Business Review Group
Lower revenue and result due to the pandemic
In a business environment marked by the coronavirus pandemic, the Conzzeta Group generated net revenue of CHF 1,283.5 million in 2020, 10.4% below the previous year on a comparable basis. The operating result (EBIT) was CHF 79.7 million and includes the extraordinary gain of CHF 47.4 million from the sale of the Schmid Rhyner business unit at the end of February 2020. The measures launched in March as part of the “Cash, Cost, Complexity” initiative were successful in partially compensating for the adverse impacts of the pandemic. The Group’s strategic transformation, which was steadily driven forward, shall be completed in 2021.
The 2020 annual financial statements, which report a decline in revenue of 18.4% compared with the previous year and an operating result (EBIT) of CHF 79.7 million, were strongly influenced both by the impact of the coronavirus pandemic and by the divestments of the Schmid Rhyner business unit at the end of February 2020 and the Glass Processing segment at the end of March 2019. The disposals resulted in a loss of contributions to revenue and earnings. However, the transactions also resulted in divestment gains of CHF 47.4 million in 2020 and CHF 29.9 million in 2019. On a comparable basis, i.e. adjusted for changes in the scope of consolidation and at stable exchange rates, the Group’s net revenue in 2020 was 10.4% below the previous year. Adverse effects from changes in the scope of consolidation amounted to CHF 63.8 million and adverse currency effects amounted to CHF 63.0 million.
The coronavirus pandemic and its impacts were the dominant theme for long periods of the reporting period. In the Bystronic and FoamPartner business units, various production facilities had to temporarily shut down in the first half of the year, while in the Mammut business unit, the physical stores, which are dominant in terms of revenue generation, remained closed for extended periods in both the first and the second half of the year. Business performance largely followed the staggered course of the pandemic in the regions relevant for Conzzeta. As expected, business activities in all segments accelerated in the second half of the year compared with the first half which was particularly weak due to the pandemic. In the fourth quarter, order intake at Bystronic and net revenue at FoamPartner exceeded the figures for the same period in 2019, before the outbreak of the pandemic. Bystronic’s order intake was CHF 241.6 million in the fourth quarter, up 2.4% from the previous year (or 8.4% at stable exchange rates), and the order book level at year-end was CHF 206.8 million (–14.6%).
The measures introduced in March as part of the “Cash, Cost, Complexity” initiative to mitigate the consequences of the pandemic included reducing outstanding accounts receivable, cost savings programs and targeted adjustments to organizational structure and/or workflows. The pandemic affected the business units and the corporate office differently, depending on the area of activity and business model. Accordingly, individual measures were defined for each specific unit. Thanks to the solid capital base, important projects to promote growth and operational improvements were able to continue. The operating result (EBIT) includes one-off effects of around CHF 14 million, mainly associated with organizational measures in the Outdoor segment and in context of the Group’s transformation. The reported EBIT reached CHF 79.7 million compared to CHF 167.2 million and includes the aforementioned divestment gains. Excluding these, adjusted EBIT was CHF 32.3 million (previous year: CHF 137.3 million), with an EBIT margin of 2.5% (8.7%). The divestment gain included in the Group result was tax-exempt, which is reflected by the tax rate of 12.8%. The Group result was CHF 66.9 million (CHF 136.8 million), with minority interests of CHF 1.9 million (CHF 11.1 million). The earnings per class A registered share were CHF 31.46 and as such 48.3% down on the previous year. The return on net operating assets in the reporting year was 4.1% (20.0%), primarily due to the lower operating result (not including the divestment gain).
Financing, investments and divestitures
The sale of the Schmid Rhyner business unit and the acquisitions made for the Bystronic business unit (first, Weber Laserservice BV, a service partner predominantly servicing the Benelux and German markets, and second the 30% minority interest in DNE Laser, which operates in the Chinese entry-level product segment) resulted in a cash inflow of CHF 12.7 million.
