1. Performance

1.1 Segment information

Discontinued operations

Conzzeta sold the Glass Processing segment to the Finnish company Glaston Corporation on April 1, 2019. The transaction produced a gain of CHF 29.9 million, which is reported in the operating result 2019 of the Glass Processing segment. The segment is shown under discontinued operations in the overview below. Net revenue, total revenue and operating result for 2019 comprise a three-month period. Refer to note 4.1 for additional information on the transaction.

On December 9, 2019, Conzzeta announced that the Board of Directors of Conzzeta AG has decided that the Group’s future focus will be on the Bystronic business unit. The other business units are to be divested step by step within the period of a year, market conditions permitting. The segments Chemical Specialties and Outdoor are shown under discontinued operations in below overview. All companies in the business unit are affected by the sale. The companies are listed in note 4.2.

As of February 28, 2020, Conzzeta sold its Schmid Rhyner business unit to the German specialty chemicals group Altana. The transaction produced a gain of CHF 47.4 million, which is reported in the 2020 operating result of the Chemical Specialties segment. Net revenue, total revenue and the operating result for 2020 comprise a two-month period, whereas the comparison period comprises a 12-month period. Refer to note 4.1 for additional information on the transaction.

On November 10, 2020, Conzzeta announced that it had signed a binding agreement to sell its FoamPartner business unit for an enterprise value of CHF 270.0 million to Recticel, a Belgian polyurethane chemicals specialist based in Brussels and listed on Euronext (REC). The transaction is expected to be completed in the course of the first quarter of 2021, subject to regulatory approvals.

Additional information to continuing operations and discontinued operations

The following table shows the income statement divided into continuing and discontinued operations. The discontinued operations comprise the Glass Processing and Schmid Rhyner business units until their sale, and the FoamPartner and Mammut Sports Group business units, which are available for sale. The continuing operations comprise the Bystronic business unit and the corporate center. Transactions between continuing operations and discontinued operations are eliminated in the Group.

Gains from the sale of the Glass Processing business unit (CHF 29.9 million in 2019) and the Schmid Rhyner business unit (CHF 47.4 million in 2020) are allocated to discontinued operations under “Other operating income”.

Accounting principles

For the purposes of segment reporting the revenues of the economically similar FoamPartner and Schmid Rhyner business units are grouped together in a single reporting segment. Given that this aggregated reporting segment is characterized by similar value drivers (e.g. innovation, life cycle, raw materials used) and risk factors, the informative value of the disclosed key figures per segment is not adversely affected.

1.2 Revenue and other operating income

Geographical information

Comparable net revenue

The effects of transactions as part of acquisitions and divestments are recognized as changes in the scope of consolidation. Figures on a comparable basis take account of currency translation effects and changes in the scope of consolidation.

Other operating income

Other operating income includes gains from the sale of the Schmid Rhyner business unit in 2020 of CHF 47.4 million and the Glass Processing business unit in 2019 of CHF 29.9 million (see note 4.1). Furthermore, this item includes revenue from the sale of materials, waste and scrap, insurance contracts, subsidies and the sale of property, plant and equipment and investments.

Accounting principles

Revenue is recognized when goods or products are delivered or a service performed, and the benefits and risks as well as the power of disposal are transferred to the buyer. If the installation of the product at the recipient’s premises is an essential contract component, the revenue is not recognized until the installation is concluded. Longer-term orders are recognized using the completed contract method. The net revenue corresponds to the expected equivalent value of the service rendered, net of sales and value-added tax, any sales deductions such as sales bonuses, granted rebates and discounts as well as value adjustments and currency effects on trade receivables. Separable revenue is recognized and measured individually.

1.3 Operating expenses

Material expenses

Material expenses include the overall cost of raw materials, intermediates and supplies, as well as merchandise held for resale and expenses for third-party manufacturing, handling or processing of the Group’s products (external services).

Material expenses decreased less sharply compared with total revenue, falling by 17.5% versus 19.3%. The ratio of material expenses to total revenue (materials ratio) was 47.8%, which is 1.0 percentage point higher than in the previous year. The materials ratio is influenced mainly by changes in inventories of semi-finished products, work in progress and finished products. Adjusted for this effect, it was 1.7 percentage points higher than in the previous year. The increase in the materials ratio was mainly due to pricing pressure in the tougher competitive environment in the Outdoor and Sheet Metal Processing segments and to shifts in the product mix in the latter.

