Double-digit profitability in Oerlikon’s MMF segment

The Manmade Fibres Segment of Oerlikon captured a significant share of the business in the filament equipment market, where a high level of demand prevailed, particularly in China.

“We are pleased to announce another quarter of profitable growth”, said Dr Roland Fischer, CEO of Oerlikon Group. “Our positive performance confirms that our strategy addresses attractive markets, our initiatives and activities are delivering positive results, and we are able to take advantage of the growth momentum and opportunities in our end markets. Consequently, we are in a position to increase our full-year expectations for the second time this year.”

“Our surface solutions business continued delivering strong performance, achieving double-digit top-line growth and maintaining its operating profitability at over 20 %. Thanks to its market-leading position, our manmade fibres business succeeded in securing substantial orders and sales, primarily but not only in the filament equipment market in China. Following the repositioning efforts, our drive systems business is today in good shape and in a favorable position to take advantage of opportunities in its markets. As a result, we achieved another quarter of good top line and operating profitability,” added Dr Fischer. “As we see a growing demand for surface solutions and advanced materials technologies in many of our end markets, we will continue to expand and improve our technology and service offering in this business, while further strengthening the market position and growth potential of our other two businesses.”

Group performance in Q3 2017

In the third quarter, the global economy continued to see growth in trade, export and manufacturing in all regions. This development was noted in most of Oerlikon’s end markets, especially in the automotive, tooling, general industries, filament equipment, transportation, agriculture and construction sectors. Oerlikon succeeded in exploiting the positive market opportunities to further develop its business, resulting in another quarter of growth in orders, sales and operating profitability.

The surface solutions segment continued to expand its business and achieved double-digit growth in both orders and sales in the third quarter. Positive development was registered in its markets, particularly in tooling and general industries, as well as in China and India. The manmade fibres segment captured a significant share of the business in the filament equipment market, where a high level of demand prevailed, particularly in China. This contributed to the significant increase in orders and sales, and consequently double-digit operating profitability for the segment. With the successful repositioning of the drive systems segment, the business has gained a stronger footing in its end markets and achieved a marked growth in orders and sales. The Segment secured new customers and wins in its key end markets – agriculture, construction, transportation and automotive – with growth most notable in the China public transportation market.

Group orders for the third quarter increased year-on-year by 29.2 per cent to CHF 739 million (Q3 2016: CHF 572 million) and sales were up by 31.5 per cent to CHF 722 million (Q3 2016: CHF 549 million). At constant exchange rates, sales stood at CHF 714 million.

The Group’s EBITDA came in higher year-on-year at CHF 112 million, or 15.5 per cent of sales (Q3 2016: CHF 81 million, 14.7 per cent). EBIT for Q3 2017 stood at CHF 63 million, corresponding to a margin of 8.7 per cent (Q3 2016: CHF 37 million, 6.8 per cent). The third quarter performance resulted in a rolling 12-month Oerlikon Group return on capital employed (ROCE) of 6.9 per cent versus 6.2 per cent (normalised for restructuring and impairment effects) in the same period in 2016.

In the third quarter, service revenues contributed to 33.4 per cent of total Group sales (Q3 2016: 38.0 per cent), reflecting the substantial increase in equipment and project businesses, particularly in the Manmade Fibres and Drive Systems Segments.

Effective November 1, 2017, the Group’s Executive Committee (EC) has been realigned. Dr. Helmut Rudigier, the long-standing Chief Technology Officer (CTO) of Oerlikon’s Surface Solutions Segment, takes on the role of Group CTO and become a member of the EC. Georg Stausberg, CEO of the Manmade Fibres Segment, and D. Bernd Matthes, CEO of the Drive Systems Segment, relinquished their role in the EC, but continue contributing as members of the managing board. Now, the Group’s EC consists of Dr Roland Fischer (CEO), Jürg Fedier (CFO), Anna Ryzhova (Chief HR Officer) and Dr Helmut Rudigier (CTO). The EC remains focused on the execution of the Group’s strategic key priorities and the development of the Group’s finance, technology, HR and talents. The managing board, reporting to the EC, was formed to strengthen the operational business and improve the Group’s focus on its key markets and customers. Its members consist of the Segment CEOs, Surface Solutions Business Unit Heads and specific function Heads.

2017 outlook raisedOerlikon expects the positive momentum in the global economy and in its end markets to prevail. Certain risks in the global political and macroeconomic environment remain, which could impact specific markets. Nonetheless, based on Oerlikon’s good third quarter performance, the robust economic backdrop and anticipated positive development of its end markets, Oerlikon is raising its guidance for the full year of 2017. The Group expects order intake to exceed CHF 2.8 billon and sales to come in around CHF 2.75 billion for the full year 2017. The group’s EBITDA margin is anticipated to be at around the same level as in 2016 (14.3 per cent), even after absorbing the significant investments for the ramp-up of its additive manufacturing business.

Segment overview

The surface solutions segment continued on its growth path and delivered double-digit increases in both year-on-year orders and sales. The segment saw positive development in its markets, especially in the automotive, tooling and general industries, while a slight year-on-year decline was registered in the aviation and power generation businesses. Regionally, a healthy uptake of orders and sales was noted in China and India.

In the third quarter, the segment added innovative technologies and expertise to its portfolio through the acquisition of Primateria in Sweden and the signed agreement with DiaPac LLC and Diamond Recovery Services (DRS) in the US. With Primateria, Oerlikon strengthened its foothold in the gear cutting market, especially in Sweden. With DiaPac and DRS, Oerlikon will gain complementary knowledge for the manufacturing, processing, application, recovery and recycling of advanced materials, especially tungsten carbide. It will also expand Oerlikon’s market access in the oil and gas, metal matrix composites and US powdered metals industries.

From October 11 to 12, Oerlikon successfully hosted over 600 participants at the first Munich Technology Conference on additive manufacturing (AM). Over 30 top speakers from industry-leading companies provided thought-provoking insights into the application, potential and challenges of AM. The event has established itself as a platform for the exchange of ideas on how AM will become the technology of choice for large series production in industry. In conjunction with the event, Oerlikon inaugurated the opening of its Technology & Innovation Center in Munich for additive manufacturing.

Manmade fibres segment

The manmade fibres segment achieved strong growth, increasing order intake by over 40 per cent and sales by over 90 per cent year-on-year. The filament equipment market is seeing a resounding recovery and the segment scored wins with large filament equipment customers in China thanks to its competitive market standing and technologies. The segment also succeeded in growing its business outside of China, primarily in India, and in the global staple fibres market.

The segment attained a double-digit EBITDA margin, reflecting the top-line development and the improvement in flexibility, quality of work, processes, customer projects and operating leverage, as well as strict cost discipline. However, the segment is and will remain impacted by lower-margin orders and projects from the down-cycle period. EBIT for Q3 2017 stood at CHF 17 million (Q3 2016: CHF – 4 million).

Drive systems segment

The drive systems segment continued to benefit from its repositioning measures and further strengthened its position to grow its business and expand market share in its key markets, as demonstrated by its strong order intake and sales results. The Segment gained customers and won new projects in all of its key end markets – agriculture, transportation, automotive and construction. Particularly in the transportation market, the segment more than doubled sales, mainly attributed to the China public transportation sector, where it is gaining market share and becoming a market leader for city-bus axles. The segment also achieved good growth in South America, primarily driven by the continued strengthening of the Brazilian agriculture market. In the automotive market, the Segment succeeded in winning its first automotive e-drive project.