Presentation 1H2019 results - Heerbrugg, 19 July 2019
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Presentation 1H2019 results Heerbrugg, 19 July 2019
Today’s speakers
Welcome to the presentation on our 1H 2019 results
Jens Breu Rolf Frei
Chief Executive Officer Chief Financial Officer
Presentation 1H 2019 results | 19 July 2019 2
Table of contents
1. Key takeaways Jens Breu
2. Development by segment Jens Breu
3. Development of key financials Rolf Frei
4. Updated guidance 2019 Rolf Frei
5. Q&A Jens Breu/Rolf Frei
Presentation 1H 2019 results | 19 July 2019 3
Key takeaways
Presentation 1H 2019 results | 19 July 2019 4
Key takeaways
Modest growth in a challenging environment
• Strong position with customers confirmed with ongoing successful acquisition of major new
projects
• Sales increased in 1H 2019 by 1.4% to CHF 867.8m
• Market position in the US strengthened by acquisition of Triangle Fastener Corporation;
overall positive consolidation effects of 4.6%
• Organic development at –2.4% burdened by weaker economy and trade tensions
• Earnings marked by mix effects and demand-driven fluctuations in capacity utilization
• Adjusted EBIT margin at 12.6% (PY 13.6%), one-time effects of CHF –3.7m
• Measures implemented to strengthen profitability
• Successful commissioning of new manufacturing platform in Nantong (China)
• Overall expect slightly better development in 2H 2019
Presentation 1H 2019 results | 19 July 2019 5
Development
by segment
Presentation 1H 2019 results | 19 July 2019 6
Headlines Engineered Components segment
Challenging markets burden performance
• Sales decreased to CHF 454.2m, –3.6% in Key figures Engineered Components
local currencies to strong PY period
2019 +/– 2018
• Decline driven by challenging Automotive and in CHF million (unaudited) 1H PY 1H
Electronics market conditions started Q4/2018 Third party sales 454.2 –4.0% 473.2
Sales growth comparable –3.6%
• Continued dynamic growth of Medical division EBITDA 96.4 –14.3% 112.5
• Profitability burdened by mix effects and As a % of net sales 21.0 23.6
fluctuations in capacity utilization. Corrective Operating profit (EBIT) adjusted 73.9 –11.9% 83.9
As a % of net sales 16.1 17.6
actions to recover margins taken ø Capital Employed 680.6 8.9% 624.8
• Strong position with customers confirmed by Investments 44.3 –16.0% 52.8
attractive new project wins Full-time equivalents (FTE) 7,310 10.8% 6,600
• CAPEX –16.0% compared to PY (Nantong) ROCE in % 21.7 26.9
• Sales expected to increase in 2H
Presentation 1H 2019 results | 19 July 2019 7
Key messages Automotive division
Weak demand, but attractive new projects acquired
• Global car sales down –8 to –6% in relevant
segments and adjustments in the supply chain
that took longer than expected impacting 1H
performance
• Ramp-up of innovative customer projects on
track with limited impact due to weak demand
• Sales of Automotive division in 1H at –4.3% to
PY, +4.0% compared to 2H 2018
• Stable innovation trends and strong position
as engineering partner fueled project pipeline
• 1H 2019 EBIT increased vs. 2H 2018 by 4.9%
• Business expected to remain flat during 2H
Presentation 1H 2019 results | 19 July 2019 8
Key messages Electronics division
Trade tensions impacting behavior
• Demand stabilized below levels of the PY
period (relevant smart phone shipments
expected to land at –14% yoy, HDD drive
builds at –15% yoy)
• Impact expected to be offset with new
product line introductions on full year basis
• Successfully defended profitability thanks to
capacity adjustments and productivity gains
• Commissioning of new manufacturing
platform in Nantong completed as planned
• hosting all SFS core technologies
