sia Abrasives posts marked growth in operating income
sia Abrasives made the turnaround in the first half of 2004, achieving marked improvement in operating performance. Excluding the effects of special items in the year-earlier period, operating income before interest and taxes (EBIT) rose 16.7% and net income increased 6.3%. Net sales came in at CHF 126.5 million, up 2.2%. For the current year, the sia Group anticipates 4% to 6% growth in sales and an EBIT margin of almost 10% of total revenues.
In the first six months of 2004, the Group of companies specialized in developing, manufacturing and marketing coated abrasive systems increased net sales by 2.2% to CHF 126.5 million. Sales advanced particularly in the markets of Asia/Australia (+4.5%) and Europe (+4.0%). Net sales in North and Latin America dropped below year-ago levels, falling 3.8% and 1.9% respectively, mainly due to currency translation. Order intake was encouraging too, picking up especially in the second quarter. At the end of June 2004, new order bookings were CHF 132 million, nearly 8% or about CHF 10 million above last year.
A summary of operating results excluding the net benefit of last year's special items of CHF 2.6 million (property sale and non-recurring expenses due to extra material consumption plus depreciation and amortization) shows marked increases in all the operating performance ratios for the current year. Net income before interest, taxes, depreciation and amortization (EBITDA) improved CHF 2.4 million or 14.9% to CHF 18.8 million, representing an EBITDA margin of 14.7%. Operating income before interest and taxes (EBIT) rose 16.7% or CHF 1.8 million to CHF 12.3 million, resulting in an EBIT margin of 9.6%. And on the bottom line, net income was up 6.3% or CHF 0.5 million to CHF 7.8 million or 6.1% of total revenues.
This good performance is largely attributable to the decrease of CHF 2.6 million in personnel expenses. Since the end of 2003, the workforce has been further reduced by approximately 8%. This summer will see the successful conclusion of both the major capital spending projects to optimize jumbo roll manufacturing processes and improve production and logistics flows in conversion operations, involving capital outlays of CHF 35 million. Economies resulting from the capital spending programs made it possible to cut the staff in Frauenfeld by more than 5%. Depreciation expense was up CHF 0.7 million year over year due to capital expenditures, and net financial items deteriorated by CHF 1.3 million primarily due to currency movements.
Taking account of special items recognized in 2003, EBITDA was down by CHF 1.4 million, EBIT by CHF 0.8 million and net income by CHF 2.5 million for the first half of 2004. The positive operating results and completion of capital projects allowed free cash flow to grow to CHF 6.0 million from -CHF 13.7 million a year ago.
More innovative products and applications
Expanding the research and development department, we focused our development activities on new products and applications. In a very short time, we geared up to start mass production of innovative diamond abrasive belts for use on special, newly designed sanding machines for finishing ceramic tiles. Pressing on with the project for a slicer to manufacture wafers, we expect to get the product ready for mass production in the near future, it having become necessary to seek a new machine manufacturer to cooperate with. In parallel with this, projects are underway for demanding applications for optics, aircraft construction and wind energy systems.
Positive outlook
Our goals for 2004 are to complete the capital spending programs, promote organic growth and enhance operating performance. Acquisitions are not on the main agenda for this fiscal year. First-half order bookings, sales and operating income make us optimistic for this year. With economic conditions stabilizing, sia Abrasives anticipates 4% to 6% growth in sales for 2004. Given the productivity gains achieved and the effects of tight cost management, we expect operating income before interest, taxes, depreciation and amortization (EBITDA) to represent about 15% of total revenues. The EBIT (operating income before interest and taxes) margin should reach some 10%. At CHF 16 million, free cash flow will exceed last year's level several times over. The equity ratio should also improve again in this fiscal year to top the 50% mark once more.
The sia Group based in Frauenfeld ranks among the world's top three suppliers of innovative abrasive systems. It develops, manufactures and markets complete abrasive systems tailored to specific requirements and applications for surface preparation and finishing of all kinds. Sanding and grinding have thus become true surface technologies. sia Abrasives employs some 1,000 people throughout the world and posted net sales of CHF 240.8 million and operating income of CHF 16.3 million for 2003. sia Abrasives Holding AG is listed on SWX Swiss Exchange and generates more than 90% of its sales outside Switzerland.
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).
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