Metall Zug Group: Continued Sales Growth

The Metall Zug Group increased gross sales by 3.4% in the first half of 2016 to CHF 441 million (H1 2015: CHF 427 million). This is equivalent to an organic growth in local currencies of 2.1%. Acquisitions contributed 0.5% to growth and currency effects 0.8%. All business units succeeded in augmenting their gross sales. The Metall Zug Group generated operating income of CHF 31.6 million. Compared with the prior-year period (CHF 31.2 million), this represents a rise of 1.4%. The gain on the sale of the Belimed site in Ballwil will not be recognized until the second half of 2016.

The financial result for the first half of 2016 amounted to CHF 0.6 million. The slightly negative performance by investments in securities was offset by the increased value of financial assets and associated companies. In the first half of 2015, the financial result had impacted the income statement in the amount of CHF –13.0 million.

The Metall Zug Group achieved net income of CHF 23.9 million in the reporting period (H1 2015: CHF 10.3 million).

The net cash position was CHF 474 million as at June 30, 2016, and therefore CHF 43.7 million lower than at December 31, 2015, following the distribution of a dividend, the advance payment of taxes and buildup of net working capital. The Metall Zug Group has a solid balance sheet with equity of CHF 825 million (December 31, 2015: CHF 833 million) and an equity ratio of 76.9%.

Whereas the prior-year period had been dominated by the abandonment of the euro minimum exchange rate, in the first half of 2016 pleasing strategic and operational progress was made in all business units: The Household Appliances Business Unit consolidated its market position in Switzerland while at the same time driving internationalization forward. In addition to the restructuring, which is proceeding on schedule, the Infection Control Business Unit made substantial investments in market development, thus laying the foundations for future growth. The Wire Processing Business Unit optimized its supply chain and posted further progress in its project business.

Household Appliances: Sales and EBIT growth

The Household Appliances Business Unit generated gross sales of CHF 286 million, representing an advance of 2.9% over the prior-year period (CHF 278 million). Adjusted for the impact of acquisitions of 0.2%, this resulted in organic growth in local currencies of 2.7%. The business unit generated operating income (EBIT) of CHF 32.9 million, an increase of 9.7% compared with the prior-year period (CHF 30.0 million).

The Household Appliances Business Unit continued to consolidate its strong position in its home market Switzerland. Strong brands, more product innovations and a global procurement strategy enabled it to increase both sales and profitability. For example, V-ZUG rounded out its kitchen line with vacuum drawers for sous-vide cooking, downdraft ventilation and design hoods. Customers can download new applications for existing household appliances that are equipped with V-ZUG Home networking technology.

Synergies are to be created in future at the Technology Cluster Zug, where know-how will also be bundled to strengthen the V-ZUG production site and generally promote Zug as a location for industry. A first part of the new “Mistral” assembly and logistics building at the Zug site is already operational. In addition, there are plans to set up joint research and test laboratories for the washers produced by V-ZUG, Gehrig und Belimed, thus laying the first cornerstone for the Technology Cluster Zug. These efforts are also being supported by a cooperation between V‑ZUG and Siemens, the “Kompetenzzentrum industrielle Bildung” (KiB), which aims at training young apprentices in eight different professions.

Infection Control: Investments in the future alongside to the restructuring

Gross sales of the Belimed Group (Infection Control Business Unit) increased 4.2% to CHF 83.1 million (H1 2015: CHF 79.7 million). Given the currency effect of 1.9%, this resulted in organic growth in local currencies of 2.3%. Sales are normally subject to seasonal fluctuations as many hospitals and customers in the Life Science segment aim to complete projects by the end of the year. In addition to the restructuring costs, investments in market development as well as in research and development also had a negative impact on operating income (EBIT). At CHF –13.0 million, this figure was 39.2% down on the prior-year period (CHF –9.3 million). This amount does not include the gain on the sale of the Ballwil site, which will not be realized until the second half of 2016.

Performance of the Belimed Group’s segments varied in the first six months of 2016: Whereas Medical and Services grew year on year, Life Science did not match expectations, following project postponements into the second half. The development and expansion of the service and sales structures in the US led to higher personnel costs, as planned. The unavoidable duplication of positions during the course of relocating production to Slovenia had a negative impact on the income statement. The Ballwill production site and associated costs will fall away in the third quarter.

In the first quarter of 2016, Belimed entered into a cooperation in the US with a provider of cleaning chemicals. This is intended to increase the share of recurring income generated in addition to the pure service business. The ongoing centralization of the European spare parts warehouse and the rollout of SAP will make Belimed more efficient and reduce costs in future.

Wire Processing: Higher operating income (EBIT)

Overall, the Schleuniger Group (Wire Processing Business Unit) reported a 4.8% rise in gross sales to CHF 74.0 million in the first six months of 2016 (H1 2015: CHF 70.6 million). Excluding the acquisition effect of 2.2% and currency effect of 2.7%, organic growth in local currencies amounted to –0.1%. Operating income (EBIT) rose by 32.2% from CHF 9.0 million in the prior-year period to CHF 11.9 million thanks to the advantageous product mix and the fact that significantly fewer product optimization costs were incurred in the year under review.

While the Cut&Strip and Cut-Strip-Terminate segments as well as NAFTA and EMEA market regions turned in a gratifying performance, China and sales in the project business lagged behind expectations. Experience has shown that sales in the project business tend to be volatile. The order backlog indicates that this business may expect sales growth for the full year. Schleuniger has responded to the increased demand with additional production capacities in Thun and Cham.

The strategic cooperation with Laser Wire Solutions (LW Solutions Ltd., UK), which focuses on laser-based wire stripping, and the non-controlling interest in this company acquired in June 2016 allow Schleuniger to broaden its position in strip operations.

Digitization is exerting a growing influence on Schleuniger’s business. The close cooperation with DiIT AG, a leading global provider of Manufacturing Execution Systems within the wire harness industry, creates a promising platform for success in this area. Following on from S.WOP (Wire Optimized Production), the simple and easy-to-use new S.RPM (Real Production Meter) is a further step towards the Internet of Things.

Outlook

The second half of 2016 may involve market uncertainties for the Metall Zug Group. The consequences of Brexit on the economic environment as well as on growth in the EU area and in Switzerland are still unclear.

If there is no significant change in the business environment and currency situation and no special events occur, the Metall Zug Group expects operating income (EBIT) for 2016 as a whole to be higher than in the previous year. The financial result for 2016 depends on how the financial markets and currency rates develop going forward.

Key figures of Metall Zug Group

About the Metall Zug Group

Metall Zug is an industrial group of companies headquartered in Zug. It comprises three business units and has a workforce of around 3 900 employees. The Household Appliances Business Unit includes the Swiss market leader V-ZUG AG and its foreign subsidiaries, V-ZUG Kühltechnik AG, SIBIRGroup AG and Gehrig Group AG. The Infection Control Business Unit is represented by the Belimed Group, and the Schleuniger Group makes up the Wire Processing Business Unit. The holding company Metall Zug AG is listed in the Swiss Reporting Standard of SIX Swiss Exchange in Zurich (series B registered shares: securities number 3 982 108, ticker symbol METN).