Arbon Thurgau, 4 August 2009. – The international construction industry supplier AFG Arbonia-Forster-Holding AG, Arbon, had to book a decline in sales of 16.4% (adjusted for currency fluctuations -13.1%) to CHF 626.4 million. Operating result before special charges (EBIT) remained positive, with CHF 3.5 million. After almost completely writing off the goodwill for the U.K. company Aqualux in the amount of CHF 15.5 million, it came to CHF -12.0 million (previous year: CHF 37.8 million). EBITDA decreased to CHF 35.0 million (CHF 69.5 million), while a consolidated loss was posted for the first half-year of CHF -23.3 million (CHF 19.1 million). „The results achieved fell short of our expectations,“ commented Edgar Oehler, Chairman of the Board of Directors and CEO, on the half-year result, „but they reflect the extraordinarily difficult market environment, which in particular our strongly export-oriented technology divisions were faced with.“ The construction-oriented divisions proved then to be the main supports of AFG. These divisions performed differently individually, but overall managed to hold up satisfactorily against the very negative market influences. The programs of adapting structures and resources, which has been ongoing for over a year, will lead to a worldwide reduction in the workforce of 10% and to sustained annual cost savings of CHF 150 million. Despite the fact that the second half-year is traditionally stronger than the first, AFG does not expect to make up for the shortfall of the first half-year and is therefore
announcing that a dividend distribution is not to be expected for the current financial year.
While incoming orders have stagnated in the building industry relevant for AFG in Switzerland since the beginning of the year and orders in its second home market of Germany have fallen significantly for certain products, the willingness to invest dipped in all of the Eastern European markets. Especially Russia, Poland, and Slovakia – AFG’s most important sales markets in Eastern Europe – slid within a short space of time into a deep recession. This led to reduced demand and further intensification of the price competition with the resulting diminished margins, which significantly impacted the construction-oriented divisions Heating Technology and Sanitary Equipment, Kitchens and Refrigeration, and Windows and Doors. Demand dropped dramatically in the sales markets of the two technology divisions Steel Technology and Surface Technology. These heavily export-dependent divisions (Steel Technology by 80% and Surface Technology by 98%) suffered massively due to the collapsing markets of the automotive and printing equipment industries. They were not able to adapt their structures and resources in pace with the falling demand, which affected the earnings position of these divisions accordingly. The strength of the Swiss Franc versus all other currencies relevant for AFG had an additional negative impact on our competitiveness, particularly in the heavily export-oriented divisions. On the other hand, falling raw material prices, lower purchasing costs through centralization of strategic purchasing, and the savings taking effect due to the timely introduction of short-time work had a positive
effect on the expenses. Roughly half of the planned worldwide personnel reduction of 10% of the total workforce has already been made under socially compatible conditions.
Significant Strengthening of Balance Sheet Structures
The overall Group result was burdened by the almost complete write-off of the goodwill for the U.K. company Aqualux, acquired in 2007. This measure was part of a package of measures intended to restructure and strengthen the financial position of the Group. The capital increase completed in Spring 2009 brought in a net amount of CHF 106.1 million, which allowed the indebtedness of CHF 491.4 million as shown in the previous year to be reduced to CHF 378.1 million and at the same time improve the equity ratio to 43%, despite the Aqualux goodwill impairment. In spite of the predominantly seasonal sales patterns, targeted measures resulted in a significant reduction in net working capital, respectively to a positive cash flow from operating activities of CHF 7.7 million (CHF -16.0 million).
Varying Performance of Individual Divisions
The performance of the individual divisions differed greatly based on their dependence on export markets. Net revenues at Heating Technology and Sanitary Equipment, the largest division with 42.1% of total Group revenues, came to CHF 264.5 million, which is 17.3% lower than a year ago (CHF 320.0 million). After adjusting for currency effects, the division would have been down 10.4% versus the previous year. Recession in the German market and the desperate state of markets in the U.K. and Eastern Europe had a strong negative effect on the division’s sales, which were lower than in the previous year in both the heating technology and sanitary equipment businesses. While EBITDA, at CHF 26.7 million, was relatively close to that of the previous year (CHF 31.2 million), the goodwill impairment charge for Aqualux of CHF 15.5 million resulted in an EBIT that was just barely in positive territory, at CHF 1.9 million (CHF 21.2 million).
Net revenues for the Kitchens and Refrigeration Division, at CHF 120.1 million, were 8.0% below the previous year’s level (CHF 130.6 million). EBITDA fell from CHF 6.1 million in the first half of 2008 to CHF 1.6 million, although the figure a year ago benefited from extraordinary income of CHF 3.8 million. EBIT dropped to CHF -2.9 million (CHF 0.8 million). The kitchen business suffered, especially in the furniture sector, from a very aggressive price and orders situation, as well as from the decline in demand from export markets. The situation is somewhat better in the refrigeration business, where results for the first half-year were only slightly under the previous year’s figures.
