Oerlikon has taken actions to protect employees while maintaining business continuity during the pandemic. The leader in surface engineering, and polymer processing, has continued to have a stable capital structure with a strong cash position and an unlevered balance sheet, while executing an action plan to preserve cash and reduce costs in all businesses.
In this highly challenging environment, group orders for the first quarter decreased by 29.9 per cent to CHF 477 million, particularly in Asia and Europe. Group sales were 15.2 per cent lower at CHF 529 million, attributed to lower sales across all regions and adverse currency movements. At constant exchange rates, group sales were CHF 558 million.Oerlikon has taken actions to protect employees while maintaining business continuity during the pandemic. The leader in surface engineering, and polymer processing, has continued to have a stable capital structure with a strong cash position and an unlevered balance sheet, while executing an action plan to preserve cash and reduce costs in all businesses.#
Group EBITDA was at CHF 58 million, corresponding to a margin of 11.0 per cent. EBIT for Q1 2020 was at CHF 6 million, or 1.1 per cent of sales. The first-quarter performance resulted in a rolling 12-month Oerlikon group ROCE of 5.4 per cent. In the first quarter of 2020, Oerlikon generated 42.0 per cent of total group sales (Q1 2019: 40.4 per cent) from services, the company said in a press release.
In February 2020, Oerlikon proactively started implementing an action plan to mitigate the impact of the pandemic. The action plan focuses on preserving the liquidity of the company, while ensuring that its businesses continue to operate and customers’ needs are met. Oerlikon has reinforced its strong cash position by proactively drawing down its revolving credit facilities. As of March 31, 2020, the group has a cash balance of CHF 1.0 billion and a net cash position of CHF 219 million. The strong cash position will enable Oerlikon to manage any potential liquidity challenges. The group will be very selective in deciding on investments to be made in 2020, in line with the target to reduce capital expenditure (CAPEX) and discretionary spend by at least CHF 100 million in total compared to 2019.
As already announced, Oerlikon is executing a productivity program, primarily aimed at reducing structural cost in its surface solutions segment. Across geographies and through a number of current and planned initiatives, Oerlikon is reducing a total headcount in the surface solutions business of approximately 800 employees, or around 10 per cent of the surface solutions segment’s headcount. As previously disclosed, Oerlikon is expecting to invest CHF 25 million to CHF 35 million in the implementation of the entire program, predominantly for severance costs.
The global economy and industries are expecting to face significant challenges in the upcoming quarters due to the COVID-19 pandemic. In particular, the end markets of the surface solutions segment are expected to be impacted globally. Following the easing of restrictions in China, production and operations in the manmade fibres segment have been running at full capacity, and the segment is confident of being able to fulfil its delivery schedules for 2020. In view of the high degree of uncertainty as to the scope and duration of the crisis, Oerlikon is withdrawing its guidance for 2020. Oerlikon remains committed to delivering on its mid-term target for the EBITDA margin of 16 per cent-18 per cent.
The surface solutions segment faced a slowdown in all of its end markets and across all regions. Order intake declined by 13.5 per cent year-over-year to CHF 333 million and sales decreased by 12.4 per cent to CHF 325 million. The decline in orders and sales was most noticeable in the tooling, automotive, and general industries, particularly in March 2020.
Fibre2Fashion News Desk (GK)
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