SFS Group reported “modest growth in a challenging environment” during the first half of 2019. Group sales increased 1.4% to CHF 867.8 million. However, like for like sales declined -2.4% “burdened by weaker economy and trade tensions”. Overall SFS expects “slightly better development” in the second half.
SFS reported earnings “marked by mix effects and demand-driven fluctuations in capacity utilisation”. EBIT was CHF 105.5 million for the half year, with an adjusted EBIT margin of 12.6%, down from 13.6% in the previous year. One time effects, including relocation costs in China partially offset by Swiss real estate sales, reduced EBIT by CHF 3.7 million.
SFS strengthened its market position in the US by acquisition of Triangle Fastener Corporation (TFC). It also successfully commissioned a new manufacturing platform in Nantong, China.
The Fastening Systems segment reported strong sales growth of 16.6% to CHF 248.3m driven by consolidation of HECO and TFC. Organic development was, however, negative at -1.8% with further negative impact from currency exchange effects (-2%). Segment operating profit increased 15.5% against H1 2018 to CHF 24 million with EBIT margin maintained at 9.4%.
SFS reported divergent trends among its fastening divisions, with stable demand in the construction industry. The division also benefiting from close collaboration between TFC and HECO expanding the product portfolio with innovative solutions in timber construction. SFS sees trends to greater safety, energy efficiency and building automation as key areas of innovation and further growth: it expects the positive trend to continue in the second half.
In contrast Riveting experienced a significant drop in demand from automotive and industrial customers, with Brexit uncertainty also impacting business. Corresponding shifts in capacity utilisation impacted earnings, with capacity adjustment measures taken to mitigate this effect. Urs Langenauer, former head of automotive in North America, has taken over responsibility for the division. SFS expects the challenging market conditions to persist in the second half resulting in a flat business trend.
SFS Distribution & Logistics segment, operating in Switzerland, experienced slight positive organic growth (+0.3%) during the period with sales at CHF 165.3 million – attributed particularly to the tools business, e-shop and retail stores. EBIT at CHF 13.3 million reflected 7.4% growth over same period 2018, with adjusted EBIT margin increasing from 7.2% to 7.9%.
Other SFS segments in brief: Automotive division sales were -4.3% against H1 2018, but +4.0% against H2 2018, on continued weak demand. EBIT increased +4.9% against H2 2018. SFS reported it had acquired attractive new projects but expected business to remain flat in the second half. Trade tensions impacted the electronics marketplace with demand stabilising below previous year levels. Over the full year SFS expects some offset from new product introductions. SFS reported returned growth in the Aircraft business due to the ramp up of Airbus A350. Overall the Industrial division reported a slight negative trend and stable development expected in the second half. There were continued dynamic sales for the Medical division, with a positive H2 forecast based on a robust project pipeline.
Full half year report at: https://www.sfs.biz/downloads/investor-relations/financial-publications/half-year-report-2019.pdf
Having held senior management roles in leading automotive and fastener businesses, Phil joined Fastener + Fixing Magazine as editor in 2002. Convinced there is no substitute for ‘being there’, over 17 years of visits and interviews around the world means he has accumulated an extraordinary knowledge and perspective of the global fastener industry, reflected in his incisive and thought provoking reporting.
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