Personnel expenses

The decrease in personnel expenses amounted to 10.1% compared with the previous year. Personnel expenses in relation to total revenue increased by 2.7 percentage points and is at 26.7%.

Due to the coronavirus pandemic, some Swiss Conzzeta companies benefited from short-time working compensation in 2020. Many Conzzeta companies domiciled abroad benefited from similar state aid. Personnel-related state aid was credited to personnel expenses and stood at CHF 9.7 million (2019: CHF 0.0 million).

As at the balance sheet date, the number of employees declined by 2.7% over the previous year to 4,891. This was due to the sale of the Schmid Rhyner business unit and a fall in headcount in the Chemical Specialties and Outdoor segments, partly offset by an increased headcount in the Sheet Metal Processing segment. The average number of employees in the reporting year was 4,700 full-time equivalents (2019: 5,086).

Other operating expenses

Other operating expenses include the cost of repairs and maintenance on property, plant and equipment, sales provisions, expenses for guarantees, assembly, transport and energy, as well as sundry expenses for production, development, sales and administration. In 2020, this line item also includes the reclassification of CHF 2.2 million goodwill originally recognized in equity from the liquidation of Mammut Korea Inc, Seoul (Korea) (see note 4.1). The decrease in other operating expenses amounted to 13.4% compared with the previous year. Other operating expenses in relation to total revenue increased by 1.4 percentage points and is at 20.3%.

1.4 Income taxes

Current taxes on income include taxes paid and owed on taxable income of the individual companies.

The expected tax rate of 20.4% (2019: 19.7%) corresponds to the weighted average tax rate in the respective tax jurisdictions. The effective tax rate for the ordinary result before taxes was 12.8% (2019: 18.1%). The decrease resulted mainly from non-taxable capital gains from the sale of the Schmid Rhyner business unit.

Deferred taxes are measured using the announced tax rates for the temporary differences in individual companies. The deferred tax assets from offsettable loss carryforwards and from temporary valuation differences amounted to CHF 11.0 million (2019: CHF 13.7 million). In view of uncertainty about the future scope for offsetting, the tax effects from loss carryforwards amounting to CHF 9.3 million (2019: CHF 7.5 million) were not capitalized. This evaluation is based on the projected income tax rates. Deferred tax liabilities amount to CHF 14.4 million (2019: CHF 23.1 million).

The change in tax rates following the adoption of the reform of corporate taxation in Switzerland effective as of January 1, 2020, did not have a material impact on deferred tax assets and liabilities recognized in the balance sheet at year-end.

Significant estimates made by management

In order to determine the amount of current and deferred income tax assets and liabilities, significant estimates need to be made. Some of these estimates are based on the interpretation of existing tax legislation and regulations. Various internal and external factors may have favorable or unfavorable effects on the income tax assets and liabilities. These factors include, but are not limited to, changes in tax laws and regulations, changing interpretations of existing tax laws and regulations, changes in tax rates, and changes in overall levels of pre-tax earnings. Any such changes may impact the current and deferred income tax assets and liabilities recognized in the balance sheet in future reporting periods.

Accounting principles

Income taxes include current and deferred income taxes. Provisions are made for all tax obligations, regardless of their payment date. Deferred income tax is provided for all temporary differences arising between the tax bases of assets and liabilities and their carrying value for reporting purposes, using the currently enacted tax rates on an entity level. The change in these deferred taxes is recorded under tax expenditure. The deferred tax assets from offsettable loss carryforwards and from temporary valuation differences are only capitalized when in all probability future taxes on profits can be offset.

1.5 Earnings per share

The share-based compensation did not result in any material dilution of earnings per share in the reporting year or in the previous year.

Accounting principles

Earnings per category of share were calculated on the basis of the portion of net income attributable to the shareholders of Conzzeta AG, based on their portion of the share capital and the average number of outstanding shares (issued shares less treasury shares).