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Adval Tech reports higher sales, but lower profits
Total income of CHF 221.1 million reported by the Adval Tech Group represented an increase of 32% compared with the same period of the previous year (CHF 167.4 million). This growth was almost completely due to the acquisition of the Omni Group. Operating earnings (EBITDA) were slightly lower at CHF 19.1 million (CHF 19.4 million in the first six months of 2007), while EBIT declined significantly to CHF 5.1 million (CHF 7.0 million in the first half of 2007). The EBIT margin thus narrowed to 2.3%. Net profit amounted to CHF 0.2 million (CHF 4.2 million in the first half of 2007). The significantly steeper decline in net profit was primarily attributable to a non-recurring financial expense of some CHF 2 million in connection with bridging loans for the acquisition of the Omni Group.
Acquisition of the Omni Group
By completing the acquisition of Omni Industries Pte Ltd in mid-January 2008 Adval Tech achieved the goal of a global presence with wholly owned sales organizations and manufacturing facilities in Europe, Asia and America - which is so important for our key customers - earlier than expected.
Omni ideally complements our corporate group. Adval Tech is now represented worldwide in all major market regions with wholly owned plants for producing plastics components. While the group's existing companies manufacture components primarily for the automotive, medical technology and pharmaceutical industries, the emphasis at Omni is on applications for leading companies in the consumer goods industry.
Integration of the Omni Group, with sales of almost USD 100 million (2007), some 2 000 employees and six manufacturing plants - three in China (Shanghai, Suzhou and Xiamen) and one each in Thailand, Malaysia and Mexico - is proceeding according to plan. Neo Age Seng, CEO of the Omni Group, has also been a member of Adval Tech group management since mid-March 2008.
Increase in share capital
In order to maintain the sound capital base an increase in share capital was concluded at the end of April to repay the bridging loans in connection with the acquisition of the Omni Group.
Shareholders could subscribe for one new registered share for each share already held, at a price of CHF 275. 99.93% of the subscription rights were taken up, with both major shareholders exercising their rights. Gross proceeds accruing to the Adval Tech Group from this increase in share capital totaled approx. CHF 100 million. Adval Tech is thus financing the acquisition of the Omni Group to a large extent from internal resources, i.e. without substantial new borrowing.
Stamping and Forming Segment (Styner+Bienz, QSCH)
The Stamping and Forming Segment posted a substantial increase in sales and earnings.
55+% of the growth in sales was organic, and almost 45% was attributable to the consolidation of QSCH, which was acquired at the beginning of April 2007. The segment achieved organic growth primarily by intensifying market activities with existing customers, especially in components and subassemblies for steering systems, airbags, ABS and automobile lamps. Sales for coffee machines for commercial use were also very encouraging in the first half of 2008. And in the currently good business climate in Brazil the organizational adjustments to the new level of business in the past year have paid off.
Injection Molding Segment (AWM, FOBOHA, Teuscher, Omni)
While component manufacture for the automotive and medical technology markets at the Injection Molding Segment's existing business units was within the range of expectations, the slump in the market for molds used in the manufacture of optical discs at AWM Mold Tech and the cancellations and postponements of orders at Foboha resulted in a steep decline in total income, inadequate utilization of production capacity and finally a negative EBIT figure. The weakness of the US dollar in relation to the Euro and the Swiss franc further intensified pressure on prices and margins.
Results at Omni in the first half of 2008 were satisfying but not quite in line with budgeting at the end of 2007. The global financial crisis had an adverse impact on sales on the North American market. In particular sales in the home electronics sector were well below budget. The new moldmaking facility in Suzhou is still in the startup phase, but initial orders have already been completed successfully.
In the light of orders in hand and market estimates, Adval Tech foresees an increase in consolidated total income to CHF 430 - 445 million (CHF 348.6 million in 2007). Adval Tech expects a slight improvement in operating earnings (EBIT) and a more substantial increase in net profit in the second half of the year. However, the outcome will fall short of the previous year's figure of some CHF 8 million.
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