Schaffner steps up its cost-reduction program in a difficult market environment

Media Release

Schaffner steps up its cost-reduction program in a difficult market environment

Luterbach, 12 May 2016 – In the first half of fiscal 2015/16, the Schaffner Group stepped up the implementation of measures aimed at achieving the operating EBITA margin target of at least 8% defined in the 2020 strategy. Schaffner currently expects restructuring costs of approx. CHF 4 million from the implementation of these measures for the fiscal year as a whole, of which CHF 0.7 million were included in the results posted for the first half of the fiscal year. The merger of the two US plants at the Wytheville (Virginia) site will contribute considerable savings from as early as the second half of the fiscal year.

The Schaffner Group's net sales fell by 9.7% to CHF 92.6 million in the first half of fiscal 2015/16 (to 31 March) due to a sharp decline in sales in the Power Magnetics division (first half of fiscal 2014/15: CHF 102.5 million). The difference in local currencies amounted to -9.2%. Impacted by Power Magnetics' low sales figures as well as extraordinary costs associated with staff cuts, the operating profit prior to acquisition-related amortization and restructuring costs (operating EBITA) fell to CHF 2.2 million (CHF 4.8 million). The operating EBITA margin amounted to 2.3% (4.7%). Net (-loss)/profit was at CHF -0.3 million (CHF 1.9 million) or CHF -0.53 (CHF 3.02) per share.

The market environment in the Schaffner Group's core markets remained extremely difficult in the reporting period as well, with the exception of the automotive sector. One key reason for this is the current low demand in drive technology, partly due to the slump in oil, gas and mining industries as a result of the persistently low commodity prices. However, harmonic filters went against this trend and reported a rise in sales by more than a third, supported by successes in Asia and Europe. At a regional level, China saw positive growth once again and is currently the Schaffner Group's most important national market, with a share of sales of 25%. Overall, the Group's order intake in the first half of fiscal 2015/16 totaled CHF 94.2 million (CHF 101.4 million). The book-to-bill ratio was 1.02 (0.99), thereby showing both a sequential and a year-on-year improvement.

Divisions of the Schaffner Group: Automotive boasting a high margin again, Power Magnetics experiencing a sharp drop in sales

Sales in the EMC division declined slightly by 3% to CHF 45.4 million in the first half of fiscal 2015/16. The segment operating profit of CHF 3.1 million (CHF 3.6 million) was characterized by a high level of investment in the expansion of the Power Quality business, in particular for developing the next generation of the ECOsine harmonic filters.

The Power Magnetics division experienced a 24% drop in sales to CHF 25.2 million. China saw solid growth, while in the other regions the division suffered due to weak demand from the drive technology, photovoltaic and rail technology sectors. The negative segment result of CHF -3.0 million (CHF 1.8 million) is down to low capacity utilization in the factories in Europe and North America. However, a rise in order intake suggests that the division has reached a trough.

The Automotive division reported sales in the first half of the fiscal year that were slightly down on the prior-year period at CHF 22.2 million (CHF 22.6 million), but again growth for components for keyless entry systems was recorded. Operating segment profit saw a considerable increase to CHF 4.7 million (CHF 2.8 million), thanks to further improvements in operational excellence as well as a high level of production capacity utilization.

Cost-reduction program being stepped up

The operating EBITA margin target of at least 8% defined in the 2020 strategy shall be achieved within 24 months since the implementation of measures has been stepped up. These measures include the plant merger in the US, as well as plans for the further relocation of production and a sustainable reduction of material costs. Fixed cost structures are being streamlined by cutting 5% of positions. The aim is to reduce costs by more than CHF 6 million annually, with most of this having taken effect by as early as fiscal 2016/17. The Automotive division, which is is already exceeding its medium-term targets, is excluded from these measures.

Outlook

The economic outlook in Schaffner's core markets remains uncertain. As the order intake develops better than sales, Schaffner expects sequentially increasing sales that – together with the initial successes from the cost-reduction measures – should result in an improvement of the operating EBITA against the first half of the fiscal year. The cost of implementing the cost-reduction program will, however, leave its mark on the Schaffner Group's results for the second half of fiscal 2015/16. Both operating EBITA and net profit for the whole of fiscal 2015/16 are expected to be well below the previous-year results.

Contacts

Alexander Hagemann

Kurt Ledermann

Chief Executive Officer

Chief Financial Officer

T +41 32 681 66 06

T +41 32 681 66 08

alexander.hagemann@schaffner.com

kurt.ledermann@schaffner.com

Key financials

Consolidated income statement

in CHF '000

H1 2015/16

H1 2014/15

Net sales

92,575

102,469

Net sales EMC

45,391

46,650

Segment operating profit EMC

3,069

3,554

Net sales Power Magnetics (PM)

25,213

33,196

Segment operating profit PM

-2,976

1,792

Net sales Automotive (AM)

21,971

22,623

Segment operating profit AM

4,663

2,776

Operating EBITA

2,154

4,815

In % of net sales

2.3

4.7

EBIT

524

3,703

In % of net sales

0.6

3.6

Net (-loss)/profit

-334

1,910

In % of net sales

-0.4

1.9

Net (-loss)/profit per share in CHF

-0.53

3.02

Free cash flow

-4,685

-2,824

Consolidated balance sheet

in CHF '000

31.3.2016

30.9.2015

Total assets

134,178

146,883

Net working capital

38,550

32,285

Net debt

23,248

18,196

Gearing in %

42

31

Shareholders' equity

55,099

59,443

Equity ratio in %

41.1

40.5

Key share figures

31.3.2016

30.9.2015

Shareholders’ equity per share in CHF

86.64

93.47

Share price in CHF

208.60

218.90

Market capitalization in CHF million

133

139

The full 2015/16 Half-Year Report and the presentation are available at:
www.schaffner-ir.com

The webcast presentation of the first-half results for fiscal 2015/16 will be available from 10.00 a.m. on 12 May 2016 at the following link:
78449.choruscall.com/dataconf/productusers/schaffner/mediaframe/15363/indexl.html

Conference Call on 12 May 2016 at 10.00 a.m.

Dial the following number 10 to 15 minutes before the scheduled start of the conference call:
Europe +41 (0)58 310 50 00 / UK +44 (0)203 059 58 62 / USA +1 (1)631 570 5613

Financial calendar

8 June 2016

Investors' day 2016

6 December 2016

Publication of annual report 2015/16 (full-year results)

12 January 2017

21st Annual General Meeting

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