SFS with significant sales and profit increase in 1H 2021

Ad hoc announcement pursuant to Art. 53 KR – 20 July 2021

Carried by a dynamic market environment, SFS Group generated a strong half-year result. Since SFS refrained predominantly from making redundancies during the pandemic, capacity was quickly ramped up again. SFS was therefore able to react quickly and flexibly to the increased demand from its customers. The focus on protecting employee health remained unchanged. Sales of CHF 957.8 million were generated in the first half of the year, which corresponds to year-on-year growth of 23.8%. The EBIT margin amounted to 17.1%. Thus, SFS emerged stronger from the crisis than before.

The signs of recovery in the market environment showing from the third quarter of 2020 continued unchanged during the first half of 2021. All three segments participated in the solid demand seen in nearly all end markets and regions, with some business units actually exceeding the expectations substantially.

The SFS Group’s long-term ‘Local-for-Local’ strategy and its decision to make predominantly temporary adjustments to production capacity during the COVID-19 pandemic have proven to be prudent. By using the instruments available to temporarily reduce capacity during the financial year 2020, the Group was able to preserve jobs, expertise and production capabilities. That, in turn, enabled it to respond swiftly to the recovery in demand and benefit from the economic environment. Short-time working was discontinued during the reporting period in all areas except Aircraft.

In this market environment, SFS generated gross sales of CHF 957.8 million in the first half of 2021, which corresponds to year-on-year growth of 23.8%. Currency effects reduced sales growth by –1.2%. Compared with the first half of 2019 – before the COVID-19 pandemic – gross sales increased organically by 10.1%. Unfavourable currency effects and acquisition effects neutralised each other.

High capacity utilisation has positive impact on profitability
The dynamic market demand resulted in a high level of capacity utilisation, which had a significantly positive impact on profitability. The EBIT margin of 17.1% in the first half of 2021 corresponds to a year-on-year increase of 7.9 percentage points. Net income amounted to CHF 134.1 million. This development was supported by prudent cost management and the fact that higher prices for raw materials and transport were passed on through the value chain. Innovation programmes and investments made to implement growth projects continued unchanged during the reporting period. Capital expenditure for the first half year amounted to CHF 46.9 million, which corresponds to 4.9% of sales (prior-year period: 7.3%).

Engineered Components (EC) segment
Participated at strong market recovery
The Engineered Components segment benefited from high demand across the board that exceeded expectations in most end markets. This positive development was particularly strong in the Automotive and Electronics divisions. Overall, this resulted in organic growth of 29.1% compared with the first half of 2020. Investment to expand production capacity at the sites in Hallau (Switzerland) and Heerbrugg (Switzerland), which had been launched in response to good order intake for growth projects in the previous year, proceeded according to plan and the additional space will be occupied over the course of the year (Hallau) and 2022 (Heerbrugg). To ensure that it can continue to provide sufficient capacity for implementation of customer projects in Asia, SFS is currently planning to expand the production capacity of the factory in Nantong (China). The expansion will enlarge the production area by approx. 70%. Work will start in the first quarter of 2022 and the space will be ready for occupancy 18 months later. Driven by strong demand and correspondingly high capacity utilisation, the segment achieved an EBIT margin of 18.7% in the first half of 2021, which corresponds to a year-on-year increase of 9.6 percentage points.

Fastening Systems (FS) segment
Dynamic market environment harnessed
Both divisions in the Fastening Systems segment succeeded in taking advantage of the extraordinarily dynamic market environment and pent-up demand. Strong demand in the construction industry caused delivery bottlenecks and cost increases along the entire supply chain. The Riveting division operated in a similarly challenging environment. It benefited not only from pent-up demand in the automotive industry, but also good recovery in demand from industrial customers. In the first half of the year the Riveting division completed the relocation of its Chinese production site from Nansha (China) to Nantong (China), the production platform also used by other divisions. This relocation will allow the division to benefit from the established production and management processes in Nantong and improve its efficiency further. Total segment sales amounted to CHF 293.1 million, corresponding to year-on-year growth of 25.3%. Thanks to the high level of capacity utilisation and the comprehensive measures of the previous years to improve performance an EBIT margin of 17.7% was achieved (prior-year period: 9.5 %).

Distribution & Logistics (D&L) segment
Positive trend sustained
The good market demand that benefited the Distribution & Logistics segment in the previous year persisted during the first half of 2021. Demand from the construction industry remained positive. This, combined with an overall recovery in the business activities of Swiss industrial customers, enabled the segment to grow its revenue across all product groups. Revenue from retail customers, which serve primarily private end customers, remained stable. Sales through the nationwide network of 29 specialist hardware stores (Handwerk-Stadt branches) also recovered year-on-year. Some of these branches were hit by the mandatory business closures during the first half of 2020.

The segment generated total sales of CHF 172.6 million, up 8.1% compared to the prior-year period. EBIT came to CHF 16.2 million, which corresponds to an EBIT margin of 9.2% (prior-year period: 8.9 %).

Sustainability-related priorities systematically pursued
In early June, SFS published its Sustainability Report 2020 in accordance with the GRI Standards (‘Core’ option). Ambitious targets, such as a reduction in CO₂ emissions by more than 90% by 2030, are being pursued and a corresponding roadmap has been drawn up. The number of occupational accidents was reduced by another -13.3% during the period under review, which takes SFS closer to its medium-term goal of halving these by 2025 compared with the baseline 2019. The goal of engaging 5–7% of the entire workforce in an apprenticeship or a dual education activity was achieved again in 2020.

Outlook: expectations raised thanks to dynamic business performance
Assuming a continuous dynamic development in the second half of the year, SFS expects sales growth to a level of around CHF 1.9 billion for the full 2021 financial year at an EBIT margin of approximately 15%.This corresponds to sales growth of approx. 5% per year since 2019, which is in line with the medium-term growth targets announced. The outlook for full-year 2021 remains fraught with uncertainties and risks due to the ongoing COVID-19 pandemic. Management’s focus on protecting employee health and safeguarding delivery capacity, with further efforts to pursue investment and innovation projects, will still be given top priority.

Link to the Half-Year Report 2021