Dynamic trend in growth markets
In the first half of fiscal 2009/10, the Schaffner Group again posted its strongest growth in the Asia/Pacific region with net sales increasing by 65%. Sales in China increased by 44% and accounted for 19% of Group sales. Europe contributed 61% (68%) to total sales of the Schaffner Group. The Asia/Pacific region accounted for 32% (23%) and American markets 7% (9%).
The Schaffner Group’s reporting for the first half of fiscal 2009/10 is broken down for the first time into three business segments: Electromagnetic Compatibility (EMC), Power Quality (PQ) and Automotive (AM). All three segments contributed to the positive interim result.
The EMC segment, supplying components that ensure the electromagnetic compatibility of electrical and electronic systems and equipment, posted segment sales of CHF 49.7 million (HY1 2008/09: CHF 47.0 million). The segment result was positively influenced by the previously completed restructuring measures, rising significantly to CHF 7.6 million (CHF –0.5 million), representing a margin of 15.3%. EMC recorded a real boom in orders from the solar inverter industry as a result of substantial investments into solar power installations in Germany, ahead of the cuts in feed-in tariffs that are scheduled to come into effect on July 1, 2010. The traditional European EMC markets for machine tools and robotics and the telecoms industry remained at a low level. EMC contributed 59% to Group sales in the first half of fiscal 2009/10.
The PQ segment designs and manufactures magnetic components and harmonic filters that guarantee power quality in electric grids as well as the reliable operation of energy efficient systems and equipment. Segment sales totalled CHF 26.9 million (CHF 22.0 million), representing a year-on-year rise of 22%. The Asia/Pacific market accounted for the largest share of growth in the PQ segment, with rail technology, photovoltaics and wind turbine construction faring particularly well. Also the growing market for harmonic filters which ensure the reliable supply of power in buildings and infrastructure installations developed positively. The segment result increased by CHF 1.0 million to CHF 0.5 million (CHF –0.5 million). The margin of 1.9% was still impacted by high development costs and investments into business expansion. A further sustainable margin improvement is being targeted in this regard. PQ accounted for 32% of Group sales.
The AM segment designs and manufactures components for security and convenience features in automobiles, as well as EMC filters for deployment in hybrid and electric vehicles. The Automotive segment recorded a 175% improvement in segment sales to CHF 8.1 million (CHF 2.9 million). The segment result totaled CHF 0.9 million (CHF –0.9 million), with a margin of 10.9%. Contributing to the growth in sales were the general market recovery and newly acquired projects for automobile manufacturers in Asia and Europe, production for which commenced during the first half of fiscal 2009/10. The Group acquired a further contract for EMC filters for hybrid and electric vehicles during the first half of fiscal 2009/10 and this will have a positive impact on segment sales over the medium term. The AM segment accounted for 9% of Group sales.
Solid financing structure
The Schaffner Group has a solid balance sheet. The convertible bond (2.25% Convertible Bonds 2004–2010) matured on January 28, 2010, in accordance with the conditions set out in the issue prospectus. The follow-up financing has been secured via the Group‘s four principal banks with an approved credit line of CHF 40 million. The rise in sales generated an increase in net working capital to CHF 34.8 million (September 30, 2009: CHF 30.7 million). The growth in net debt to CHF 13.8 million (CHF 11.9 million) is chiefly attributable to the increase in net working capital; the ratio of net debt to shareholders' equity amounted to 27% (25%). With a rise in shareholders' equity to CHF 51.0 million (CHF 47.3 million), the equity ratio increased further to 41.3% (37.3%) as at the end of March.
Outlook
Demand for EMC and power quality solutions in the Chinese domestic market, particularly in the fields of renewable energies and rail technology, remains high. Schaffner has received the order from Siemens for delivery of the second tranche of transformers and chokes for the construction of high-speed trains for the Chinese National Railway. Sales in the automotive sector are also developing well. In contrast, the prospects for EMC filters for photovoltaic applications are uncertain due to the decision taken in Germany to reduce the feed-in tariffs for solar electricity from July 1, 2010. Against this background, the Schaffner Group anticipates that sales and the operating result for the second half-year will be comparable to the first half, which would lead to a sales figure for fiscal 2009/10 of between CHF 160 million and CHF 180 million and an EBIT margin of between 5 and 7%.
The 2009/10 Interim Report can be downloaded from www.schaffner.com
http://www.schaffner.com/corporate/en/corporate/investor/reports.asp?level=1$3$3&language_id=12
Luterbach, May 12, 2010
