sia Abrasives sets the stage for continued organic growth (08/04/2003)
First quarter 2003 sales beat expectations
In 2002, sia Abrasives generated sales of CHF 241.1 million, topping the year-earlier level of CHF 222.3 million by 8.4%. Operating income before interest and taxes (EBIT) rose 5.5% to CHF 21.8 million while net income stood at CHF 13.4 million compared to CHF 15.1 million in 2001. The broad-based capital spending program being carried out in Frauenfeld to accommodate the company’s rapid growth is well underway and has already generated cost savings. The Annual Meeting of Stockholders will be recommended to declare an unchanged dividend of CHF 6.75 per registered share. The sia Group’s first quarter 2003 sales were 4% up on last year.
“In 2002, the sia Group succeeded in significantly strengthening its market position as the world’s third largest coated abrasives producer”, reported CEO Peter A. Schifferle at the annual press conference on April 8, 2003. sia Abrasives is seeking to grow much faster than the market as a whole. In local currencies, the Group recorded a 12% gain, with 6% driven by organic growth and 6% by foreign acquisitions. In Swiss francs, net sales reached CHF 241.1 million, up 8.4% from CHF 222.3 million in 2001. Despite the adverse exchange rate movements, global economic slowdown and one-time costs of CHF 0.8 million incurred in combing and optimizing sia Abrasives’ UK facilities, operating income before interest and taxes (EBIT) rose to CHF 21.8 million from CHF 20.6 million. This represents 9.0% of net sales versus 9.3% in 2001. Foreign exchange losses and higher financial expense due to acquisitions had the effect of reducing net income by CHF 1.7 million to CHF 13.4 million from CHF 15.1 million in 2001, resulting in a 5.6% return on sales in 2002 versus 6.8% in 2001. The Board of Directors is recommending the Annual Meeting of Stockholders to declare an unchanged dividend of CHF 6.75 per registered share.
Investments in jumbo roll manufacture and conversion reduce costs
To accommodate the company’s rapid growth, sia Abrasives is spending CHF 46.5 million on its jumbo roll manufacturing and conversion facilities in Frauenfeld alone over the period 2000 to 2006. By the end of 2002, projects to the tune of CHF 27.8 million had already been completed. The sia Group expects this program to cut costs by altogether CHF 8 million per annum from 2006 onward.
The Frauenfeld reengineering project has significantly simplified and automated jumbo roll manufacturing operations. The company further developed and improved critical process technologies, reduced manufacturing costs and increased capacity. Difficulties that arose in supplying customers were overcome during the introductory phase. The capital expenditures made so far, running to approximately CHF 12 million, have delivered the projected economies, already cutting costs by CHF 4 million in 2002.
To bolster its technological leadership, sia Abrasives is investing another CHF 26 million in expanding and improving its Frauenfeld conversion and logistics operations. Here too, the Group anticipates great room for improvement and better efficiency in organizational procedures. The project will be largely completed in 2003. These investments will reduce sia Abrasives’ annual costs by CHF 3 million in 2004 and CHF 5 million from 2005 onward.
Acquisitions strengthen position
In 2003, the Group is looking to utilize the synergy potential resulting from the latest acquisitions. sia Abrasives Deutschland GmbH and Weck Schleifmittel GmbH, a company focused primarily on the metalworking industry, are intensifying their market coverage by aligning their customers and markets with their core competences. In the US growth market, the conversion expertise of sia Abrasives, Inc. USA is being transferred also to sia CAPCO, which should increase productivity and reduce costs.
After the first quarter of 2003, the order books are much fuller than last year. The sia Group’s sales in the first three months of this year were up 4% on the comparative prior year period even though exchange rates were lower on average. While the business climate still looks difficult, sia Abrasives views the prospects for 2003 with cautious optimism.
® 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).
News 