Georg Fischer achieved top-line growth of 6% in the first half of 2008, with sales amounting to CHF 2.4 billion. Currency effects and soaring material and energy costs had a negative impact of over CHF 60 million on earnings. Pricing and efficiency measures have been put in place as a counterbalance, but with a delayed effect. As a result, EBIT dropped to CHF 157 million (EBIT margin 6.6%) against CHF 193 million at mid-2007 (EBIT margin 8.6%). GF Piping Systems again put in a strong performance; the strategic acquisition Central Plastics is well on track.GF Automotive enjoyed sustained demand but is facing a steep increase in materials costs.GF AgieCharmilles achieved continuing high growth in the milling machine business, lengthening delivery times short-term, but a stagnating EDM (electric discharge machining)business and the weak dollar affected overall sales and margins.
At CHF 2,383 million, corporate sales were 6% up on the previous year (CHF 2,248 million).Adjusted for currency effects and for changes in the scope of consolidation, the growth rate stands at 7.5%. While GF Automotive and GF Piping Systems continued to grow, GF AgieCharmilles returned a slight decrease in sales. Corporate turnover in local currencies increased by 7% in Europe and by 8% in Asia, whilst the Americas showed no growth.
Earnings at mid-2008 are clearly below the record previous year's first half. Currency effects reduced EBIT by CHF 28 million, particularly at GF AgieCharmilles and GF Piping Systems. The GF Automotive result was affected by the soaring costs of iron scrap, coke and other materials to an amount of CHF 35 million. These external effects lowered the EBIT margin at mid-year by over two points.
Net profit totals CHF 109 million, corresponding to a reduction of 20% compared to previous year.Free cash flow stands at CHF -212 million. The main impact stems from the acquisitions of Central Plastics and the 50% stake in Georg Fischer Simona, which used funds totalling CHF 120 million.Additionally, investments in China and the overall sales growth induced a considerable increase in working capital. Net debt therefore jumped up to CHF 573 million. Corporate headcount rose by 10%, partly as a result of acquisitions, partly from expansion moves in growth markets mainly in Asia.
Corporate Groups
GF Automotive enjoyed sustained demand from both the passenger car and commercial vehicle sectors. Turnover grew 9% to CHF 1,214 million (11% in local currencies). Margins were affected as the price of iron scrap almost doubled between April and June 2008; these price increases can only be passed on to customers with a time lag. As a result EBIT at half-year stands at CHF 72 million, 19% below the previous year. In the Iron Castings division, the installation of additional melting capacity has permitted a further volume increase to meet demand. In the Light Metal Castings division, volume was increased to planned levels. This is also true for the Herzogenburg plant, where costs were reduced thanks to efficiency increases but have not yet reached planned levels.
The new iron material SiboDur® is proving to be a market success, and the first component made of SiMo 1000®, a high-temperature resistant alloy developed by GF, has been successfully launched, tapping into the major potential that exists in the market for low-emission engines. The combined development and production competence in light metal led to a large order for new 8-speed automatic gearboxes from the leading European gearbox manufacturer. A Chinese OEM placed orders for a further series of aluminium engine blocks from our plant in Suzhou.
Outlook: Bookings at GF Automotive remain strong, leading to continuing high workloads. Pricing measures will also compensate part of the material hikes. The construction of the iron foundry in Kunshan (China) is well on track for production start-up early next year.
GF Piping Systems remains on a growth path with sales of CHF 622 million (up 11% against the previous year, 7% adjusted for currency effects and acquisitions). Continuing high demand for water distribution and water treatment applications is driving growth. Strong sales in emerging markets are also making up for negative currency effects. The newly acquired Central Plastics Company in Shawnee (USA) is running well and has contributed CHF 41 million of sales in five months. Currency effects on margins have amounted to CHF 8 million so far. Nevertheless, EBIT stands at CHF 72 million, just short of last year's record figure of CHF 73 million.
Organic growth in excess of the very strong first half of 2007 was registered in Europe, Asia and the emerging markets whilst the American market slightly declined. In Europe, our market segment approach paid off in traditional areas such as water treatment and utilities as well as in more recent applications such as photovoltaic thin-film technology. Even the drop in the residential housing market could be mitigated with a better focus on commercial and high-rise buildings. The postponement of important semicon projects in Japan, Taiwan and Singapore dampened our performance in Asia despite outstanding 18% growth in China, where investments in industry and in building construction continue to be high. In the USA cooling and refrigeration applications made up for the lack of new projects in microelectronics.