The Group adhered to important initiatives, thanks to its substantial liquid assets and strong capital base. Investments in property, plant and equipment and intangible assets amounted to CHF 39.4 million (CHF 69.8 million). Free cash flow from operating activities was CHF 51.5 million, which exceeded the previous year’s figure (CHF 40.6 million) despite the lower operating result. Noteworthy individual investments, particularly in the Sheet Metal Processing segment, included a site optimization in Shenzhen (China) and the construction of two experience centers in Elgin (US) and Incheon (Korea). In the Chemical Specialties segment, warehouse capacities in Changzhou (China) were expanded and the construction of a new processing center for foams was completed in Duderstadt (Germany).
After the distribution of an unchanged ordinary dividend for the 2019 financial year and cash not required from the sale of Schmid Rhyner totaling CHF 86.8 million, Conzzeta held cash and cash equivalents of CHF 273.3 million at the end of 2020, with an equity ratio of 69.2%. Conzzeta thus continues to have a solid balance sheet to sustainably support its business development.
Conzzeta strives to achieve leading positions in the markets in which it operates, demanding that all of its business units contribute to achieving the Group’s financial aspirations throughout their business cycles. The announcement on December 9, 2019, that the strategic focus would shift to sheet metal processing and that all other activities would be sold (see the Strategy section) was preceded by a careful evaluation of all options, with the aim of accelerating the development of the improved potential seen in all business units in recent years.
Already on December 20, 2019, it was announced that a binding agreement had been entered into to sell the Schmid Rhyner business unit, part of the Chemical Specialties segment, which was completed at the end of February 2020. On November 10, 2020, Conzzeta then announced that it had entered into a binding agreement to sell the FoamPartner business unit by the end of the first quarter of 2021, subject to regulatory approval. The sale of the Mammut business unit (Outdoor segment) is currently still expected towards the middle of 2021, subject to market conditions. As part of its “Strategy 2025”, which was presented at a virtual Capital Markets Day on November 10, 2020, Bystronic is seeking to further improve customer proximity with new technical solutions and services.
Conzzeta’s transformation has not only involved the focusing the business portfolio, but also adapting elements of corporate governance and changing the name from Conzzeta to Bystronic. With this in mind, during the transition year of 2020 various foundations were laid and preparations were made for organizational changes, which will be implemented over the course of 2021. With the divestment of the discontinued businesses, the current management structure for a Group with very different business activities is no longer required, which is why the Executive Committee will resign at the Annual General Meeting on April 21, 2021. From April 22 onwards, Bystronic’s Executive Committee, as newly appointed by the Board of Directors, will have operational responsibility. To ensure the stability required to implement the “Strategy 2025”, the existing shareholder agreement will remain in place. The name change from Conzzeta to Bystronic will also be on the agenda for the Annual General Meeting and will form the basis for the sharpened positioning of Bystronic in the capital market. Subject to shareholder approval and following official notification by SIX Swiss Stock Exchange, the company’s listed registered shares will trade under the ticker symbol BYS (but with the same Swiss securities number and ISIN) as of the start of May 2021.
Risk management and corporate responsibility
Conzzeta encourages responsible corporate behavior and a consistent focus on innovation and sustainable customer value, while carefully managing risks, seamlessly adhering to the binding standards of conduct laid down in the Code of Conduct, and appropriately considering the interests of all stakeholder groups.
As in every year, the audit schedule set by the internal audit function established in 2015 was carried out during the reporting year. In 2020, the Board of Directors again undertook an integral Group-wide risk assessment based on management reporting and the separate Group Risk Report, which contains the process of risk monitoring as well as the most significant risks. The risk management process, which has been implemented across the Group, encompasses the identification, evaluation and qualitative appraisal of operational, financial and strategic risks in all business units and at Group level. It is supported by risk monitoring, plans of action and standardized reporting.
As at the end of 2020, the Group had identified the following key risks:
- Competitiveness: missing out on technologies and trends, disruptive changes in new technologies, business models and other areas such as digitalization.
- Portfolio risk: unprofitable business areas, strategic misjudgments of markets, missed M&A opportunities and failed acquisitions.