• serving as strategic hub also for Automotive
• providing ample capacity for future growth
Presentation 1H 2019 results | 19 July 2019 9
Key messages Industrial division
Growth returned to Aircraft business
• Overall slightly negative trend, individual
business areas developing unevenly
• Aircraft business returned to growth track as
expected due to ramp up of Airbus A350
• Strong capabilities in micro injection molding
providing growth opportunities in
• dental applications
• drug delivery products
• Site expansion project at Stamm (CH, plastic
injection molding) to be completed until 2021
• Expect stable development in 2H
Presentation 1H 2019 results | 19 July 2019 10Key messages Medical division
Continued dynamic sales momentum
• Strong sales trend of 2018 confirmed and
accelerated in 1H
• Successful customer project launches in the
application areas of sports medicine, urology,
and vascular surgery
Sports medicine
• Improvements in productivity supporting
margin development
• Standardized production machine park at
multiple sites confirmed to be a competitive
advantage
• Based on robust project pipeline expect
positive trend to continue in 2H Vascular surgery
Presentation 1H 2019 results | 19 July 2019 11Headlines Fastening Systems segment
Market position in the US strengthened
• Strong sales growth of 16.6% to CHF 248.3m Key figures Fastening Systems
driven by consolidation of HECO & TFC (20.4%)
2019 +/– 2018
• Organic development (–1.8%) and FX impact in CHF million (unaudited) 1H PY 1H
(–2.0%) negative Third party sales 248.3 16.6% 213.0
Sales growth comparable –1.8%
• Divergent trends among the divisions EBITDA 34.1 –15.6% 29.5
• Construction: Stable demand in construction As a % of net sales 13.4 13.3
industry and positive consolidation effects Operating profit (EBIT) 24.0 15.5% 20.7
As a % of net sales 9.4 9.4
• Riveting: Significant drop in demand from
ø Capital Employed 294.8 18.8% 248.1
automotive- & industrial customers
Investments 9.1 10.6% 8.2
• EBIT margin at 9.4% matching PY level Full-time equivalents (FTE) 2,459 22.2% 2,012
• Continued strong project pipeline ROCE in % 16.3 16.7
• Expect stable development of business in 2H
Presentation 1H 2019 results | 19 July 2019 12Key messages Construction division
Ongoing positive development
• Organic growth momentum continued at
slower pace than 2018, supported by several
business units including flat-roof applications
• Division clearly benefiting from close
collaboration with TFC and HECO by
• significantly strengthened position in USA
• expansion of product portfolio with inno-
vative solutions like in timber construction
• Trends to greater safety, energy efficiency
and building automation continue to be key
areas of innovation and further growth
• Positive trend expected to continue in 2H
Presentation 1H 2019 results | 19 July 2019 13Triangle Fasteners Corporation (“TFC”)
Acquisition completed and integration started
Strategic rational of TFC acquisition
• Add direct access to local installers and
contractors (about 6000 active end customers)
• Leverage direct customer access for cross-
sales of Construction division’s portfolio
• Significantly strengthens SFS’ competitive
position in the US construction market
Key Figures
• Sales of > USD 70m in 2018
• 200 employees and 23 proprietary sales
offices in 15 states
Presentation 1H 2019 results | 19 July 2019 14Key messages Riveting division
Development burdened by weak demand
• Significant exposure to automotive- and
industrial markets and uncertainty due to
Brexit strongly impacting business
• Corresponding shifts in capacity utilization
rate impacting earnings
• Capacity adjustment measures taken to