Outlook: GF Piping Systems expects continuing growth overall, driven by solid demand worldwide in most applications and by a strong presence in the emerging economies. Margins are also on the rise thanks to price adjustments. New sales companies in Taiwan and Canada were established to better cater for local demand.
At GF AgieCharmilles, sales reached CHF 547 million (4% below the previous year, up 1% in local currencies). The Milling division is again enjoying high demand, mainly in Europe, which has resulted in lengthened delivery times and a higher order backlog at mid-year. By contrast the EDM business slowed down during the first-half, owing to weaker demand in parts of Asia; sales in Europe and America remained at a satisfactory level. The services, spare parts and tooling businesses, which are less exposed to market cycles, now make up a third of total sales.
GF AgieCharmilles faced clearly unfavourable currency exchange rates during the first half of 2008, with a negative effect on margins amounting to CHF 18 million. The result is an EBIT of CHF 20 million as opposed to CHF 39 million last year.
Manufacturing capacity at the Beijing EDM plant was enlarged. The Chinese-built Cut 20/30 and Form 20/30 machines, which were launched at EMO 2007, are successful in the market and enjoying strong demand. The Form 2000 and Hyperspark IQ die-sinking machines, which feature an advanced zero-wear technology, were launched. The new HPM 600 HD (3 axes) and HPM 800 U(5 axes) high-performance milling machines have been well received by the market. The Milling plant in China is under construction and expected to start production in 2009.
Outlook: The second-half is traditionally stronger than the first at GF AgieCharmilles. Whilst currency effects may not disappear, the order backlog at mid-year is high, giving GF AgieCharmilles a good chance to improve its performance during the second half.
Outlook and measures GF is well-positioned worldwide in its three core businesses, each of which is enjoying sustained demand despite certain indications of a downward economic trend. Barring unforeseen circumstances, GF Corporation should continue on its growth path during the second half of 2008 albeit at a more moderate pace. The volatile currency and raw material situation will probably continue to put pressure on margins.
Pricing measures are in place to counterbalance such effects, either as part of the sales contracts at GF Automotive or within the framework of already announced general price increases at GF Piping Systems and GF AgieCharmilles. Efficiency-enhancing programmes including the improvement of the net working capital have been set up in all three Groups. Moreover, new facilities are being built in Asia in all three Groups of GF, which, together with the recent acquisitions in North America, will further reduce currency exposure.
At CHF 2,383 million, corporate sales were 6% up on the previous year (CHF 2,248 million).Adjusted for currency effects and for changes in the scope of consolidation, the growth rate stands at 7.5%. While GF Automotive and GF Piping Systems continued to grow, GF AgieCharmilles returned a slight decrease in sales. Corporate turnover in local currencies increased by 7% in Europe and by 8% in Asia, whilst the Americas showed no growth.
Earnings at mid-2008 are clearly below the record previous year's first half. Currency effects reduced EBIT by CHF 28 million, particularly at GF AgieCharmilles and GF Piping Systems. The GF Automotive result was affected by the soaring costs of iron scrap, coke and other materials to an amount of CHF 35 million. These external effects lowered the EBIT margin at mid-year by over two points.
Net profit totals CHF 109 million, corresponding to a reduction of 20% compared to previous year.Free cash flow stands at CHF -212 million. The main impact stems from the acquisitions of Central Plastics and the 50% stake in Georg Fischer Simona, which used funds totalling CHF 120 million.Additionally, investments in China and the overall sales growth induced a considerable increase in working capital. Net debt therefore jumped up to CHF 573 million. Corporate headcount rose by 10%, partly as a result of acquisitions, partly from expansion moves in growth markets mainly in Asia.
Corporate Groups
GF Automotive enjoyed sustained demand from both the passenger car and commercial vehicle sectors. Turnover grew 9% to CHF 1,214 million (11% in local currencies). Margins were affected as the price of iron scrap almost doubled between April and June 2008; these price increases can only be passed on to customers with a time lag. As a result EBIT at half-year stands at CHF 72 million, 19% below the previous year. In the Iron Castings division, the installation of additional melting capacity has permitted a further volume increase to meet demand. In the Light Metal Castings division, volume was increased to planned levels. This is also true for the Herzogenburg plant, where costs were reduced thanks to efficiency increases but have not yet reached planned levels.