In a difficult environment, the Windows and Doors Division’s net revenues of
CHF 157.9 million were only 2.6% lower than the CHF 162.1 million recorded a year ago. Windows and Doors was the only division to pose a slightly higher EBITDA for the first half of 2009 – CHF 15.0 million – than for the equivalent period last year. The division’s EBIT CHF 8.4 million was also virtually unchanged over the previous year’s figure of CHF 9.0 million. Within the windows business, EgoKiefer closed the first half-year with better results than a year ago. By contrast, Slovaktual suffered from a combination of continued economic crisis and intense competitive pressure. The doors business, RWD Schlatter, posted slightly lower revenues than last year.
In a market dominated by the crisis in the automotive industry, the Steel Technology Division’s net revenues were 32.9% lower than in the previous year, at CHF 60.3 million. Both businesses within the division – tubes and profiles – fell well short of the previous year’s figures. The division sells 80% of its products outside Switzerland, and this high reliance on exports was reflected all too clearly in its results. Earnings fell dramatically. EBITDA was down to CHF
-3.0 million (CHF 13.3 million) and EBIT to CHF -6.3 million (CHF 10.2 million). In addition to lower volumes, these weak results were also caused by the valuation of inventories, which was much higher at the end of 2008 – thanks to much higher steel prices – than in the first half of 2009.
The Surface Technology Division’s net revenues, about half of which are generated by the printing business, were 47.6% below the previous year, at CHF 25.8 million, following a sharp decline in orders from the division’s most important customer. Roughly 98% of STI’s sales are generated outside Switzerland. Despite the immediate introduction of comprehensive cost reduction measures, EBITDA dipped from CHF 8.6 million in the previous year to CHF -3.3 million in the reporting period, and EBIT from CHF 4.2 million to CHF -7.9 million. Orders are only at a satisfactory level in the rolls, drums, textiles, and foods businesses – not high enough, however, to compensate for the massive drop-off in other areas of business.
Keeping a Confident Outlook
As is the case for most industrial enterprises, the fall-out from the global economic crisis is confronting AFG with the biggest challenges in its history. Nevertheless, it is assumed that the technology divisions have reached the bottom and over the course of the second half of the year will begin to make up some of the ground that was lost. The development of the construction-oriented divisions could also consolidate in the second half of the year. Yet the company does not expect any sustained improvement in demand before 2011. Once the process of adjusting the company’s structures and resources has been completed, AFG will be smaller, but more agile and more focused, writes Edgar Oehler to the shareholders in the First Semester Financial Report 2009. Combined with measures introduced to achieve sustainable cost savings of CHF
150 million per year and strengthen the balance sheet structures, AFG will be well equipped to make improvements on the earnings side and to benefit from the coming economic recovery. With respect to the current financial year, however, he reported that there is no prospect of a dividend payment.
Expansion of Group Management
The Board of Directors of AFG has appointed Dr. Christoph Schönenberger (41), General Counsel and Head of Corporate Services at the company, as a member of Group Management effective from 1 September 2009. Since joining AFG on 1 September 2007, Dr. Schönenberger has been responsible for the central Group functions – legal services, human resources, and communications
Key figures of AFG Arbonia-Forster-Group
Kontakte:
AFG Arbonia-Forster-Holding AG
Dr. Edgar Oehler | Felix Bodmer Chief Financial Officer Tel. +41 71 447 45 51  felix.bodmer@afg.ch |
This media release, as well as additional information on AFG Arbonia-Forster-Holding AG, can be found on our website at www.afg.ch.
AFG Arbonia-Forster-Holding AG – Leading Supplier to the International Construction Industry
AFG Arbonia-Forster-Holding AG, based in Arbon, Switzerland, has leading positions as an inte-grated construction industry supplier. Listed on the SIX Swiss Exchange, the company comprises five divisions: Heating Technology and Sanitary Equipment, Kitchens and Refrigeration, Windows and Doors, Steel Technology, and Surface Technology. The Group has production facilities in Switzerland, Germany, France, the United States, the Czech Republic, the U.K., and Slovakia.
AFG has an active presence in more than 70 countries worldwide, with roughly 50 of its own production and distribution companies, as well as representatives and partners. The Kermi, Ar-bonia, Prolux, ASCO Swiss, Aqualux, Forster Kitchens, Forster Refrigeration, Piatti, Miele Kitch-ens, EgoKiefer, RWD Schlatter, Slovaktual, Forster Precision Steel Tubes, Forster Profile Systems, and STI | Hartchrom brands are the backbone of AFG. With these brands, AFG has built leading positions in its home markets of Switzerland and Germany and is intensively pursuing entry and development of new markets in Eastern Europe, Russia, and the Middle and Far East. In 2008, AFG Arbonia-Forster-Holding AG employed some 6100 people and posted revenues of CHF 1,571 million and earnings before interest and taxes (EBIT) of CHF 86.6 million.
press release
