2006 was an extremely successful year for the global sia Group. Operating profit before interest, tax, depreciation and amortisation (EBITDA) came in at CHF 44.4 million, EBIT at CHF 31.5 million and profit for the year (EAT) at CHF 22.6 million, making it another record year for the Group. The world’s Number Three in the coated abrasives market is clearly poised for continued growth in 2007. The current year got off to a good start, showing promising above-average sales increases. A dividend of CHF 12.00 (+20%) will be recommended at the Annual General Meeting.
In 2006, the consistent efforts to focus all activities on customers translated into another marked upturn in the sia Group’s sales. sia Abrasives saw net sales rise by 8% to CHF 282 million, clearly beating the original growth target of 4% to 6%.
Operating performance also improved solidly during 2006, making it another record year. Operating profit before interest, tax, depreciation and amortisation (EBITDA) rose by 9.6% or CHF 3.9 million to CHF 44.4 million, representing 16.0% of operating revenue. Operating profit before interest and tax (EBIT) was even up by 12.6% to CHF 31.5 million, resulting in a margin of 11.3%. Coming in at CHF 22.6 million, profit for the year (EAT) showed a growth rate of 13.7% and a margin of 8.1%. The sale of a plot of non-operating land yielded a gain of CHF 2.8 million. Free cash flow doubled from CHF 11.9 million to CHF 24.1 million. Altogether, the record results have strengthened the balance sheet, providing ideal prerequisites for funding further growth and making acquisitions. The directors propose that the Annual General Meeting raise the dividend from CHF 10.00 to CHF 12.00.
Growth engine North America
Acquired in autumn 2005, sia Abrafoam (UK) contributed about half of the sales growth. Growth was also driven by the product innovations launched in all the application areas. Bolstered by the focus on profitable niches, such as interior works and mobile homes, a large number of new customers and good progress in catalogue business with its partner Fastenal, one of the leading industrial and construction supply distributors, sia Abrasives put on a growth spurt in the USA. North American sales climbed by a handsome 24.7%. In Europe (excl. Switzerland), the sia Group grew by 7.5%, matching the pace set in the Group as a whole. Switzerland, the home market, displayed disproportionately high growth of 9.5%, spurred by gains in market share.
sia Abrafoam beats expectations
The acquisition of sia Abrafoam Ltd. based in Alfreton (UK) in November 2005 has been a real success story for sia Abrasives. Being an excellent strategic fit with the Group, sia Abrafoam has enabled sia Abrasives to offer three complementary products groups – coated, nonwoven and now foam abrasives – all from one source. In addition, it has given the Group a third manufacturing company, allowing it to generate synergies in logistics and sales, thus gaining a decisive market advantage. The line of Abrafoam products has been smoothly integrated into the sia Group’s distribution channels. Because there is little overlap in the customer base, no sales were lost. On the contrary, the products have been well received by existing sia customers. Furthermore, sia Abrafoam has brought new customers to the Group, which has opened up additional sales potential for coated and nonwoven abrasives.
Partnerships speed market penetration
The alliance with Sika AG in Baar has continued to flourish. On 1 November 2006, sia Abrasives and Sika formed part GmbH, a German joint venture company based in Bad Urach. Already established in Italy, the UK and Greece, the marketing model for offering a combined range of automotive repair products through both companies’ sales channels was also introduced in Germany in early November. This model allows the companies to provide customers with the best quality abrasive, bonding, sealing and damping products from one source. While benefiting from a more closely-knit sales network, they are generating synergies in marketing, distribution and logistics. sia Abrasives expects the advantages of this alliance already to be reflected in growing market share during 2007.
Fresh impetus and continuity in management
Roland Eberle took the helm as CEO of the sia Group at the beginning of 2007. He will press on with the growth strategy mapped out for sia Abrasives and bring fresh impetus. Peter A. Schifferle, who shaped the destiny of the Group as CEO from 1991, will take over as Chairman of the Board after the 2007 Annual General Meeting. The current Chairman, Hans-Ulrich Spiess, will serve as Deputy Chairman.
Outlook for 2007
sia Abrasives expects the growth trend to continue during 2007. The goal is to expand sales by 4% to 6% over last year. The current year got off to a good start, showing promising above-average sales increases. One example is sales of sia Abrafoam’s foam abrasives, which are currently enjoying double-digit year-on-year growth. Looking to further expand market share, the Group will drive organic business growth, fuelled by proximity to customers and product innovation. To round out the range of systems, it will selectively consider acquisitions.
From a geographical perspective, focus is being placed on North America, where sia Abrasives is enjoying above-average expansion as a result of targeted investments, and on the growth markets of Eastern Europe and Asia. sia Abrasives is about to open its own conversion facility in Mexico, a market that offers substantial potential for the high-quality sia products. To realign its operations in the South East Asian markets, the company is opening its own representative office in Singapore, complete with a training and communication centre. Through these initiatives, the sia Group is systematically tailoring its organisation to local market needs.
Key data for the sia Group (CHF amounts in thousands)
2006
2005
+/-
Net sales
281,975
261,351
7.9%
Operating revenue
278,179
262,720
5.9%
Operating profit before interest, tax, depreciation and amortisation (EBITDA)
44,385
40,511
9.6%
EBITDA as % of operating revenue
16.0%
15.4%
Operating profit before interest and tax (EBIT)
31,516
27,985
12.6%
EBIT as % of operating revenue
11.3%
10.7%
Profit for the year
22,635
19,903
13.7%
Profit for the year as % of operating revenue
8.1%
7.6%
Net cash inflow from operating activities
33,151
27,924
18.7%
Free cash flow
24,139
11,930
102.3%
Depreciation and amortisation
12,869
12,526
2.7%
Capital expenditure (gross)
8,295
7,352
12.8%
Net debt
50,768
70,212
-27.7%
Equity ratio
64.2%
56.2%
Number of employees
1,092
1,022
-1.0%
Dividend per share
CHF 12.00*
CHF 10.00
20.0%
* Board of Directors’ proposal for appropriation of retained earnings
Financial calendar
24 April 2007, 4 p.m.: Annual General Meeting of Shareholders at Frauenfeld Stadtcasino 30 April 2007: Dividend payment Mid-August 2007: Announcement of interim results 18 March 2008, 9 a.m.: Annual press conference at SWX Swiss Exchange in Zurich 18 March 2008, 11 a.m.: Analyst conference at SWX Swiss Exchange in Zurich
The sia Group based in Frauenfeld ranks among the world’s top three suppliers of coated abrasives. It develops, manufactures and markets complete abrasive systems tailored to specific requirements and applications for surface preparation and finishing of all kinds. This commitment has made sanding and grinding into true surface technologies. Employing some 1,100 people worldwide, sia Abrasives posted net sales of CHF 282 million and operating profit (EBIT) of CHF 31.5 million for 2006. sia Abrasives Holding AG is listed on SWX Swiss Exchange and generates more than 90% of its sales outside Switzerland.
® 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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