Implementation of operating and strategic priorities in the challenging pandemic environment
The global pandemic environment has left a deep mark on Conzzeta’s earnings for the first half of 2020. We had to take extensive countermeasures in order to mitigate the multilayered impacts as far as possible. At the same time, we continued to work on important projects and achieved significant milestones during the reporting period.
First of all, the protection of our own employees and responsible dealings with our business partners were of key importance. We made considerable efforts to help our customers, even during the crisis, with innovative offerings and solutions. Not least thanks to the solid capital position we have built up over the decades, we were able to consistently work on important projects of the Group and business units, also in the pandemic environment. Our employees deserve particular thanks for their exceptional dedication to crisis management.
Due to the diversity of their business models, our business units were affected by the widespread lockdowns, interrupted supply chains, and global travel restrictions in different ways. At Bystronic, the order backlog mitigated the adverse impact on revenue and results, even though it was already somewhat lower at the start of the reporting period compared to the previous year due to the weakening of the investment cycle in 2019. By means of operational improvements, FoamPartner was able to partially mitigate its dependency on business in the automotive segment, which has been particularly challenged not only since the outbreak of the pandemic. At Mammut, however, it was not possible to prevent a significant widening of the loss in the seasonally weaker first half of the year due to the almost complete closure of the proportionally dominant physical sales channels for around 40 days, the complex supply chains in the outdoor business and the additional expense caused by the pandemic. Thanks to the significant change in customer behavior during the crisis, Mammut achieved a 93% revenue increase in its own online business.
The measures we initiated in March to mitigate the financial impact will reduce the Group’s cost base by around CHF 40 million by year-end. Despite extensive use of the support mechanisms provided and the encouraging revival of the business following the lifting of the lockdowns toward the end of the reporting period, structural measures going beyond this will be required for reasons of “rightsizing.” This will be a matter of adjusting the cost base to the foreseeable protracted recovery of the economy. At the same time, the allocation of resources available must be prioritized even more clearly.
Due to the sharp rise in the acceptance of digital sales and collaboration opportunities, product launches, sales meetings and customer trainings were conducted virtually for the first time during the reporting period. The consideration of the social and environmental effects of doing business, which is also gaining in political importance in the context of combating the pandemic, is of increasing importance to our clients. Mammut’s sustainability strategy WE CARE proved to be a useful and fair framework for dealing with suppliers affected by business closures in less developed countries. All business units take environmental aspects into consideration when developing products. With RegiSeal® e-Thermo, for example, FoamPartner presented a solution for electric mobility that reduces energy consumption and extends the range of the vehicle thanks to improved insulation.
With the commissioning of the new Bystronic assembly plant in Chicago, USA, and the new FoamPartner converting center in Duderstadt, Germany, we achieved important milestones in the first half of the year even under difficult conditions. In addition, Bystronic broke ground for a new experience center in the Asian growth region not far from Incheon International Airport near South Korea’s capital, Seoul. With such promising projects, we want to take advantage of the opportunities of the future, despite or precicely because of the current challenges. This includes the continued improvement of our processes and the continuously increased activities in Asia and other growth markets.
Outlook for 2020
The announced strategic focus on Bystronic is well on track. The divestment of the Schmid Rhyner business unit was completed by the end of February 2020, and the gain on disposal of CHF 48.1 million is recognized in our half-year results. The preparations for the further divestitures have now also been concluded. We are currently holding concrete discussions on the sale of FoamPartner, and we envisage approaching the market with regard to Mammut in the second half of the year, subject to the pandemic situation. The presentation of Bystronic’s revised strategy is planned for the fourth quarter.
We fully support official measures for combating the pandemic and hope for an easing and a progressive recovery of business activities in the second half of the year. However, we continue to expect significant uncertainties, also with regard to the social impacts of the pandemic, the future course of global trade disputes, and the outcome of the upcoming presidential election in the USA.
The order backlog at Bystronic at mid-year was 17.3% below the level at the end of 2019, which will have an adverse impact on the accounts in the second half of the year, despite the improved order intake towards the end of the first half. For this reason, and in view of the uncertainties mentioned above, Conzzeta confirms its expectation for the 2020 financial year of an operating result (including the gain on the sale of Schmid Rhyner) in the mid double-digit CHF million range, with substantially lower net sales compared to the previous year.
Chairman of the Board of Directors