Georg Fischer: Resilient Thanks to Global Footprint
Despite a clear market slowdown in Europe, Georg Fischer generated a turnover of CHF 3.6 billion in 2012, 3 percent above the 2011 figure.
On a like-for-like basis, sales reached the same level as in 2011. All three divisions both considerably increased their sales in Asia and the Americas and continued to generate value.
Operating profit (EBIT) reached CHF 221 million, down from CHF 233 million in 2011 on account of low capacity utilization at several European plants. As a result, the EBIT margin (ROS) stood at 6.1 percent versus 6.6 percent in 2011, and the return on invested capital (ROIC) stood at 12.1 percent versus 13.4 percent in the previous year. Nevertheless, all three divisions continued to generate value. The equity ratio increased again to 44 percent, up from 42 percent in 2011. Free cash flow before acquisitions reached CHF 97 million, slightly below the 2011 figure of CHF 103 million.
The three divisions of Georg Fischer reported mixed growth patterns in 2012. Whereas GF Piping Systems and GF AgieCharmilles increased their top line, GF Automotive suffered a drop of 5 percent due to its large exposure to the European car and truck market.
Headcount went up by 259 to 13,412 employees. More personnel was hired in the growing markets of Asia. In America headcount increased on account of the two acquisitions.
Net profit reached CHF 127 million after the CHF 28 million non-cash impact of the GF Automotive divestments. Earnings per share stood at CHF 30, including the above-mentioned one-off effect. The Board of Directors will propose an unchanged dividend of CHF 15 at the Annual Shareholders’ Meeting.
GF Piping Systems grew with acquisitions and new markets
GF Piping Systems increased its top line by 11 percent to CHF 1,299 million in 2012 partly thanks to its two US acquisitions, which added CHF 97 million during the year. The division reached a further milestone in 2012 regarding its global presence. For the first time, sales in Asia, the Americas, and the emerging markets exceeded 50 percent of total. Demand for water supply systems remained high, following a clear global trend. In addition, promising new solutions were developed and have already been sold successfully for mining applications as well as to address hygiene issues in hospitals and large buildings in Europe.
Operating profit amounted to CHF 130 million for an ROS of 10 percent, compared to CHF 137 million in 2011. The ROIC reached 13.9 percent. The lower capacity utilization of several plants in Europe, especially in Italy, as well as the amortizations linked to the IFRS accounting of the new US acquisitions had an impact on profitability in 2012.
In 2012, GF Piping Systems strengthened its presence in the US significantly with the acquisitions of Harvel Plastics and IPP, closed in January and May respectively. Harvel Plastics allows the division to cover the whole US territory for industrial piping systems and IPP enables it to substantially increase its leadership in PE (polyethylene) large water transport systems, certainly a growth area in the US.
In addition, one new plant has been added in Zhuozhou, bringing the total number of manufacturing facilities in China to 16.
GF Automotive: Europe subdued, importance of Asia grows
GF Automotive faced a clear demand slowdown in Europe especially in the truck and compact car sectors and at the same time enjoyed strong growth in China.
Sales decreased organically by 4 percent. Moreover, two plants were sold, subtracting CHF 118 million from the top line. As a result, turnover stood at CHF 1,461 million. Operating profit (EBIT), which was affected by the reduced capacity utilization at several European plants, amounted to CHF 54 million for an ROS of 3.7 percent, compared to CHF 69 million and an ROS of 4.5 percent in 2011. The ROIC amounted to 10.3 percent.
GF Automotive took action in 2012, adjusting the number of temporary workers and overtime at all its plant in Europe. Furthermore, the non-core aluminium sand casting plants of Garching and Friedrichshafen were sold, and the European activities focused on large-series iron and aluminum pressure die castings. At the same time, GF Automotive invested about CHF 45 million in a new ultramodern automatic molding line at its iron foundry in Mettmann (Germany), in order to boost productivity and ensure the best quality for its customers.
Performance further enhanced at GF AgieCharmilles
GF AgieCharmilles increased its top line by 5 percent to CHF 842 million despite a difficult market situation. This result was achieved by promoting sales in less cyclical segments like mobile phones, medical devices, and aeronautics and thanks to a well-balanced distribution of sales worldwide.
The division significantly increased its profitability from an ROS of 4.6 percent in 2011 to 5.3 percent in 2012, resulting in an EBIT of CHF 45 million. The ROIC went up to 13.4 percent.
Promising new products were launched in 2012 including a highly precise small-size five-axis milling machine to support customers in the machining of miniature metal parts. Also two new machines were developed at the Chinese plants of GF AgieCharmilles to further complete the offering in China.
A state-of-the-art training facility was inaugurated in Geneva in December to deepen and focus the expertise across the division regarding the key market segments of the future.
Finally, the production plants in Beijing and Changzhou (China) were upgraded and the milling machine facility of Nidau (Switzerland) enlarged, including a new Milling Technology Center, in order to cope with the increased demand for the products made at those sites.
Strategic implementation well on track
Due to the Swiss franc appreciation and the slowdown in the eurozone, our profitability objectives have become more challenging. Nevertheless, we are sticking to them because the implementation of all key strategic initiatives is on track.
Firstly, the portfolio of activities is continuously being realigned towards less cyclical and more profitable end markets. In 2012, GF Piping Systems added almost CHF 100 million of turnover through acquisitions while GF Automotive divested two aluminum sand casting plants.
Secondly, the share of turnover generated in the growing markets of Asia and the Americas is increasing.
Today a clear majority of the turnover of GF Piping systems and GF AgieCharmilles is generated outside of Europe. Finally, the focus on productivity and innovation at all divisions is well underway. Plants in Europe are being further automated at GF Automotive and GF Piping Systems, while GF AgieCharmilles is introducing new products at a faster rate.
Mid-term objectives confirmed
In 2013, additional investments including acquisitions are being planned in order to extend our presence in the growing areas of the world and further align our portfolio to our strategic objectives.
For 2013, we do not expect any major improvement in demand in Europe and will therefore focus on productivity there while continuing to expand in Asia and the Americas.
Despite signs of improved demand in China and in the US, the short-term overall economic trend remains difficult to predict at least in the sectors of activity relevant for us. However, we confirm our mid-term profitability objectives for 2015 of an ROIC in the 15 percent range and an ROS between 8 and 9 percent.
Source: Georg Fischer AG