The new iron material SiboDur® is proving to be a market success, and the first component made of SiMo 1000®, a high-temperature resistant alloy developed by GF, has been successfully launched, tapping into the major potential that exists in the market for low-emission engines. The combined development and production competence in light metal led to a large order for new 8-speed automatic gearboxes from the leading European gearbox manufacturer. A Chinese OEM placed orders for a further series of aluminium engine blocks from our plant in Suzhou.
Outlook: Bookings at GF Automotive remain strong, leading to continuing high workloads. Pricing measures will also compensate part of the material hikes. The construction of the iron foundry in Kunshan (China) is well on track for production start-up early next year.
GF Piping Systems remains on a growth path with sales of CHF 622 million (up 11% against the previous year, 7% adjusted for currency effects and acquisitions). Continuing high demand for water distribution and water treatment applications is driving growth. Strong sales in emerging markets are also making up for negative currency effects. The newly acquired Central Plastics Company in Shawnee (USA) is running well and has contributed CHF 41 million of sales in five months. Currency effects on margins have amounted to CHF 8 million so far. Nevertheless, EBIT stands at CHF 72 million, just short of last year's record figure of CHF 73 million.
Organic growth in excess of the very strong first half of 2007 was registered in Europe, Asia and the emerging markets whilst the American market slightly declined. In Europe, our market segment approach paid off in traditional areas such as water treatment and utilities as well as in more recent applications such as photovoltaic thin-film technology. Even the drop in the residential housing market could be mitigated with a better focus on commercial and high-rise buildings. The postponement of important semicon projects in Japan, Taiwan and Singapore dampened our performance in Asia despite outstanding 18% growth in China, where investments in industry and in building construction continue to be high. In the USA cooling and refrigeration applications made up for the lack of new projects in microelectronics.
Outlook: GF Piping Systems expects continuing growth overall, driven by solid demand worldwide in most applications and by a strong presence in the emerging economies. Margins are also on the rise thanks to price adjustments. New sales companies in Taiwan and Canada were established to better cater for local demand.
At GF AgieCharmilles, sales reached CHF 547 million (4% below the previous year, up 1% in local currencies). The Milling division is again enjoying high demand, mainly in Europe, which has resulted in lengthened delivery times and a higher order backlog at mid-year. By contrast the EDM business slowed down during the first-half, owing to weaker demand in parts of Asia; sales in Europe and America remained at a satisfactory level. The services, spare parts and tooling businesses, which are less exposed to market cycles, now make up a third of total sales.
GF AgieCharmilles faced clearly unfavourable currency exchange rates during the first half of 2008, with a negative effect on margins amounting to CHF 18 million. The result is an EBIT of CHF 20 million as opposed to CHF 39 million last year.
Manufacturing capacity at the Beijing EDM plant was enlarged. The Chinese-built Cut 20/30 and Form 20/30 machines, which were launched at EMO 2007, are successful in the market and enjoying strong demand. The Form 2000 and Hyperspark IQ die-sinking machines, which feature an advanced zero-wear technology, were launched. The new HPM 600 HD (3 axes) and HPM 800 U(5 axes) high-performance milling machines have been well received by the market. The Milling plant in China is under construction and expected to start production in 2009.
Outlook: The second-half is traditionally stronger than the first at GF AgieCharmilles. Whilst currency effects may not disappear, the order backlog at mid-year is high, giving GF AgieCharmilles a good chance to improve its performance during the second half.
Outlook and measures GF is well-positioned worldwide in its three core businesses, each of which is enjoying sustained demand despite certain indications of a downward economic trend. Barring unforeseen circumstances, GF Corporation should continue on its growth path during the second half of 2008 albeit at a more moderate pace. The volatile currency and raw material situation will probably continue to put pressure on margins.
Pricing measures are in place to counterbalance such effects, either as part of the sales contracts at GF Automotive or within the framework of already announced general price increases at GF Piping Systems and GF AgieCharmilles. Efficiency-enhancing programmes including the improvement of the net working capital have been set up in all three Groups. Moreover, new facilities are being built in Asia in all three Groups of GF, which, together with the recent acquisitions in North America, will further reduce currency exposure.
