In 2017, Oerlikon delivered on its targets and recorded top-line growth as well as improved operating profitability across all segments.
Dr Roland Fischer, CEO Oerlikon Group, said, “The year 2017 marks a year of strong financial performance for the group and across all segments. We recorded profitable growth by securing wins in our markets and industries, delivered on our strategy and sustained a high EBITDA margin after offsetting sizable investment expenses.”
“Our surface solutions segment continued its steady upward trend, generating notable organic growth that was complemented by technology-strengthening acquisitions. Our manmade fibres business reported substantial recovery, driven mainly by the China-led filament equipment market. The drive systems business made significant gains in sales, orders and operating profitability. We are evaluating all value-creating options for the drive systems segment,” added Dr Fischer.Strong performance
In 2017, Oerlikon delivered on its targets and recorded top-line growth as well as improved operating profitability across all segments. The strong performance affirms the group’s strategy and ability to capture business opportunities in its markets. The global economic expansion provided a steady backdrop for the upward trend in trade, export and capital investments in practically all of Oerlikon’s end markets, including automotive, aviation, tooling, general industries, energy, agriculture, construction and transportation.
Full-year, the group order intake increased year-on-year by 24.5 per cent to CHF 3,005 million, including a positive currency impact of 0.7 per cent, while sales were 22.1 per cent higher year-on-year at CHF 2,847 million, including a positive currency impact of 0.8 per cent.
In 2017, Oerlikon delivered on its strategy by strengthening the market and technology leadership of its surface solutions segment, securing wins in recovering filament equipment market for the manmade fibres segment and successfully repositioning the drive systems segment. The surface solutions segment generated 48 per cent of group sales and 66 per cent of EBITDA in 2017, making it the largest contributor to group sales and profits for the year. The manmade fibres segment and the drive systems segment each accounted for 26 per cent of group sales. Oerlikon also saw sales growth across all regions in 2017. Europe continued to represent the largest proportion of group sales with 39 per cent (CHF 1,101 million), reflecting a 13.2 per cent increase compared to 2016. Asia followed with 37 per cent (CHF 1,073 million), up 42.9 per cent versus 2016, and North America contributed 19 per cent (CHF 538 million), 8.5 per cent higher compared to 2016. Sales in other regions came in at around 5 per cent (CHF 135 million), an increase of 21.6 per cent. The group generated 33.7 per cent of its revenue from services in 2017 (2016: 36.6 per cent).Strong operating profitability
Oerlikon achieved strong year-on-year growth in operating profitability for the full year, as measured by both EBITDA and EBIT. The group EBITDA increased 24.3 per cent to CHF 415 million, yielding a margin of 14.6 per cent. That compares with group EBITDA of CHF 334 million and a margin of 14.3 per cent for the full year 2016. Full-year group EBIT for 2017 was CHF 219 million, or 7.7 per cent of group sales. The result from continuing operations was 78 per cent higher at CHF 146 million, compared to CHF 82 million in 2016. After including net results from discontinued operations of CHF 6 million in 2017, net income totaled CHF 152 million in 2017, or earnings per share of CHF 0.44. In 2016, the group’s net result stood at CHF 388 million – mainly due to the positive impact from the divestment of the vacuum segment – or earnings per share of CHF 1.14 in 2016.
As of December 31, 2017, Oerlikon had equity of CHF 1,970 million, representing an equity ratio of 45 per cent (2016: 48 per cent). Net cash amounted to CHF 499 million at year-end 2017 (2016: CHF 401 million) and the cash flow from operating activities before changes in net current assets increased 50.6 per cent in 2017 to CHF 405 million, compared to CHF 269 million in 2016. In December 2017, Oerlikon exercised the optional one-year extension of a five-year unsecured syndicated credit facility of CHF 600 million, thus maintaining a strong financial base for further investment in core strategic businesses and new technologies, including additive manufacturing (AM), and to support future growth. The group’s return on capital employed (ROCE) increased to 8.2 per cent (2016: 5.7 per cent).Continued strong commitment to R&D
In 2017, Oerlikon strengthened its innovation pipeline by filing 91 patents. The company continued to invest 4 per cent (CHF 107 million) of 2017 sales in R&D, developing upgrades and new technologies to meet customers’ needs and demands. These efforts underline Oerlikon’s commitment to maintain its technology leadership in its end markets and to advance its strategic development.
