Datwyler accelerates its profitable growth

Once again, the COVID-19 pandemic dominated the first half of the year around the world. Unlike in the first lockdown phase in spring of 2020, however, Datwyler’s sales markets and production were significantly less affected. The safety concepts and rules of conduct at the sites were optimised continuously and proved to be effective, enabling us to protect our employees‘ health and guarantee delivery capacities for our customers at all times. Thanks to our modern ICT infrastructure, working from home did not limit our employees‘ productivity.

Large increase in profit thanks to revenue growth and cost discipline

In contrast to the pandemic-hit prior-year period, Datwyler recorded dynamic revenue growth from continuing operations of 20.8% to CHF 590.0 million (previous year: CHF 488.6 million) in the first half of 2021. The currency effect was practically negligible. Datwyler was able to achieve revenue growth – in some cases well into double digit – in almost all the markets it serves. Thanks to the good utilisation of capacity and strict cost management, the operating result (EBIT) rose disproportionately by 53.3% to CHF 98.9 million (previous year: CHF 64.5 million). As a result, the EBIT margin improved accordingly by more than three percentage points to 16.8% (previous year: 13.2%). The net result rose by 71.3% to CHF 74.5 million (previous year: CHF 43.5 million). Due to the one-off negative effects of the coronavirus pandemic in the first half of 2020, it is worth drawing a comparison with the first half of 2019 and the second half of 2020. Taking continuing operations into account, the comparison with the first half of 2019 shows that Datwyler’s revenue and income rose above pre-pandemic levels by 8.0% and 7.4%, respectively. In comparison with the second half of 2020, we were able to accelerate revenue growth and improve our margin. The Healthcare Solutions and Industrial Solutions business areas generated a combined EBIT margin of 18.3% in the first half of 2021. With this figure, the profitability of the core business is already close to that of the former Sealing Solutions Division.

"Our strategic realignment with a focus on system-critical elastomer components for attractive global markets is paying off. With high demand and dynamic, profitable growth, our core business shows the promising potential for the future," says Datwyler CEO Dirk Lambrecht.

Healthcare Solutions increases EBIT by more than 50%

In its Healthcare Solutions business area, Datwyler is supporting the leading vaccine manufacturers in the provision of COVID-19 vaccines. We supply, among others, BioNTech and the Serum Institute of India with system-critical elastomer components. Boosted by the additional demand due to COVID-19, revenue was up by 18.7% to CHF 238.7 million (previous year: CHF 201.1 million). The currency effect was negligible. Datwyler also posted strong organic growth in its core business for system-critical components for high-quality injectable medicines. Through its newly launched NeoFlex components, the company was able to acquire new customers and medicine projects, which will lay the foundations for long-term revenue growth. Datwyler was also able to expand its customer base via its participation in COVID-19 vaccine projects. Thanks to the high utilisation of capacities, Healthcare Solutions increased the operating result (EBIT) by 60.3% to CHF 56.9 million (previous year: CHF 35.5 million). The EBIT margin improved by around a third to 23.8% (previous year: 17.7%). One factor that contributed to this was a positive change in the product mix with a greater proportion of high-margin coated components being manufactured according to FirstLine standards.

To avoid future capacity bottlenecks and maintain delivery capabilities, Datwyler is continuing to invest in the expansion of production capacities. Over the course of 2021, CHF 75 million to CHF 85 million are being invested in additional production facilities in the existing seven healthcare sites on three continents and the second production plant at the existing site in India. In addition to the expansion of our own capacities, the limited availability of global logistical capacities is causing additional challenges. The procurement of raw materials requires increased attention, but should be ensured.

Significant recovery at Industrial Solutions

The Industrial Solutions business area experienced a significant recovery in demand in the first half of 2021. The revenue for continuing operations (excluding Civil Engineering) rose by 23.9% to CHF 249.3 million (previous year: CHF 201.2 million). Adjusted for currency effects, this equates to a growth rate of 23.2%. Thanks to the improved capacity utilisation and consistent cost management, the operating result (EBIT) rose by 50.5% to CHF 31.9 million (previous year: CHF 21.2 million). As a result, the EBIT margin improved accordingly to 12.8% (previous year: 10.5%). In total, the revenue of Industrial Solutions is still 4.7% and the EBIT 22.2% below pre-pandemic levels of 2019. In the Mobility and General Industry business units in particular, the market conditions have more or less normalised again in comparison with the pandemic-hit first half of 2020. However, the general shortage of IT components in the automobile industry has a negative impact on global production activities, which also slows down the development of revenues in Datwyler’s Mobility business unit. As a result, Mobility’s revenue is still around 10% below pre-pandemic levels from 2019. With the transfer of the liquid silicone production technology to the sites in Mexico and China, Datwyler established a global production base for complex multi-component parts, which are used in electric vehicles in particular. The company is also upgrading its Chinese site with nextgeneration injection moulding technology.

In the Food & Beverage business unit, the new ten-year contract with Nespresso and the supply of further customers accelerated revenue growth. As announced, the changed product mix has a negative impact on the margin. Due to the high order backlog in the Food & Beverage business unit, Datwyler invests an expected CHF 30 million in new production facilities and automation at the Swiss plant over the course of 2021. To streamline its organisation, Datwyler further optimised the structures in the Industrial Solutions business area. Among other changes, the Oil & Gas business unit is now part of the General Industry business unit.

Strong growth at online distributor Reichelt

The online distributor Reichelt benefited from the acceleration in the online shopping trend that occurred in the first half of 2021 as well as the additional demand for electronic equipment for home offices and home schooling. Revenue increased by 17.2% to CHF 105.0 million (previous year: CHF 89.6 million). Adjusted for currency effects, this equates to growth of 14.0%. Over the course of the reporting period, Reichelt recorded slower growth in the business-to-consumer segment and faster growth in the business-to-business segment. Thanks to the very high utilisation of capacity and operating leverage effects, the operating result (EBIT) rose by 36.5% to CHF 10.1 million (previous year: CHF 7.4 million). The EBIT margin further improved to 9.6% (previous year: 8.3%). Over the last five years, Reichelt has more than doubled its range of available products and increased the share of revenue generated outside Germany, which is growing at an above-average rate, to almost 20%. To be able to continue serving customers with its short delivery times, Reichelt is investing around CHF 10 million in a new distribution centre which will double its logistical capacities. The centre is scheduled to go into operation in 2023.

Optimistic outlook – higher forecasts

The outlook remains uncertain due to the pandemic. Thanks to the progress of global vaccination campaigns, however, we expect framework conditions in the markets relevant to us to remain mostly stable. The order books in the Healthcare and Food & Beverage businesses remain high. We are confident that the market recovery will continue for General Industry. Short-term trends in the Mobility business unit depend substantially on how the general shortage of electronic components affects the number of vehicles produced worldwide. Further uncertainty is created by the increasingly difficult procurement situation for certain raw materials in the Mobility and General Industry business units. In most cases, rising raw material prices can be passed on to customers after a certain delay through price clauses in the contracts. For the online distributor Reichelt, the shortage of components could dampen the very high growth. Thanks to the excellent value proposition it offers, however, Reichelt still enjoys a very strong long-term market position. Against this backdrop, Datwyler is confident that, despite a seasonally weaker second half, we will be able to increase revenue to over CHF 1’150 million (previous target: CHF 1’100 million) and achieve an EBIT margin of above 16% (previous target: 15%) over the year as a whole.