mitigate impact on earnings
• Strong competitive positioning maintained
• Urs Langenauer, former Head of Automotive in
North America, replaced Thomas Bamberger
• Due to unchanged challenging markets flat
business trend expected in 2H
Presentation 1H 2019 results | 19 July 2019 15Headlines Distribution & Logistics segment
Continuous growth of customer base
• Slightly positive organic growth of +0.3% to Key figures Distribution & Logistics
strong previous year period resulting in sales
2019 +/– 2018
of CHF 165.3m in CHF million (unaudited) 1H PY 1H
• Development attributed particularly to tools Third party sales 165.3 –2.6% 169.7
Sales growth comparable 0.3%
business, e-shop and retail stores
EBITDA 21.2 38.1% 15.4
• Divestment of security system business and As a % of net sales 12.6 8.9
FX headwinds impacting sales (totally –2.9%) Operating profit (EBIT) adjusted 13.3 7.4% 12.4
As a % of net sales 7.9 7.2
• Positive 2018 earnings trend maintained with ø Capital Employed 138.5 –3.2% 143.2
adjusted EBIT margin of 7.9% (+70 bps yoy) Investments 1.6 –49.4% 3.2
• Reported earnings benefited from book gain Full-time equivalents (FTE) 618 0.0% 618
on sale of property ROCE in % 19.2 17.4
• Expected positive trend to continue in 2H
Presentation 1H 2019 results | 19 July 2019 16Key messages Distribution & Logistics segment
Optimization of logistics operations initiated
• To ensure efficient and competitive future
logistics operations:
• Transfer of management responsibility and
sale of logistics infrastructure in Emmen-
brücke to service provider by year end
• Subsequent relocation of further logistics
operations from Bäretswil to Emmenbrücke
• All Allchemet based logistics activities will be
consolidated at one site
• New concept will result in reduced number of
customer shipments
• Envisaged set-up planned to be fully
operational beginning 2022
Presentation 1H 2019 results | 19 July 2019 17Development of
key financials
Presentation 1H 2019 results | 19 July 2019 18Sales bridge
Heco and TFC added 4.6% to overall growth of 1.4%
CHF million
• Reported growth of 1.4% (PY 9.9) 1'000
• –2.4% organic business (PY 7.1) 856 –20 39 –7 868
• 4.6% scope (PY –0.3)
• –0.8% FX impact (PY 3.1) 900
• Main influencing factor 800
• challenging economic environment in
automotive and electronics industry 700
• Like-for-like growth by segment
600
• –3.6% in Engineered Components (PY 7.6)
• –1.8% in Fastening Systems (PY 6.9)
• 0.3% in D&L (PY 5.8) 500
1H 18 Organic Scope FX 1H 19
Presentation 1H 2019 results | 19 July 2019 19Organic sales growth
Growth stabilized against strong PY at Ø of –2.4%
Organic growth in CHF million yoy Organic growth in % yoy
30 15%
20 10%
7.5%
6.7%
10 4.2% 5%
-1.1%
0 -1.8%
0%
-3.1%
-10 -5%
Q1.18 Q2.18 Q3.18 Q4.18 Q1.19 Q2.19
Presentation 1H 2019 results | 19 July 2019 20Sales breakdown by end markets
Construction and Medical increase their share
• Construction up by 370 bps to 30% by End Markets
• driven by slight organic growth and
first time consolidation of Heco and TFC Others (trade, Construction
capital goods, aircraft)
• Medical up by 130 bps to 7.5% 21.2%
• strong double digit organic growth PY 21.7% 30.0%
PY 26.3%
• Automotive down 230 bps to 25.8% Medical
7.5%
PY 6.2%
• Electronics down 220 bps to 15.5%
• both impacted by challenging economic 15.5%
environment and lower demand from PY 17.7% 25.8%
PY 28.1%
customers
Electronics
Automotive
Presentation 1H 2019 results | 19 July 2019 21Sales breakdown by regions
America benefits from TFC and organic growth
• America up 360 bps to 21.2% by Regions
• first time consolidation of TFC
• strong organic growth Medical division
Switzerland Europe
• favorable USD currency development yoy