Q4: ending the year strongly
For Q4 2017, Oerlikon further increased top-line growth and profitability across all Segments. Order intake increased 25.8 per cent year-on-year to CHF 830 million (Q4 2016: CHF 660 million). Sales came in 35.2 per cent higher at CHF 829 million (Q4 2016: CHF 613 million). The increase in the top line was seen in all segments. The surface solutions segment continued reporting growth; in particular, higher demand was noted in the aviation, automotive and general industries. The manmade fibres segment recorded an increase in sales of over 85 per cent in Q4 2017, driven mainly by the filament equipment business but also boosted by upward sales trends in texturing, staple fibres and polymer processing. The drive systems segment completed the year with very strong topline results, registering growth in most of its markets with transportation as particularly noteworthy.
Following strong revenues, the quarter saw strong operating profitability compared to the previous year. EBITDA came in 27.8 per cent higher at CHF 124 million, corresponding to a margin of 15 per cent. Q4 2016 EBITDA was CHF 97 million and the margin was 15.8 per cent. Q4 2017 EBIT stood at CHF 73 million, or 8.8 per cent of sales (Q4 2016: CHF 53 million; or 8.6 per cent of sales).
Based on the group’s underlying performance improvement for 2017, the affordability from the balance sheet, and Oerlikon’s commitment to returning value to shareholders, the BoDs will be recommending an increased dividend payout of CHF 0.35 per share (2016: CHF 0.30 per share) at the AGM taking place on April 10, 2018, in Lucerne.Outlook: Sustaining performance in 2018
The positive development in the global economy and in Oerlikon’s key markets is expected to continue in 2018. Certain uncertainties remain on the macroeconomic and geopolitical scene, which could impact Oerlikon’s end markets. Having established a strong foundation, financially and technologically, to further its growth, Oerlikon will execute three key drivers to sustain mid-term profitability: targeting growth markets, securing structural growth and expanding through complementary M&A.
Given Oerlikon’s strong performance in 2017 and assuming market prospects will remain positive, the group expects order intake to increase up to CHF 3.4 billion and sales to around CHF 3.2 billion for the full year 2018, and to deliver an improved EBITDA margin, after offsetting investments, of around 15 per cent.Segment overview
Surface solutions segment: The surface solutions segment remained the largest revenue generator for group sales in 2017. Its performance in 2017 demonstrates its central role in the group and further validates Oerlikon’s strategy to become a global leader in advanced materials, surface solutions and materials processing. Segment’s order intake increased 14.6 per cent in 2017 to CHF 1,417 million, compared to CHF 1,236 million in 2016. Sales came in 11.2 per cent higher in 2017 at CHF 1,377 million, compared to CHF 1,238 million in 2016. Sales growth was seen in all regions and across industries, most notably in aerospace, general industries and Asia.
The surface solutions segment achieved an EBITDA margin of 20 per cent for 2017 (2016: 22.2 per cent), even after offsetting the segment’s substantial investments especially in AM during the year. For 2017, EBITDA for the segment totaled CHF 276 million, around the same level as that of the previous year. The segment’s EBIT in 2017 stood at CHF 149 million, or 10.8 per cent of segment sales (2016: CHF 161 million, or 13 per cent of sales).
In 2017, the segment completed four strategic acquisitions, adding technologies and expertise in advanced materials and surface solutions to its portfolio, while also gaining market access. This included the assets of Recentis Advanced Materials, Canada, to strengthen the segment’s competency in high-temperature manufacturing; Scoperta, USA, for its computational software enabling rapid identification and development of innovative and disruptive material solutions; Primateria, Sweden, which is strengthening its foothold in the gear-cutting market; and the assets of DiaPac LLC and Diamond Recovery Services (DRS), USA, complementing the segment’s expertise in the manufacturing, processing, application, recovery and recycling of advanced materials.
To intensify its focus on AM, Oerlikon AM was established as a competence brand of the surface solutions segment in 2017. In addition to acquisitions, AM Business Unit moved forward in its strategy to play a leading role in the industrialisation of that market in 2017. Initiatives included key partnerships with GE Additive, Technical University of Munich and Skoltech, the opening of the innovation and technology centre for AM in Munich, Germany, and moving forward with the construction of an R&D and production facility in Charlotte, North Carolina, and the advanced materials manufacturing facility in Plymouth Township, Michigan.
