sia Abrasives held up well in the difficult economic environment witnessed during the first half of 2008. The surface finishing specialist based in Eastern Switzerland grew net sales by 4.6% in local currencies. In Swiss francs, the increase was 0.5%. For the full year, the Group expects to post local currency sales growth at the lower end of its 4% to 6% target range.

Overall, the first half of 2008 went well for the sia Group aside from the adverse currency effects of the weak US dollar and low pound sterling. While sales grew 4.6% in local currencies compared to the same period last year, net sales denominated in Swiss francs increased 0.5% year on year to CHF 148.3 million from CHF 147.6 million. Operating profit before interest and tax (EBIT) stood at CHF 15.3 million compared to CHF 16.7 million a year ago, representing a margin of 10.0% of operating revenue against 11.1% last year. Operating results reflected a lower gross margin due to the unfavourable impact of foreign currency translation on sales. Adverse factors were the pricing pressure in foreign markets where the sia Group invoices in Swiss francs and the rising energy costs for oil and gas. Profit for the period came in at CHF 10.7 million, compared to CHF 11.8 million for the same period last year, and represents 7.0% of operating revenue against 7.9% a year ago.

Performance varies in Europe and overseas
Despite the low growth in the worldwide market for flexible abrasives, sia Abrasives continued to expand its market share. Positive developments were seen in the domestic Swiss market, Germany and East European countries. In Germany, the sales company established jointly with Baar-based Sika AG, part GmbH in Bad Urach, continued its solid 2007 sales performance through the first half of 2008. This year the marketing concept was also launched in the UK, to be followed by other European countries in 2009. While overseas growth is mainly driven by China, encouraging local currency growth rates were also recorded in Australia and parts of America. With the strong Swiss franc, sia Abrasives has been facing ever stiffer competition in America and Asia. In those countries, the sia Group needs to compensate for its competitors’ relative currency advantages by leveraging its strengths, such as superior product quality, high supply capability and intensive customer care.

New products open doors
sia Abrasives’ innovative strength paid off once again. A number of new products were rolled out in the past few months and are proving their merits in the market, often opening doors to win new customers. In particular, several products were successfully launched for metal applications, such as the new ceramic fibre disc for demanding grinding operations and a new product developed with 3D grain. A new flap disc for high-performance grinding on stainless steel, which was brought to market at the end of 2007, has also been well received and is now being sold by well-known manufacturers of abrasive power tools. While sales of siastar, the sanding and grinding system launched in 2007, are still growing at a moderate pace, this innovation has been highly effective in opening doors. siastar is drawing wide attention to sia Abrasives as a provider of innovative products for metalworking. This is particularly helpful in the drive to push sales of siastar in retail chains. In the first half of 2008, sia Abrasives came out with siaspeed, a successful innovation for plastics and coatings that was developed especially for use in automotive repair shops and on composites.

Outlook
The present economic climate makes it extremely hard to predict the outcome for the full year. For one, the strong Swiss franc is still weighing on sales and profits and, for the other, various economic developments indicate slowing and subdued market conditions. Despite the difficulty in gauging what the future holds, sia Abrasives expects to post local currency sales growth at the lower end of its 4% to 6% target range for the full financial year. If exchange rates remain at the current level with their direct and indirect negative effects, the targeted volume growth is likely to be offset by foreign exchange losses.