Datwyler performs strongly in extraordinary times

Due to the COVID-19 pandemic, Datwyler had to contend with some extremely challenging developments in some of the markets it serves in 2020. With measures being taken at an early stage, however, it was possible to protect employees’ health at all times and guarantee delivery capacity.

Switch of focus to system-critical elastomer components.

Notwithstanding the challenges associated with COVID-19, Datwyler switched its focus, as promised, to high-quality, system-critical elastomer components during the reporting year. This meant selling the Distrelec and Nedis distribution companies in March and the civil engineering business in May. Taking into account the companies sold, net revenue amounted to CHF 1’069.2 million. The sale of the subsidiaries resulted, as announced, in a non-cash book loss of CHF 464.5 million. As a consequence, the reported operating result (EBIT) came to CHF –315.9 million and the reported net result to CHF –346.3 million. Further reporting will relate to the operating performance of continuing operations for the two business areas Healthcare Solutions and Industrial Solutions as well as the online distributor Reichelt.

Continuing operations with currency-adjusted growth.

At an operational level, Datwyler performed strongly despite the negative impact of the COVID-19 pandemic. Thanks to its leading market positions and close customer relationships, the company generated net revenue of CHF 1’012.1 million (previous year: CHF 1’050.5 million) from continuing operations. Adjusted for the negative impact of the strong Swiss franc, this equates to a currency-adjusted increase of 1.2%. The Healthcare Solutions business area, the Food & Beverage business unit and the online distributor Reichelt in particular reported additional revenues for 2020 and strong incoming order figures for 2021 as a result of the pandemic. In the healthcare business, the combination of additional demand for the provision of COVID-19 vaccines and the ongoing rise in demand for high-quality FirstLine™ components accelerated revenue growth in the second half of the year. In the Food & Beverage business unit and at the online distributor Reichelt, it was the widespread changeover to working from home that led to an increase in demand for capsule coffee and electronic appliances and accessories. The situation was different in the Mobility, General Industry and Oil & Gas business units. In these units, Datwyler had to contend with significant revenue declines over several months due to the coronavirus pandemic.

Improved profitability despite expenses for managing the impact of the pandemic.

By taking action early, the company was able to adapt cost structures at the sites negatively impacted by the pandemic to the lower demand quickly and effectively. At the same time, the healthcare business and the online distributor Reichelt significantly improved their profitability. As a result, Datwyler was able to in-crease the operating result (EBIT) by 10.9% to CHF 148.0 million (previous year: CHF 133.5 million) and the EBIT margin to 14.6% (previous year: 12.7%). This was despite expenses incurred in managing the impact of the pandemic and start-up costs for new production capacities. The net result for continuing operations rose by 20.7% to CHF 118.9 million (previous year: CHF 98.5 million). Diversification across several market segments has proven its worth in tough times such as the COVID-19 pandemic. With the Healthcare Solutions and Food & Beverage areas and the online distributor Reichelt, Datwyler earns over 70% of its revenue in low cyclical markets that are growing steadily. In view of the higher profitability levels and given that prospects look promising, the Board of Directors is asking the Annual General Meeting to pay an increased cash dividend of CHF 3.20 per bearer share and CHF 0.64 per registered share. This equates to a payout ratio of 45.8% of the net result for continuing operations.

Healthcare Solutions reports increasing growth in revenue and margins.

The Healthcare Solutions business area increased sales to CHF 403.4 million (previous year: CHF 380.6 million). Having accelerated continuously over the course of the year, growth ultimately reached a figure of 11.8%, adjusted for the impact of the strong Swiss franc. Datwyler supplies the leading pharmaceutical companies with system-critical components for Covid-19 vaccines. Despite expenses for managing the im-pact of the pandemic, start-up costs for new production capacities, higher depreciation and negative currency effects, Datwyler succeeded in improving the operating result (EBIT) by 24.1% to CHF 79.2 million (previous year: CHF 63.8 million). This equates to a significantly higher EBIT margin of 19.6% (previous year: 16.8%).

New multi-year contract with Nespresso until 2030.