Manmade fibres segment: The manmade fibres segment saw significant and positive turnaround in market demand in 2017 after two years of challenging conditions. The growth was mainly driven by a few key players in the China manmade fibre industry, but at the same time larger projects in Turkey and India could be secured as well. With its leading market position, among others, for pre-oriented and full-drawn (POY and FDY) filament equipment, the segment was able to capture a healthy share of market opportunities.
For 2017, segment order intake increased 40.4 per cent to CHF 810 million, compared to CHF 577 million in 2016. Segment order backlog increased 32.2 per cent to CHF 357 million at year-end 2017, compared to CHF 270 million at year-end 2016. Sales jumped 53.8 per cent in 2017 to CHF 740 million from CHF 481 million in 2016.
Segment profitability also improved substantially in 2017, with EBITDA more than tripling (up 256 per cent) to CHF 57 million, or 7.7 per cent of sales, compared to CHF 16 million, or 3.3 per cent of sales, in 2016. EBIT in 2017 totaled CHF 34 million, or 4.6 per cent of sales, compared to negative EBIT in 2016 (CHF -3 million, or -0.6 per cent of sales). In addition to recovery in the filament equipment market in 2017, the segment’s growth was complemented by a notable increase in global demand for staple fibres machinery and in texturing, including the delivery of its first DTY machines to a key customer in China. Good demand for bulked continuous filament (BCF) plant solutions for the production of carpet yarns was also seen in the USA and Turkey. In addition, a strong increase in sales was noted in polymer processing, driven mainly by Oerlikon’s joint venture with Huitong in this market. To position itself for future growth, the segment has been ramping up its production capacity in all business areas. Additionally, the Segment created a separate business unit to capture opportunities in the attractive and growing nonwovens market and entered into a partnership agreement with Teknoweb Materials in Italy to add disposable nonwoven solutions to its product offering.
Drive systems segment: The drive systems segment benefited from its repositioning strategy and delivered a noteworthy recovery in 2017. Continuing the process initiated in 2016, the segment streamlined its product portfolio, improved production efficiency through a focused factory approach, and increased its emphasis on higher-value projects and quality orders. This enabled the segment to capture business and take profits in 2017 in agriculture, construction, transportation and automotive markets around the world.
Through the joint venture with Kenway, the segment doubled its sales to the Chinese transportation market and has established itself as a market leader in low-floor city bus axles. The segment also noted a sharp increase in demand for e-drive solutions in China, Europe and North America. In 2017, it secured key automotive e-drive projects and is partnering with leading automotive brands in Asia on electric drive projects for passenger cars.
Segment order intake increased 29.7 per cent in 2017 to CHF 778 million, compared to CHF 600 million in 2016, while order backlog more than doubled to CHF 202 million at year-end 2017, compared to CHF 97 million at year-end 2016. The segment sales totaled CHF 730 million in 2017, an increase of 19.3 per cent from CHF 612 million in 2016. Reflecting the continued benefits of its repositioning and process optimisation measures, the segment delivered a 52.9 per cent increase in EBITDA in 2017, which amounted to CHF 78 million, or 10.6 per cent of sales, compared to CHF 51 million, or 8.4 per cent of sales in 2016. EBIT for 2017 tripled to CHF 36 million, or 4.9 per cent of sales, from CHF 12 million, or 2 per cent of sales, in 2016.
In 2017, the segment made important inroads to meet customers’ needs in the e-drive and hybrid car market. For example, it launched innovative, scalable, quiet and efficient transmissions for battery electric vehicles, and developed a very compact hybrid rear axle module with an integrated electronically-controlled limited slip differential, which is a highly efficient solution to hybridise high-performance cars.
Oerlikon engineers materials, equipment and surfaces and provides expert services to enable customers to have high-performance products and systems with extended lifespans. Drawing on its key technological competencies and strong financial foundation, the group is sustaining mid-term growth by executing three strategic drivers: addressing attractive growth markets, securing structural growth, and expanding through targeted M&A. A leading global technology and engineering group, Oerlikon operates its business in three segments (surface solutions, manmade fibres and drive systems) and has a global footprint of around 15,000 employees at 186 locations in 37 countries. In 2017, Oerlikon generated CHF 2.8 billion in sales and invested CHF 107 million in R&D.
"Both Indian and the Turkish Government can play a vital role in easing out the regulations for the logistic and incentives for the expenses towards participation.”