Efficiency gains drive record results (24/03/2006)
sia Abrasives strengthens its position with innovations in the abrasives market
During fiscal 2005, sia Abrasives achieved record results at all operating levels. The best results in the company’s history were driven by the efficiency gains resulting from the capital spending and rationalization programs implemented over the past few years. Net income was up 22.1% to CHF 19.9 million on net sales of CHF 261.4 million (2004: CHF 252.1 million). The acquisition of Abrasive Foam Ltd. brought targeted expansion in the broad spectrum of flexible abrasives. Improving its supply capability and delivering product innovations, sia Abrasives set the stage for future growth. A 25% higher dividend of CHF 10.– will be proposed to the Annual Meeting of Stockholders.
A key component of the sia Group’s success in 2005 was the continuation of its multi-year business strategy. Product quality and innovations, service expertise and high supply capability allowed sia Abrasives to maintain and strengthen its position as the world’s third largest manufacturer of coated abrasives. Net sales grew 3.7% to CHF 261.4 million, outpacing the estimated industry average by 2.7%. A dividend of CHF 10.– will be proposed to the Annual Meeting of Stockholders. This is 25% higher than last year and underscores the company’s policy of sustaining an attractive payout.
Sustained improvement in operating results
sia Abrasives achieved record results at all levels. Net income increased 22.1% to CHF 19.9 million and the return on operating revenues to 7.6% from 6.4%. Operating income before interest, taxes, depreciation and amortization (EBITDA) grew 6.7% to CHF 40.5 million. As a result, the EBITDA margin reached 15.4% of operating revenues, compared to 15.0% a year earlier. Operating income before interest and taxes (EBIT) improved 13.1% to CHF 28.0 million and the EBIT margin rose 0.9 percentage points to 10.7%. Due to changes in IRFS accounting standards, recoverable goodwill ceased to be amortized in 2005. This contributed CHF 1.2 million to EBIT.
Innovations and acquisitions set the stage for further growth
Innovations and improved products allowed sia Abrasives to increase its sales in various application areas. One example is a new series of wide belts for a dust-free abrasive process that produces an even more homogeneous surface finish. After just one year, the market launch can be chalked up as a success. sia Abrasives expects the sales volume to rise significantly in 2006.
An innovative product developed and patented by sia Abrasives is the new pad system launched on the market in mid-2005. This system makes panel sanding even more precise and economical. sia Abrasives anticipates corresponding increases in sales during 2006. It believes that both these innovations will both help to retain existing customers and directly win over new users.
By acquiring abrasives manufacturer Abrasive Foam Ltd. at the beginning of November 2005, sia Abrasives expanded into the market for foam abrasives. This has put it at the forefront to play an early and active role in shaping the trend toward ever softer and more flexible abrasives. The integration of the unit, operating as sia Abrafoam Ltd., into the sia culture is going according to plan.
And finally, the tool patents acquired in October 2005 from SANDEX GmbH, a German sanding and grinding tool specialist, are pointing the way forward for expansion of sia Abrasives’ surface expertise. The main patent is a universal quick release mechanism that fits all common hand-held grinding machines and considerably lowers the cost of all kinds of grinding processes. As the patent holder, sia Abrasives has the exclusive right to manufacture the quick release mechanism and grinding tools. In mid-2006, the company will take over the production of the grinding tools from SANDEX.
Rationalization measures improve efficiency
The trends in operating results reflect the productivity and profitability gains generated by the capital spending and rationalization programs implemented over the past few years. Various measures were taken to further speed up the processes for manufacturing jumbo rolls, substantially increasing production flexibility and capacity. Further cost reductions and rising sales can be expected. In 2006, the teamwork with Herisau-based AG Cilander will have a positive impact on material costs for finished fabric. sia Abrasives is also committed to continuously improving its customer responsiveness and service expertise. To this end, it invested in a new, fully automated roll slitting and packaging line in the conversion facility in 2005.
Outlook for 2006
This year the sia Group is focusing on sales growth. Remaining true to its strategy, it will strengthen customer relationships by delivering high supply capability, service expertise and new products. Constantly adding to the product lines, it will keep investing in new application areas and entering more geographic markets. sia Abrasives anticipates further cost reductions from the past years’ capital spending on production facilities and the resulting process improvements.
In the global markets, geographic boundaries are playing an ever smaller role because customers operate across former borders. As a result, sia Abrasives is continually adjusting its own sales organization to the new situation. Here the company attaches increasing importance to alliances. The partnership entered into with Sika in Baar during 2005 marks the beginning of this trend. This joint venture allows sia Abrasives to sell a wider range of automotive repair products through a more closely knit distribution network. Having started in Italy, the new distribution model is going to be launched in other large European markets during 2006.
Key data for the sia Group (CHF amounts in thousands)
2005
2004
+/-
Net sales
261,351
252,118
3.7%
Operating revenues
262,720
252,949
3.9%
Operating income before depreciation and amortization (EBITDA)
40,511
37,973
6.7%
EBITDA as % of operating revenues
15.4%
15.0%
Operating income (EBIT)
27,985
24,745
13.1%
EBIT as % of operating revenues
10.7%
9.8%
Net income
19,903
16,303
22.1%
Net income as % of operating revenues
7.6%
6.4%
Net cash provided by operating activities
27,924
27,842
0.3%
Free cash flow
11,930
21,660
-44.9%
Depreciation and amortization
12,526
13,228
-5.3%
Capital expenditures (gross)
7,352
5,724
28.4%
Net debt
70,212
70,890
-1.0%
Equity ratio
56.2%
55.4%
1.4%
Number of employees (annual average)
1,022
1,003
1.9%
Dividend per share
CHF 10.00*
CHF 8.00
25.0%
* Directors’ proposal for appropriation of retained earnings
Calendar of events
April 19, 2006: Annual Meeting of Stockholders at Frauenfeld Stadtcasino April 25, 2006: Dividend payment August 2006: Publication of first-half results
The sia Group based in Frauenfeld ranks among the world’s top three suppliers of coated and nonwoven 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 261.4 million and operating income (EBITDA) of CHF40.5 million for 2005. 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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