Due to the substantial negative impact of the pandemic, revenue for continuing operations in the Industrial Solutions business area (excluding the divested Civil Engineering business unit) fell to CHF 427.5 million (previous year: CHF 505.3 million). This corresponds to a currency-adjusted decline of 11.4%. Thanks to the rapid adjustment of the cost structures and the encouraging performance of the Food & Beverage business, the EBIT margin improved slightly to 11.8% (previous year: 11.7%). The operating result (EBIT) amounted to CHF 50.4 million (previous year: CHF 59.1 million). Towards the end of the reporting year, Datwyler extended its strategic partnership with Nespresso. The new multi-year contract runs until 2030 and envisages continuous volume and revenue growth.

Online distributor Reichelt wins market share.

Reichelt was able to increase its market share in the reporting year by offering excellent value for money. The online distributor achieved currency-adjusted growth of 12.7% in a challenging market environment and increased revenue to CHF 188.8 million (previous year: CHF 174.3 million). The low cost base helped to increase the operating result (EBIT) by 16.2% to CHF 17.2 million (previous year: CHF 14.8 million). The EBIT margin improved to 9.1% (previous year: 8.5%). Reichelt benefited from the growing popularity of online shopping, which received a further boost as a result of the pandemic. There was particularly strong demand for electronic devices and accessories for use in a home-office or home-schooling setting. The scalability of Reichelt’s systems and software solutions meant that it was able to guarantee the availability of goods and logistical and delivery capacities at all times despite high order volumes, bottlenecks at courier services and the challenges of Brexit.

New organisation and strategic priorities prove their worth.

The new organisational structure introduced at the start of February 2020 with the two business areas Healthcare Solutions and Industrial Solutions and the two Group functions Technology & Innovation and Finance & Shared Services already proved its worth during the COVID-19 pandemic. The increased focus on the respective markets helped Datwyler respond to changing market conditions and customer needs with speed and agility. At the same time, the core competencies and the innovation process are being further developed and significantly strengthened by the new Group function Technology & Innovation. One example is the investment in a new centre of competence for surface technology at the Swiss site, with which we are reinforcing our leading position in the market for multi-component parts in combination with elastomers. These products play a particularly important role in systems for electric vehicles.

The strategic priorities of driving profitable growth, accelerating digitalisation and increasing agility, which have already been in place for some time, mean Datwyler is well equipped to deal with any unexpected developments. As a socially and environmentally responsible company, we established the advancing of sustainability as a fourth strategic priority in the reporting year. An interdisciplinary project group is working on a new sustainability and climate strategy with the goal of achieving carbon neutrality for our own activities (scope 1 and 2) at all our sites by 2030 based on the Science Based Targets concept. We already obtain 35% of our global electricity needs from renewable energy sources.

Datwyler is confident that the company has the necessary strategic, organisational, financial and cultural prerequisites to emerge from the pandemic even stronger than before and take advantage of growth opportunities in existing and future markets.

Confident despite uncertainty due to the pandemic.

In specific terms, Datwyler expects significant double-digit revenue growth in the healthcare business in 2021. Strong demand for high-quality coated components manufactured according to FirstLine™ production standards is bringing about a positive change in the product mix and the average margin. To be able to handle the volumes forecast, Datwyler is investing in the expansion of its production facilities. The additional healthcare production capacities at the new US site and the Indian site will enable the company to increase its market share and participate in market growth to a disproportionately high extent. For the Industrial Solutions business area Datwyler is confident – despite the uncertainty caused by the pandemic – that the recovery of the markets in the fourth quarter and good order backlogs will lead to high single-digit revenue growth in 2021. In the Food & Beverage business unit, the company expects to achieve strong growth over the next few years thanks to the new multi-year contract with Nespresso that runs until 2030 and the acquisition of additional customers. Investments in additional production facilities are underway. Margins will weaken as a result of the altered customer and product mix. The demand situation in the Oil & Gas business unit will only improve with a significantly higher oil price. Due to the excellent value for money it offers, the online distributor Reichelt is likely to achieve low single-digit growth in 2021 following the strong reporting year. Subject to additional unpredictable effects of the pandemic, Datwyler expects an increase in revenue to over CHF 1’100 million and an EBIT margin to be around15% in 2021.

Changes to the Board of Directors

Zhiqiang Zhang is not standing for re-election to the Board of Directors at the 2021 Annual General Meeting. Martin Hirzel will be nominated for election as a new Director and a further representative of the public shareholders. Martin Hirzel is the President of Swissmem, the industry association for the Swiss mechanical, electrical engineering and metals industries, Director of Bucher Industries and was CEO of Autoneum from 2011 to 2019.