Group business performance
Stable margins in a more challenging environment
The first half of 2019 was broadly in line with expectations. The slowdown in the Sheet Metal Processing and Chemical Specialties segments was partially offset by continued growth in the Outdoor segment. The adjusted EBIT margin remained stable at 7.6% of total revenue.
Conzzetaʼs half-year result for 2019 was strongly impacted by the divestment of the Glass Processing segment as of April 1, 2019, with a decline in revenue of 9.7% compared with the previous year and an improvement in the operating result (EBIT) of 36.6%. The disposal did eliminate the segmentʼs revenue and earnings contribution for the second quarter, but it resulted in a capital gain of CHF 30.6 million. On a comparable basis, i.e. taking into account all changes in the scope of consolidation and at stable exchange rates, the Group achieved net revenue of 5.6% and an operating result (EBIT) of 4.3% below the previous year period. At net revenue level, the negative impact of changes in the scope of consolidation was CHF 24.4 million, while the negative impact of currency effects was CHF 11.0 million. EBIT excluding the capital gain amounted to CHF 59.9 million, and the thus adjusted EBIT margin remained stable at 7.6% of total revenue in a significantly more challenging business environment.
Regionally, business performance was uneven: the significant decline in revenue in Asia, particularly in China, and the somewhat weaker business in Europe were partially offset by progress in America. The segmentsʼ contribution to performance was varied. Sheet Metal Processing and Chemical Specialties experienced the expected deceleration largely due to market conditions, while Outdoor continued to grow despite the strong prior-year basis. Sheet Metal Processing and Outdoor achieved higher revenue in America, while the Chemical Specialties segment posted lower sales in all regions. Any comparison with the previous year must take into account the challenging basis for comparison, especially since both net revenue and order intake in the first half year of 2018 were at record levels after a pronounced spurt in growth.
Reported EBIT for the first half year amounted to CHF 90.5 million, while EBIT adjusted for the capital gain stood at CHF 59.9 million. The Sheet Metal Processing and Chemical Specialties segments posted lower results on the previous year with lower revenue, while the Outdoor segment managed to further reduce the loss in an already seasonally weaker first half of the year. Within the Chemical Specialties segment, the FoamPartner business unit was able to compensate well for the market-related decline in revenue in the automotive business thanks to significantly lower raw material costs and internal improvements in earnings. By contrast, raw material costs for the Schmid Rhyner business unit were still considerably higher than in the previous year, which, along with an unfavorable trend in the product mix, burdened the operating result compared with the strong previous-year period.
The Group result for the first half of 2019 was CHF 78.2 million, up 53.0% on the previous year. Minority interests were 17.9% lower at CHF 6.4 million. Earnings per class A registered share stood at CHF 34.76, up 66.0% on the previous year.
The cash inflow from investing activities was CHF 60.0 million, following an outflow of CHF 33.6 million in the first half of 2018. The divestment of the Glass Processing segment resulted in a cash inflow of CHF 74.7 million. The Group continued to build on its market presence and infrastructure projects in a more challenging environment. Investments in property, plant and equipment and intangible assets amounted to CHF 18.6 million. With lower client activity in the first half of the year and pre-work for the second half, free cash flow from operating activities was significantly lower at CHF –10.0 million, compared to CHF 39.4 million in the strong previous year period. As of mid-2019, Conzzeta had cash and cash equivalents and short-term securities of CHF 389.9 million (7.1% above the previous year) with an equity ratio of 71.2% (400 basis points above the previous year).
The annualized return on average net operating assets (RONOA), excluding the capital gain, amounted to 17.3% (previous year: 20.6%).
