Schlatter records a loss for the first half of 2020 Dienstag, 18. August 2020 - 06:00

Media information

S c h l i e r e n, 18 August 2020. In the first half of 2020, the Schlatter Group recorded an order intake of CHF 39.1 million (H1 2019: CHF 43.1 million) and net sales of CHF 36.6 million (H1 2019: CHF 54.7 million). The order backlog stood at CHF 28.8 million as at 30 June 2020 (31.12.2019: CHF 26.4 million). For the first half of the year, the Schlatter Group posted an operating loss (EBIT) of CHF -3.6 million (H1 2019: CHF 1.9 million). The net result for the first half of 2020 was CHF -4.0 million (H1 2019: CHF 1.4 million).

Despite a lower order intake than in previous years, the Schlatter Group enjoyed a positive start to the 2020 financial year in its two segments, welding and weaving. However, the repercussions of the coronavirus pandemic resulted in significantly lower net sales than had been expected for the first half of 2020, as well as an operating loss. Net sales in the welding segment collapsed as a result of the coronavirus protection measures implemented worldwide from March onwards. Numerous customer factories in the mesh area had to shut down operations for a prolonged period, which led to a slump in sales in the area of systems and spare parts. Profitability in this segment was additionally dragged down by the resurgence of the Swiss franc. In the weaving segment, a number of projects that were on the verge of contract signing were postponed as a result of lockdowns. The new site in Münster was occupied in May 2020. As anticipated, the relocation involved a number of one-off costs as well as a production outage for a limited period of time. The market environment remains uncertain and volatile, and will depend greatly on the further development of the pandemic.

The spare parts and services business performed well in the first two months of the year, but slumped from March onwards due to factory closures. However, a recovery in demand was apparent by June, and Schlatter is anticipating further improvement in the second half of 2020. The spare parts and services business is extremely important, as Schlatter has a large number of installed systems around the world. Indeed, this area accounts for around 30 percent of the Schlatter Group’s net sales.

Welding segment cuts product costs and implements innovations

Order intake in the welding segment came to CHF 28.4 million in the first half of 2020 (H1 2019: CHF 33.9 million). Net sales amounted to CHF 30.0 million (H1 2019: CHF 44.7 million). The order backlog stood at CHF 19.9 million as at 30 June 2020 (31.12.2019: CHF 21.5 million).

The welding segment has reported a loss for the first half of 2020, driven by a combination of lower sales of new plants and spare parts for coronavirus-related reasons along with lower profitability due to the resurgence of the Swiss franc.

In response to the decline in sales in the 2019 financial year, the Schlatter Group introduced a comprehensive package of measures at its Schlieren site towards the end of the year in order to cut costs and boost productivity. The effect of these measures will be felt in the second half of 2020. Additional credit lines were secured at the Schlieren site as a result of the coronavirus pandemic.

A prototype of the new machine platform for the welding of reinforcing mesh has been delivered. Schlatter is continuing to devote significant capacity to the development of its platform, which can be used in numerous different industries and areas of application thanks to its modular design. Schlatter is creating further potential in this area through the expansion of application possibilities. This project, which will unfold over the medium to long term, is expected to deliver lasting competitive advantages for the wire product area. Another of Schlatter’s priorities is the area of digitalisation. For example, the company has launched a long-term project to renew the control platform and user interface of its systems.

For the second half of 2020, the Schlatter Group is anticipating a recessionary environment followed by a gradual recovery in 2021. Schlatter will drive forward its innovations over the coming months and continue to invest in product development in order to be in a strong position when the upturn arrives.

Weaving segment drives forward innovation in new market areas

Order intake in the weaving segment came to CHF 10.7 million in the first half of 2020 (H1 2019: CHF 9.1 million). Net sales amounted to CHF 6.6 million (H1 2019: CHF 10.0 million). The order backlog stood at CHF 9.0 million as at 30 June 2020 (31.12.2019: CHF 4.9 million).

The weaving segment has reported a loss for the first half of 2020. Owing to the coronavirus pandemic, a number of significant customer projects were postponed. The new site in Münster was occupied in May 2020. As anticipated, the relocation involved a number of one-off costs as well as a production outage for a limited period of time, yet it will enable Schlatter to streamline its production processes and increase productivity.

A product development project launched in 2019 will enable the company to enter growth markets for the production of other technical weaves, the aim here being to reduce Schlatter's dependence on the volatile market for weaving machines for the production of paper machine clothing and to generate growth.

The Schlatter Group has restructured the sales function for its wire weaving machines. The mesh welding sales organisation is now responsible for sales in this area. This will considerably increase this area’s selling power while facilitating the leveraging of market synergies with the company’s industrial mesh customers.

The weaving segment has entered the second half of 2020 with a significantly higher order backlog. The company is therefore expecting a marked increase in net sales and an improvement in profitability in the second half of the year. Efforts to boost productivity and cut costs are continuing.

Outlook

The Schlatter Group will continue to invest significant resources in product development with a view to consolidating its market position and being in good shape to take advantage of the upturn. Comprehensive measures are currently being implemented, including the sales offensive to reinforce marketing activities, cost-cutting and productivity enhancement measures, and service initiatives.

The market environment remains uncertain and volatile, and will depend greatly on the further development of the pandemic. A recovery of the Group’s markets is anticipated in 2021. The Board of Directors and management also expect the Schlatter Group to report a loss for the second half of 2020.

The full 2020 half-year report can be downloaded from the Schlatter Group website: http://www.schlattergroup.com/en/investor-relations/annual_and_semester_reports/

Further information

Schlatter Industries AG

Werner Schmidli

Chief Executive Officer

Tel. +41 44 732 71 70

Mobile +41 (0)79 343 62 62

werner.schmidli@schlattergroup.com

Agenda

Schlatter Group (www.schlattergroup.com)

Schlatter Group is a world leader in the manufacture of resistance welding systems as well as of weaving and finishing machines for the production of paper-machine clothing, wire fabrics and wire mesh. The Group is listed in the Swiss Reporting Standard of the SIX Swiss Exchange. With its many years of experience in the plant technology field, its innovative strength and its reliable customer service, Schlatter Group guarantees high-performance, high-value production facilities.

This media release contains certain forward-looking statements including statements using the words "believes", "assumes", "expects" or formulations of a similar kind. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which could lead to substantial differences between the actual future results, the financial situation, the development or performance of the Company and those either expressed or implied by such statements. Such factors include, among other things: competition from other companies, the effects and risks of new technologies, the Company's continuing capital requirements, financing costs, delays in the integration of acquisitions, changes in the operating expenses, the Company's ability to recruit and retain qualified employees, unfavourable changes to the applicable tax laws, and other factors identified in this communication. In view of these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company accepts no obligation to continue to report or update such forward-looking statements or adjust them to future events or developments.

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