20.2%
• Asia, RoW down 230 bps to 16.6% PY 20.8% 42.0%
• reflects situation in Electronics division PY 42.7%
16.6%
PY 18.9%
Asia, RoW
21.2%
PY 17.6%
America
Presentation 1H 2019 results | 19 July 2019 22Operating profitability
Mix effects and lower customer demand burden EBIT
in % of net sales in CHF million
• Adjusted EBIT margin of 12.6% impacted by 16% 400
14.6% 14.3%
• changes in the sales mix due to varying 14.0% 13.6%
14%
12.6% 12.6% 350
growth in the end markets
• insufficient capacity utilization due to lower 12% 300
customer demand 10% 250
243.1
233.3
• One time effects reduced EBIT by CHF 3.7m 8% 200
210.1
• –CHF 8.5m relocation expenses in CN
174.3
6% 150
• +CHF 4.8m book gains from sale of
property in CH 4% 100
116.0
109.2
2% 50
• Reported EBIT at CHF 105.5m
0% 0
2015 2016 2017 2018 1H18 1H19
Presentation 1H 2019 results | 19 July 2019 23Operating profitability
EBIT in 2nd half year tends upwards against 1st half
EBIT
250 adjusted in CHF million EBIT adjusted margin in %
18%
225 16.2%
200 16%
175 14.2% 14.3% 14.4%
150 13.6% 14%
12.9%
125 12.6%
122.4 127.1
121.2
116.0
100 110.9 109.2 12%
75 88.9
50 10%
25
0 8%
1H2016 2H2016 1H2017 2H2017 1H2018 2H2018 1H2019
Presentation 1H 2019 results | 19 July 2019 24Swiss franc exposure
Opex in Swiss francs further decline
% share
• Operating expenses in Swiss francs 50%
• all time low share of 38% of group OPEX 45% Opex in Swiss francs
46.1%
• target range below 40% 40%
44.3%
39.8% 40.2% 41.3% 38.0%
35%
• Drivers for strategically targeted reduction
• international M&A 30%
• improved productivity in CH 25% 22.9% 22.4%
20.1% 19.6% 21.0% 19.1%
• relocations to sites outside CH 20%
• higher growth outside CH 15%
Sales invoiced in Swiss francs
• natural hedging
10%
5%
0%
2015 2016 2017 2018 1H18 1H19
Presentation 1H 2019 results | 19 July 2019 25Net working capital
Seasonal peak at mid year as seen in the past
in % of net sales in days
• NWC higher at 32.7% of net sales 35% 32.7% 175
31.0% 31.2% 31.1% 30.3% 32.0%
• equals 119 working days
30% 150
• measured at end of period
25% 125
• Days outstanding up 2 days yoy
119
117
114
113
113
111
• accounts receivable down 3 days 20% 100
• inventory up 5 days
15% 75
10% 50
5% 25
0% 0
2015 2016 2017 2018 1H18 1H19
Presentation 1H 2019 results | 19 July 2019 26Capital expenditure
Spending back to “normal”
in % of net sales in CHF million
• CAPEX spending at 6.5% of net sales 10% 250
• to increase capacity, efficiency, productivity 8.6%
8.1%
• to support future growth 8% 8.1%
200
• lower as Nantong site was completed 2018 6.6% 6.5%
• CAPEX spending by region 6% 150
149.1
5.9%
• 42% Switzerland (PY 36)
132.8
• 15% Europe (PY 17) 4% 100
• 13% Americas (PY 11)
90.4
84.6
• 30% Asia (PY 36)
69.5
2% 50
56.4
• CAPEX by segment
• 79% EC (PY 78) 0% 0
• 16% FS (PY 11) 2015 2016 2017 2018 1H18 1H19
Presentation 1H 2019 results | 19 July 2019 27Operating free cash flow
Cash flow fully financed CAPEX and NWC
oFCF in % of EBITDA oFCF CHF million
• Stable and strong cash flow from operations 60% 300
• 105m cash from operations (PY 104) 51.2%
• –56m CAPEX (PY 69) 50% 47.6% 250
• 49m free cash flow (PY 34)
40% 200
34.4%
• Conversion rate at 31.9% of EBITDA 31.9%
• driven by CAPEX and NWC increase 30% 150
157
• seasonally low with 29.0% 21.8%
121
• clear upside potential in 2nd half year
114
20% 100
94
• target range 40–50%
10% 50
49
35
0% 0
2015 2016 2017 2018 1H18 1H19
Presentation 1H 2019 results | 19 July 2019 28Balance sheet
Solid equity and strong financial flexibility
Equity ratio in % CHF million net cash/debt
• Equity ratio remains strong and healthy 90% 210
• solid ratio at 69.5%
80% 78.4% 74.4% 180
• equity value at CHF 1.1bn