- Geographic expansion: insufficiently aggressive expansion of business in Asia and the USA, resulting in continued subcritical mass and lost profits.
- Digital infrastructure: insufficient maintenance of adequate IT infrastructure and IT security, including digital products (for example, machine control systems, automation, mobile applications).
- Strategic transformation: losing executives and key employees at the level of the business units and at Group level. Effect on leadership, performance and reputation because one or more business units intended for sale are unable to be sold, and/or because Bystronic’s preparations for a future as an independent listed company prove inadequate.
- Business continuity management: disruptions or breakdowns in supply and sales channels or the closure of production facilities at the behest of government authorities, as a result of the coronavirus pandemic or future pandemics.
Conzzeta is committed to value-oriented corporate management with a long-term perspective. The annual risk assessment considers the future viability of the individual business activities and their ability to survive, and served as the basis for the decision taken at the end of 2019 in favor of the Group’s strategic transformation. It also systematically takes into account environmental, social and governance (ESG) issues. In 2020, in light of the Group’s strategic realignment and in preparation for listing separately on the stock exchange without Conzzeta as its holding company, Bystronic continued to develop the Group’s materiality assessment (see the Responsibility section).
Appropriation of profit
The Group result for 2020 amounted to CHF 31.46 for each class A registered share and CHF 6.29 for each class B registered share, compared with CHF 60.85 and CHF 12.17, respectively, the previous year.
The Board of Directors proposes to the Annual General Meeting of April 21, 2021, the distribution of a dividend of CHF 124.2 million. The proposal allows shareholders to participate in the excess liquidity of the company, as announced in December 2019 in context of the strategic transformation. Besides the transformation progress, the proposal also considers the capital needs of Bystronic and the current market environment. Subject to the approval of the General Meeting of Shareholders, CHF 60.00 will be distributed for registered share A and CHF 12.00 for registered share B.
At the end of 2020, the Conzzeta Group had 4,891 employees worldwide, compared with 5,026 the previous year. The decrease is due to the sale of the Schmid Rhyner business unit at the end of February 2020 as part of the Group’s strategic realignment, and the measures introduced in all business units in March 2020 as part of the “Cash, Cost, Complexity” initiative to contain the financial impact of the coronavirus pandemic. In the second half of 2020, longer-term operational improvements were also implemented, particularly in the Mammut and FoamPartner business units, in order to relieve the cost bases also structurally. By contrast, the number of employees in the Bystronic business unit increased compared with the previous year in accordance with its “Strategy 2025”. Traditionally, Conzzeta Group companies have participated in apprentice training programs. At the end of 2020, 168 apprentices were in training at 12 locations in a total of 25 disciplines.
The expertise, flexibility and commitment of our employees have always been among the key factors that ensure the long-term success of the Conzzeta Group companies. These skills were really put to the test in 2020 in light of the Group’s strategic realignment and the pandemic. The Board of Directors and the Executive Committee would like to thank all employees for their dedication and efforts in 2020, in the conviction that the personnel development measures systematically implemented over the past few years have prepared employees well for future challenges and changes, whether as part of the team at Bystronic or in employment outside the Group.
Conzzeta is within reach of completing its strategic transformation. In addition to the change of name, the Board of Directors also proposes to the Annual General Meeting of April 21, 2021, the distribution of a dividend of CHF 124.2 million. The proposal allows shareholders to participate in the excess liquidity of the company, as announced in December 2019 in context of the strategic transformation. Bystronic, however, shall remain well capitalized for the implementation of its “Strategy 2025” in order to be able to act flexibly as a growth-oriented company in a market of the future.
All of Conzzeta’s business units have started 2021 with positive momentum, while the business environment remains challenging due to the tense pandemic situation and ongoing macroeconomic uncertainties. For the continued business of Bystronic, a return to growth is expected in 2021 in line with the targets communicated at the Capital Markets Day on November 10, 2020, with revenue growth of 5% to 8% as well an EBIT margin of around 8%, which is still at the lower end of the target range.