Pause in demand in the second quarter due to lockdowns
A strong start to the year was outweighed by an abrupt decrease in volumes in the second quarter – due to the closure of beauty stores, dental practices and factories amidst the pandemic. Applicator Systems (APS) reacted early on to take decisive steps on cost-out measures, which will manifest to their full extent in the second half of 2020.The lower volumes led to a sharp decrease of operational EBITA and operational ROSA. APS’s business started to recover in June. The extension of its Bechhofen factory to enhance the positioning in the Beauty market is proceeding according to plan.
If not otherwise indicated, changes from the previous year are based on currency-adjusted figures.
Suffering from the impact of lockdowns
The lockdowns imposed by authorities to fight the spread of the coronavirus led to closures of beauty stores and dental practices around the globe. Consequently, Beauty and Dental customers stopped placing orders immediately. Factory closures curbed demand in the Adhesives segment that serves a wide range of markets such as the automotive, aviation and electronics industries.
Transforming industrial base and growing portfolio
While taking measures to keep employees safe and to ensure business continuity throughout the pandemic, the Beauty segment continues to drive the transformation of its industrial base to better serve its evolving mix of customers and introduce process automation to increase flexibility.
In June 2020, Sulzer acquired Stamixco, a small Swiss company which developed and commercializes an innovative, high performance mixer for adhesives, filling a gap in Sulzer’s static mixer portfolio.
Our business suffered from the lockdown measures in many countries of the world, leading to a collapse in demand as beauty stores and dental practices had to temporarily close. We have implemented decisive cost measures to mitigate the impact and are ready to seize the opportunities as the markets recover.
Girts Cimermans, Division President Applicator Systems
COVID-19 measures leading to fewer orders and sales
In the first half of 2020, order intake decreased by 27.3%. Double-digit growth in the Healthcare segment could not offset the decrease of other segments which were impacted by the temporary closures of cosmetics stores, dental practices and factories.
Due to the short-cycle nature of the business, the impact of the pandemic led to a sales decrease of 21.0% compared with the same period last year, negatively affecting all segments except for Healthcare.
Order intake by segment
Order intake by region
Decrease of operational EBITA and operational ROSA
Operational EBITA was 58.3% lower than in the first six months of 2019. Higher opEBITA in Healthcare could not offset the under-absorption in APS’ plants due to the abrupt fall in demand. Decisive cost-out measures subsequently launched will favorably affect the second half of 2020.
As a result, operational ROSA decreased to 11.8% in the first half of 2020 compared with 21.7% for the same period a year ago.
Key figures Applicator Systems (January 1 – June 30)
|
millions of CHF |
|
2020 |
|
2019 |
|
Change in +/–% |
|
+/–% adjusted 1) |
|
+/–% organic 2) |
|
Order intake |
|
160.2 |
|
228.4 |
|
–29.9 |
|
–27.3 |
|
–27.3 |
|
Order intake gross margin |
|
47.4% |
|
46.4% |
|
|
|
|
|
|
|
Order backlog as of June 30/ December 31 |
|
53.6 |
|
60.8 |
|
–11.9 |
|
|
|
|
|
Sales |
|
166.1 |
|
218.2 |
|
–23.9 |
|
–21.0 |
|
–21.0 |
|
EBIT |
|
9.0 |
|
15.9 |
|
–43.5 |
|
|
|
|
|
opEBITA |
|
19.5 |
|
47.3 |
|
–58.7 |
|
–58.3 |
|
–58.3 |
|
opROSA |
|
11.8% |
|
21.7% |
|
|
|
|
|
|
|
Employees (number of full-time equivalents) as of June 30/ December 31 |
|
1’769 |
|
1’821 |
|
–2.9 |
|
|
|
|
1) Adjusted for currency effects.
2) Adjusted for acquisition and currency effects.
Abbreviations
EBIT: Earnings before interest and taxes
opEBITA: Operational earnings before interest, taxes and amortization
opROSA: Operational return on sales adjusted
For the definition of the alternative performance measures, please refer to the Sulzer Annual Report 2019.