Oerlikon Group, Pfäffikon, Schwyz, Switzerland, has announced its financial results for the second quarter and first six months of 2020. As a result of the coronavirus (COVID-19) pandemic, the group reported a decrease in order intake year-on-year of 10.1% to CHF 604 million for Q2 2020, and a reduction in group sales by 27.2% to CHF 510 million.
The group stated that the lockdowns imposed by governments had impacted supply chain and demand across regions and industries, significantly effecting the end markets of Oerlikon Surface Solutions, which includes its Additive Manufacturing segment Oerlikon AM. The most effected markets were aviation, automotive, tooling and general industries, power generation and oil & gas.
In the first half of 2020, the group’s order intake declined by 20.1% year-on-year to CHF 1,081 million, and sales decreased by 21.5% to CHF 1,039 million. The net result for the first half of the year was CHF -32 million.
“We have accelerated our productivity programmes to mitigate the impacts from the pandemic and are ahead of schedule,” commented Dr Roland Fischer, CEO Oerlikon Group. “We have significantly reduced cost and are putting in place a more flexible cost structure to strengthen our foundation.”
“The Surface Solutions Segment experienced significant demand challenges due to the lockdowns,” he explained. “Toward the end of the quarter, we saw some encouraging signs of moderate recovery in automotive and precision components in China and Germany. The recovery of the economy and markets remains uncertain.”
“We have a strong cash position of CHF 600 million, a healthy balance sheet and expect to see improvements in margins and net liquidity in the second half of the year,” he stated. “We will continue implementing the structural programmes to strengthen our cost and competitive market position and further invest in our sustainable innovations.”
Oerlikon Surface Solutions
Within the Surface Solutions segment, order intake declined by 36.5% to CHF 238 million (Q2 2019: CHF 374 million), and sales by 30.9% to CHF 262 million for Q2 2020, compared to CHF 379 million in Q2 2019. Order intake for the first half 2020 was also down by 24.7% year-on-year, having fallen from CHF 759 million in the first half 2019 to CHF 571 million in the first half 2020.
A decrease in sales was noted across all end markets for Surface Solutions. The aviation industry is facing one of its most severe crises, with the drastic reduction in air travel and transport caused by COVID-19. The automotive industry, which has been facing industry-specific challenges such as the electrification of cars, is expected to shrink by more than 20%.
Industrial production is expected to see a steep decline following lower demand and supply chain disruptions. The power generation market also saw the deferral of projects, while the oil & gas sector has been facing a historic drop in demand and exhausted storage capacities.
Restructuring and productivity programmes
The execution of comprehensive restructuring and productivity programmes across Oerlikon Group has been accelerated and extended to mitigate the impacts caused by the COVID-19 pandemic. Short-term measures such as short-time work and reducing discretionary spend and capital expenditures have been implemented.
In the first half of 2020, operating expenses were said to have been reduced by more than CHF 90 million and capital expenditure was reduced by CHF 18 million, compared to the preceding year.
The execution of the structural and cost-out programmes that were launched in 2019 has also been accelerated. These programmes include rightsizing Additive Manufacturing, optimising support functions and the global footprint, leveraging synergies in procurement and equipment business, and addressing market challenges.
More than 400 of a targeted 800 headcount reduction had been completed by the end of June 2020, and more than 700 headcount reductions are expected to be concluded by the end of 2020, of which around fifty are based in Switzerland and Liechtenstein.
The company’s structural programmes are said to be on track, and an annual run-rate of savings of around CHF 60 million is expected to be realised. These short-term and structural programmes are expected to yield significant margin benefits in the second half of the year.
These programmes are also expected to further strengthen the market position of the Surface Solutions business and improve its resilience to manage further potential pandemic-induced impacts.