUR 50 million if larger acquisitions need to be made. At year-end, shareholders’ equity was EUR 326.9 million (previous year: EUR 303.0 million). This equates to another high equity ratio of 66% (previous year: 64%).
Dividend and share buyback programme
For the 2020 financial year, the Board of Directors is proposing to the Annual General Meeting on 26 March 2021 a dividend of CHF 1.25 per registered share A (previous year: CHF 0.70). The provision of 35% is in line with the Zehnder Group’s long-term dividend policy of distributing 30% to 50% of the consolidated net profit.
Furthermore, the Board of Directors is planning to launch a public share buyback programme in the coming weeks for up to 5% of listed registered shares A. This will enable a lasting concentration of earnings per share. Due to the strong balance sheet with a high equity ratio and net liquidity at the end of 2020, strategic flexibility for future investments and acquisitions will be maintained. The plan is to buy back registered shares A for the purposes of capital reduction via a second trading line on the SIX Swiss Exchange over a maximum period of three years. The Board of Directors of Zehnder Group AG is likely to propose the cancellation of the repurchased registered shares A – up to 487,800 in total, each with a nominal value of CHF 0.05 – at future general meetings.
Details on how the share buyback programme will work will be communicated in the coming weeks.
Outlook: focus on sales growth and improved profitability
In 2020, the Zehnder Group managed to negotiate the coronavirus crisis successfully. The increased awareness of the importance of a clean, healthy and comfortable indoor climate as well as the growing demand for sustainable products and systems should spur on further growth for the Group. Nevertheless, it is important to remember that the COVID-19 pandemic is not yet over. The prices of raw materials are rising sharply, and geopolitical tensions are continuing.
The Zehnder Group will continue to enhance its market coverage and its innovation strength in order to lay the foundations for future growth. Moreover, it is maintaining its focus on optimising costs and increasing efficiency. These efforts should lead to a further improvement in profitability in 2021. In the medium term, the Zehnder Group is targeting average annual sales growth of 5% and an EBIT margin of between 8 % and 10 %.
The Zehnder Group improves quality of life with comprehensive indoor climate solutions. The globally active company develops and manufactures its products in 16 plants, including 2 in China and 3 in North America. Its sales activities, spanning more than 70 countries, take place through local sales companies and representative offices.
Zehnder Group products and systems for heating and cooling, comfortable indoor ventilation and air cleaning are characterised by outstanding design and high energy efficiency. The Group is among the market and technology leaders in its business areas with brands such as Zehnder, Runtal, Acova, Bisque, Greenwood, Paul, Core, Enervent and Recair.
The Zehnder Group has had its headquarters in Gränichen (Switzerland) since 1895. It employs around 3300 people worldwide and achieved sales of EUR 618 million in 2020. The company is listed on the SIX Swiss Exchange (symbol ZEHN/number 27 653 461). The unlisted registered shares B are held by the Zehnder family and persons closely associated with them.