Daetwyler with robust portfolio - Strategic opportunities used - cautiously optimistic for 2010

The Daetwyler Group was able to post a good operating performance despite a difficult environment marked by an in some cases pronounced drop in demand. Systematically focusing on niche markets has proven its value and is conferring a certain degree of resilience on the Group. Despite a slight recovery in the second half of 2009, the Group recorded a 14.0% decline in net revenue to CHF 1'113.4 million for the full year compared with CHF 1'294.9 million last year. The effect of changes in the scope of consolidation amounted to 0.4%. Exchange rate movements had a negative impact of 3.4%. After adjustment for these two factors, net revenue fell by 11.0%.

Improved profitability in second half
In order to remain competitive, Daetwyler adjusted its cost structures – where necessary – to the changing market environment. The number of temporary employees was reduced and short-time work-ing was introduced. Despite these measures, it was not possible to avoid headcount reductions – in some cases involving terminations – at home and abroad in the Rubber and Technical Components Divisions. Thanks to the rapid implementation of cost-cutting measures, the decline in operating profit (EBIT) was contained. The centralisation of logistics and closure of local sales offices in the specialist distribution business resulted in restructuring charges, extraordinary costs and impairments totalling CHF 19.5 million. Consequently, operating profit at CHF 70.4 million was 47.5% below the previous year’s record level of CHF 134.2 million. The resulting EBIT margin is 6.3% (previous year 10.4%). Profitability increased in the second half of the year, demonstrating that the lower cost base is already having a positive impact. Profit for the year declined by 47.8% from CHF 109.6 million last year to CHF 57.2 million. In view of the slight economic recovery and the Daetwyler Group’s intact perspectives, the Board of Directors will propose a dividend of CHF 1.20 per bearer share and CHF 0.24 per registered share to the Annual General Meeting. This represents a payout ratio of 32.3%.

The Divisions developed differently

The individual divisions show differences in their development. The Cables Division was confronted with a decline in revenue by 19.0%. Taking 2008 copper prices as a basis, the decline was 14.5%. The valuation of copper inventories boosted the 2009 operating result (EBIT), which rose 25.7%. Factoring out the inventory valuation, the Cables Division experienced a decline in profitability at the operating level. The EBIT margin fell accordingly to 4.8%. In the Rubber Division, net sales declined by 19.5%. Despite strict cost management operating profit (EBIT) in the year under review fell by 53.2%. The Pharmaceutical Packaging Division proved itself to be a pillar of resilience to cyclical fluctuations. It achieved a slight currency adjusted growth of 2.5%, operating profit rose by 16.6%. The Technical Components Division as supplier to the export-centred manufacturing industry suffered strongly from the economic crisis. Net revenue fell by 16.0% and restructuring charges, once-only costs and impair-ments resulted in a negative operating profit (EBIT) of -4.0 Mio. Excluding these extraordinary costs the EBIT margin came to 4.0%.

Expanded distribution activities through Reichelt acquisition
At the strategic level, Daetwyler resolutely continued to expand its distribution activities: The acquisition of the German company Reichelt Elektronik, which generates annual sales of around CHF 150 million, at the start of 2010 marks a further surge in growth in the catalogue distribution for industrial electronics, automation and computer accessories. The economies of volume and scale and strategic synergies generated by the acquisition of the high-margin Reichelt will increase the value of previous takeovers and the existing core business. Daetwyler intends to continue to capitalise on the consolidation that is taking place in catalogue distribution to make further strategic acquisitions.


At the strategic level, Daetwyler in 2009 initiated and implemented a number of projects to strengthen the Group's competitiveness: The specialist distribution realigned its business model to customers' future needs, production sites in low-cost countries were expanded, outsourcing of the ICT infrastructure was driven forward, and with Reichelt an opportunity for growth through acquisition was made use of. As a year of challenges, 2009 showed that the strategic alignment of the Daetwyler Group as a multi-niche player is proving effective. The global and regional niches in which the Group operates have different geographical and segment-specific development cycles. In times of crisis this combination provides stability and continuity, and prevents a slump in revenue and profits which could threaten the existence of the Group. Moreover, Daetwyler used the period of economic growth prior to 2009 to sharpen its focus within its market niches, thus strengthening the position of its companies.

Sustainable asset management with solid equity ratio
Daetwyler underpins the stability conferred by its business portfolio and market position with sustainable asset management and an equity ratio of a solid 67.7%. Furthermore, there resulted a net cash surplus of CHF 40.1 million. All in all, even in such a crisis-ridden year as 2009, Daetwyler had the financial resources to acquire market share, to drive strategic innovation projects forward and to establish a basis for sustainable, profitable growth in the future. Daetwyler is benefiting from the fact that, particularly in difficult times, customers in all branches of industry prefer to do business with leading, dependable suppliers.

Outlook for 2010: Cautiously optimistic
After a difficult year, management is slightly more confident about the future. The markets that are im-portant for the company appear to be stabilising. Daetwyler intends to use the freedom granted by its intact business situation to gain further market share in 2010. In addition, Reichelt, which generates annual revenue in the region of CHF 150 million, will be consolidated for the first time. On the cost side, the Daetwyler Group has adapted its structures to the changed environment. Assuming that market conditions do not change, 2010 should therefore see Daetwyler regain the lower threshold of the long-term EBIT margin target range (operating profit in relation to net revenue), which stands at 8% to 12%.

Further informations:
Guido Unternährer Leiter Corporate Communications Tel. 041 875 19 00