67.2%
70%
71.6% 150
71.1% 69.5%
• Net debt at CHF 52m, expect strong 60% 120
128
improvement in 2H 50% 90
• Financial flexibility for growth secured by 40% 60
59
• cash in hand 30% 30
35
• annual operating free cash flow
0
20% 0
1
-52
• unused credit facilities
• available debt capacity 10% -30
0% -60
2015 2016 2017 2018 1H18 1H19
Presentation 1H 2019 results | 19 July 2019 29Return on capital
Sideward development with potential for improvement
Return in %
• Average capital employed (Ø CE) 30% 27.8%
• ROCE at 19.5% (PY 21.7%) 25.9%
• EBIT adjusted in % of Ø Capital Employed 25% 22.7%
• target range of >20% 20.6% 21.7%
19.5%
20%
• Return on invested capital
• ROIC at 8.6% after tax (PY 9.0%) 15%
• EBIT adjusted less tax in % of invested
capital* 10%
7.5% 9.9% 9.7%
• below target range of >12% 9.5% 9.0% 8.6%
5%
0%
* Equity before goodwill offset less net cash / plus net debt 2015 2016 2017 2018 1H18 1H19
Presentation 1H 2019 results | 19 July 2019 30KPI summary
Well-positioned in spite of a challenging environment
In CHF million 1H 2019 % 1H 2018 % yoy
Sales 867.8 855.9 1.4%
EBITDA margin 152.6 17.6% 159.5 18.7% –4.3%
EBIT adjusted margin 109.2 12.6% 116.0 13.6% –6.0%
Net income margin 88.6 10.2% 88.9 10.4% –0.3%
Equity ratio 1,139.2 69.5% 1,103.9 71.1% 3.2%
Net cash -51.9 –0.4
Capex % net sales 56.4 6.5% 69.5 8.1% –18.9%
Free cash flow conversion rate 48.7 31.9% 34.8 21.8% 40.4%
ROCE 19.5% 21.7%
Presentation 1H 2019 results | 19 July 2019 31Updated
guidance 2019
Presentation 1H 2019 results | 19 July 2019 32Updated guidance FY2019
Slightly positive business trends expected
• Expect volatile environment (political / Expected sales growth & EBIT % adjusted for FY2019
economic) and trade tensions to persist in 2H
• Against this background, SFS has reviewed 2019G 1H19A 2019G
its forecasts and expects only a slight (March) (July)
increase in sales in 2H Sales 3–5% 1.4% 3–6%
Organic –2.4% 0–2%
• As stated earlier, SFS expects extraordinary Scope 4.6% 4–5%
effects to burden reported EBIT by a high FX –0.8% ~–1%
single-digit to a low double-digit CHF m
amount due to EBIT adj. 13–15 % 12.6% ~13%
• commissioning of new manufacturing
A = Actual G = Guidance
platform in Nantong (negative)
• sale of properties (positive)
Presentation 1H 2019 results | 19 July 2019 33SFS Group priorities
Focus on cost control and new project acquisition
• Continue selective hiring freeze and adjustment of capacity were needed
• Carrying forward on ramp-up of growth projects while meeting profitability targets
• Increase offering with digitization solutions, along grow revenues as percentage of sales
• Identification of next-generation applications in our core markets with above-average growth
potential based on underlying megatrends
• Pursue suitable M&A add-ons
Presentation 1H 2019 results | 19 July 2019 34Q&A
Presentation 1H 2019 results | 19 July 2019 35Q&A
Any questions?
Jens Breu Rolf Frei
Chief Executive Officer Chief Financial Officer
Presentation 1H 2019 results | 19 July 2019 36Thank you for
your attention
Presentation 1H 2019 results | 19 July 2019 37Presentation 1H 2019 results | 19 July 2019 38
Disclaimer
This presentation includes forward looking statements. These statements reflect the SFS Group's
current assessment of market conditions and future events. The statements are therefore subject
to risks, uncertainties and assumptions. Unforeseen events may lead to deviations of the actual
results from the forecasts and estimates made in this presentation and in other published
information. To this extent all forward looking statements in this presentation are subject to such
limitations.
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