Productivity gains boost earnings
During 2004, the sia Group significantly improved its earnings performance. With net sales rising 4.7% to CHF 252.1 million, operating income before interest and taxes (EBIT) climbed 51% and net income 46%. The completed capital projects increased productivity by reducing costs. Coupled with better operating performance, this resulted in considerably higher free cash flow of CHF 21.7 million, up from CHF 1.9 million a year earlier. As a result, net debt was reduced and the equity ratio continued to rise. In the current year, growth will be spurred by new products and innovations. The proposed dividend has been raised from CHF 6.75 to CHF 8.00 per registered share, still providing a dividend yield of about 3%.
Last year, sia Abrasives expanded organically, recording a marked upturn in earnings. Product quality, service expertise and delivery capability were critical factors in successfully meeting the targets set. The sia Group increased its net sales by 4.7% to CHF 252.1 million. With this organic growth, the Frauenfeld-based surface finishing specialist clearly outpaced the market as a whole in 2004. The positive and negative effects of foreign currency translation almost balanced out, reducing revenues by CHF 0.4 million.
Earnings surge on higher productivityOperating income before depreciation and amortization (EBITDA) grew even stronger, rising 27.9% to CHF 38.0 million. This represents 15.0% of total revenues, compared to 12.3% in 2003. Operating income before interest and taxes (EBIT) even surged 51.4% to CHF 24.7 million, an EBIT margin of 9.8% against 6.8% in 2003. Net income also climbed 45.5% to CHF 16.3 million, to represent 6.4% of total revenues versus 4.7% in 2003. Fueled by higher sales, this solid performance was also due to both a slightly higher gross margin, up from 60.7% to 61.8%, and a reduction of CHF 4.1 million in personnel expenses. EBIT for 2003 had been boosted by one-time and extraordinary items totaling CHF 2.0 million. This means that, based on operating results, sia Abrasives increased EBIT by 73% and net income by 87% in 2004.
Completed capital projects and significantly stronger balance sheetIn 2004, the completed capital projects and reorganization measures reduced the sia Group’s employee numbers by 93. This reflects the cost reduction impact of the capital spending on jumbo roll manufacture and conversion. Lower net capital expenditures and better operating performance significantly improved free cash flow to CHF 21.7 million from CHF 1.9 million. Net debt was reduced by CHF 22.2 million to CHF 70.9 million, and the equity ratio rose from 49.3% to 55.4%. The net debt to equity ratio decreased from 74% to 50%.
Growth momentum in low-wage countriesRevenues were boosted especially by high sales figures in Poland and Russia. Even stronger growth momentum than in Eastern Europe was seen in Asian countries. In this region, sia Abrasives posted above-average growth, spurred by the continued relocation of industrial production from traditional industrialized countries to Asia, and especially China. Sales in the Latin American market were also higher than average. In contrast, the upturn in local currency sales across North America and Mexico was offset by the negative impact of foreign currency translation. In the USA, the company vigorously expanded sales through Fastenal, the catalog distributor.
The sia Group was especially successful in the wood panel market due to its product quality and strong position. Last year, this application area was the primary growth driver, with sales up 12.6%. The product group for furniture/interior works grew 6.7% and was still the largest sales contributor, accounting for nearly one-third of revenues. sia Abrasives generated about half of its net sales in the metal and ART (automotive paint and bodywork) segments, maintaining revenues at prior year levels amid fierce competition.
Outlook for 2005While anticipating modest global market growth in 2005, sia Abrasives expects disproportionately strong growth to continue in Eastern Europe and China. On balance, the sia Group believes that it will outpace the market again in 2005. New products and innovations, some already or shortly to be launched, will bolster organic growth. With additions to the product line, sia Abrasives will keep penetrating new application areas and geographic markets. Productivity gains generated by the major capital improvements to production facilities over the past years should have a full impact in 2005.
sia Abrasives expects additional impetus for growth from strategic partnerships on the sales and procurement side. Under last year’s agreement with AG Cilander in Herisau for the development and production of finished fabric, deliveries are scheduled to start in the first half of 2005. In a test market, sia Abrasives entered into a new partnership with Sika AG in Baar, a global specialty chemicals company. The aim is to strengthen both companies’ position in the ART segment. In view of the good response in the test market, the cooperation will be extended to other markets in the current fiscal year.
For further information
Peter A. Schifferle, CEO and Executive Director
Gerhard Mahrle, CFO and Investor Relations
Phone: +41 52 724 45 75
Fax: +41 52 724 45 70
E-mail: ir@sia-abrasives.com
Internet: http://www.sia-abrasives.com/
® Correct nomenclature for sia Abrasives Holding AG
As there are other companies and organizations that use the same abbreviation as our company, we would be grateful if you could help to avoid any misunderstandings by always writing our name as follows: sia Abrasives (never just sia by itself). |
