The Schaffner Group generated net sales of CHF 176.9 million in fiscal year 2011/12 (2010/11 restated: CHF 182.6 million). The sales reduction of 3.1% (or 4.7% in local currencies) was in line with expectations and resulted from the economic uncertainty in the euro countries, a cyclical low in traditional markets such as machine tools and robotics, and a sales slump in the renewable energy and rail markets in the first quarter of 2011/12. Schaffner MTC, which the Group acquired in September 2011, contributed CHF 16.8 million to sales in the reporting period (prior year for one month: CHF 1.2 million). Through savings in material and production costs, Schaffner largely offset higher staff costs in Thailand and China and further reduced its fixed costs. The shift in the geographic sales mix toward the more intensely competitive Asia-Pacific region drove up price pressure; this and the volume-induced underutilization of plants led to an operating (EBIT) margin of 4.1% (prior year: 7.0%), at the lower end of the expected range of 4% to 6%. Operating profit (EBIT) eased to CHF 7.2 million (from CHF 12.8 million) and net profit for the year declined to CHF 3.9 million (prior year: CHF 10.2 million). In fiscal 2011/12 the book-to-bill ratio (new orders to sales) was 1.02 (prior year: 0.97). EMC division:Market weakness in Europe weighed on sales and earnings In fiscal year 2011/12 the EMC division generated sales of CHF 105.8 million (prior year: CHF 128.9 million) and accounted for 59.8% of Group sales (prior year: 70.6%). In local currencies, sales decreased by 18.3% year-on-year. The main reason for the reduction was the drastically lower demand from European manufacturers of capital goods and solar inverters compared to the prior year. The market growth for solar technology in China, North America and Japan, as well as market share wins achieved especially in North America, only partly cushioned this steep fall in sales. For the fiscal year as a whole, the EMC division thus missed expectations with a segment profit of CHF 12.6 million (prior year: CHF 20.2 million). While the current earnings situation is very adversely affected by a cyclical low in demand, the Schaffner Group also foresees structural market changes and – above all in Asia – an unabated rise in costs, which can only partly be passed through to customers in higher prices. The Schaffner Group therefore launched a suite of measures for the improvement of the EMC division's earnings. Schaffner's management is confident that the implementation of these measures will enable the EMC division to achieve a target operating margin of 16% to 20% even under the current market conditions. Power Magnetics division:Healthysales growth in second half of year In fiscal year 2011/12 the Power Magnetics division increased its sales by 29.2% (31.1% in local currencies) to CHF 46.5 million (prior year: CHF 36.0 million) and contributed 26.3% (prior year: 19.7%) of Group sales. The sales figure includes the first-time consolidation of Schaffner MTC, which contributed CHF 16.8 million (prior year for one month: CHF 1.2 million). Adjusted for acquisition effects, sales contracted by 14.7%. Especially in China, sales were down sharply year-on-year due to the suspension of rail projects amid the reorganization of the Ministry of Railways and a drop in demand for photovoltaic products. The resulting underutilization of the Shanghai plant in the first six months led to a significant loss at that facility. The production sites in Europe and the USA, on the other hand, achieved their earnings targets. Although the Power Magnetics division closed the second half of the year on a segment profit, its result for the full year was still a small loss of CHF 0.3 million (prior year: loss of CHF 0.3 million). All manufacturing plants succeeded in cutting material costs while improving process quality during the year under review, and the standardization across sites allows further cost savings to be achieved. In combination with the measures to hone operational excellence, the division is thus well placed to meet its targeted segment profit margin of between 8% and 10% in the medium term. Automotive division: Expectations surpassed Reaping the benefits of its business strategy, the Automotive division pushed up sales in fiscal year 2011/12 by 39.9% to CHF 24.7 million (prior year: CHF 17.6 million), or by 40.3% in local currencies. The Automotive division enlarged its share of Group sales to 13.9% (from 9.7%). Despite continuing high costs for the development and series production of new products, the division reported a sooner-than-expected positive result, with a segment profit of CHF 0.6 million (prior year: loss of CHF 0.4 million). The campaign to step up Automotive product development activities and globalize sales is proving very successful. Thus, the first deliveries of components for keyless entry systems for a leading global automobile manufacturer are underway, and assuming full order draw-down by the customer over the project’s multi-year term, the division expects to achieve cumulative sales in the mid double-digit millions with this account alone. The Schaffner Group expects that the Automotive division will be able to meet its CHF 40 million sales target for fiscal year 2014/15 one year earlier than planned, in 2013/14, and to reach a segment profit margin target range of 8% to 10% in the medium term. Sound financing structure The Schaffner Group has a sound financing structure. As a result of the higher business volume at the end of the fiscal year, net working capital rose to CHF 37.8 million (from CHF 33.0 million at the prior year-end). Free cash flow consequently fell to CHF 1.5 million (prior year: CHF 9.7 million). Net debt therefore increased to CHF 25.9 million (prior year: CHF 20.3 million) and the gearing ratio of net debt to equity rose somewhat to 43% (prior year: 36%). With shareholders' equity of CHF 60.3 million (prior year: CHF 56.9 million), Schaffner’s equity ratio at the end of September 2012 was 42.8% (prior year: 41.6%). Distribution proposal The Board of Directors of Schaffner Holding AG will propose to the 17th Annual General Meeting on 14 January 2013 a distribution of CHF 2.00 (prior year: CHF 4.50) per share in the form of a tax-free repayment of capital to shareholders. This represents a payout ratio of 32.5%, in line with the adjusted target range of 25% to 35% of net profit. Outlook Provided the global economic situation does not worsen further, and assuming stable key currencies, Schaffner expects an increase in sales and in EBIT margin, especially in the first half of the new fiscal year relative to the 2011/12 comparative period. In the growth regions of Asia-Pacific and North America, and with new products and market share wins, Schaffner is well positioned both to grow structurally and to benefit disproportionately from a cyclical recovery in the markets. In the medium term – by fiscal year 2014/15 – the Schaffner Group, through organic growth of more than 8% per year and focused acquisitions in the EMC and Automotive divisions, aims to achieve net sales of CHF 250 million to CHF 280 million and an EBIT margin of between 9% and 12%. Luterbach, 6 December 2012 | 
