Challenging market environment – focusing for the future
The performance of our businesses was varied in 2019: while the Outdoor segment was able to generate increased revenue, the other segments reported revenue declines due to market factors. Despite this, the Group was able to maintain its operating profit on a comparable basis. The sale of the Glass Processing segment as per the end of March 2019 resulted in a one-off gain of CHF 29.9 million. At the end of 2019, Conzzeta decided to focus on the Sheet Metal Processing segment (Bystronic) and divest its other activities.
The market environment in 2019 was challenging and marked, among other things, by global trade disputes, geopolitical uncertainty, disruptive changes in important industrial sectors, heightened competitive pressure in individual markets and overall unfavorable exchange rate fluctuations. In light of these circumstances, revenue declined by 4.9% on a comparable basis, i.e., excluding changes in the scope of consolidation and at stable exchange rates, while the corresponding operating result remained stable.
The operating margin increased in all segments in 2019. For the discontinued Outdoor and Chemical Specialties segments, the increase amounted to 190 basis points to 3.6%. Despite this progress, income in both segments is still far too low, which is why we are continuing to work on operational improvements this year, irrespective of the announced focus strategy.
Plans for accelerated growth in the mid-term
By contrast, we are developing a comprehensive strategy for mid-term accelerated growth in the Sheet Metal Processing segment in 2020. Despite a 7.6% decrease in net revenue, Bystronic’s operating margin increased by 10 basis points to 12.9% in 2019. Its innovative range of products and services, process improvements and active cost management contributed to the stability of results, as did certain special factors.
The challenging market environment that prevailed in 2019 demonstrated the importance of leading market positions, which are not sufficiently prominent everywhere at Conzzeta. For this reason, Conzzeta announced in August 2019 that it would review measures to accelerate the development of value potential in the segments.
The corresponding analyses led to the announcement on December 9, 2019, that Conzzeta would be focusing on the Sheet Metal Processing segment, in which Bystronic is among the leading global providers. The other activities are to be gradually sold within a year, as far as the market situation permits.
The associated preparatory works have begun and, as at the end of February 2020 with the sale of the Schmid Rhyner business unit, a first partial goal was already achieved. The transaction gives rise to a substantial capital gain, which is taken into account in the dividend proposal of the Board of Directors to the upcoming Annual General Meeting. Bystronic’s new strategy is expected to be presented at a Capital Markets’ Day probably in fall 2020.
On behalf of the Board of Directors, we thank all our employees for their efforts and their support during this challenging transformation process. We are aware that the restructuring of the Group creates a burden in addition to day-to-day activities, and it may also be associated with uncertainty. We have therefore made arrangements to also provide assistance to employees who will be particularly affected.
With the announced strategic reorientation, 2020 will be a transition year for Conzzeta. The timing of the sale of both the FoamPartner and Mammut business units remains to be seen. Conzzeta anticipates a difficult economic development due to the consequences of the coronavirus epidemic and is taking appropriate actions. In the current situation it is not possible to provide a concrete financial outlook for 2020. With regard to the continuing business, Conzzeta however expects Bystronic to outperform the relevant market development thanks to its innovative portfolio of products and services.
Zurich, March 2020
Chairman of the Board