In a difficult environment, Datwyler achieved the objectives for 2022 that it communicated in May thanks to its strong market positions. In comparison with the previous year, revenue was up by 21.4% to CHF 1'150.6 million (previous year: CHF 947.6 million, continuing operations). Adjusted for negative currency effects of CHF 23.7 million and the revenues of QSR and Xinhui of CHF 127.9 million, which were consolidated for the first time, this corresponds to organic growth of 10.4%. Around one third of the growth comes from the price increases implemented.
Review
Margin pressure due to significant rise in input costs
To date, Datwyler has been able to pass on the sharp rise in input costs brought about by geopolitical developments and increasing inflation to its customers in all business units. However, due to the delayed impact of the price increases and cost savings implemented, the margin came under pressure. The operating result (EBIT) decreased to CHF 149.2 million (previous year: CHF 160.4 million, continuing operations), which equates to an EBIT margin of 13.0% (previous year: 16.9%). EBIT also includes one-off negative effects resulting from inventories in the acquired balance sheets and impairments on assets due to the temporary closure of the Ukrainian subsidiary totaling approximately CHF 7.5 million. The net result amounted to CHF 104.8 million (previous year: CHF 123.7 million, continuing operations), which equates to earnings per share of CHF 6.16 (previous year: CHF 7.28, continuing operations).
Datwyler coped well in 2022, which was a challenging year. Having completed the takeovers of QSR and Xinhui, expanded the Indian healthcare production site and made promising progress in a range of growth and innovation projects, we are in a strong strategic position.
Dirk Lambrecht
CEO
Payout ratio of over 50%
The Board of Directors proposes to the Annual General Meeting a cash dividend of CHF 3.20 per bearer share (previous year CHF 4.20) and CHF 0.64 per registered share (previous year CHF 0.84). With total dividends of CHF 54.4 million and a payout ratio of 51.9%, Datwyler maintains a balance between dividend payments and strengthening the balance sheet. Last year's reported net result of CHF 194.0 million included an exceptional contribution of CHF 70.3 million from operations and from the divestment of online distributor Reichelt.
Healthcare Solutions achieves double-digit organic growth
The Healthcare Solutions business area increased its revenue to CHF 520.3 million (previous year: CHF 466.8 million) in 2022. Adjusted for currency effects and acquisitions, this equates to organic growth of 13.0% in comparison with the previous year. As expected, revenue from components for COVID vaccines declined, with an accelerating trend towards the end of the year. Datwyler was able to pass the significantly increased costs for input factors onto its customers over the course of the reporting year. The delayed impact of the price increases and the unfavorable development of the product mix caused the EBIT margin to decline to 20.4% (previous year: 22.4%). However, at CHF 106.3 million, the absolute operating result (EBIT) was slightly higher than in the previous year (CHF 104.6 million).
Industrial Solutions enjoys strong second half
The Industrial Solutions business area increased its revenue by 30.2% to CHF 636.1 million (previous year: CHF 488.4 million) in 2022. Adjusted for negative currency effects and the first-time consolidation of QSR’s revenue for eight months, which amounted to CHF 112.8 million, this equates to organic growth of the previous three business units of 7.5%, with increasing momentum in the second half of the year. Due to the significantly higher input costs and the delayed impact of price increases, the operating result (EBIT) fell to CHF 42.9 million (previous year: CHF 55.8 million), which equates to an EBIT margin of 6.7% (previous year: 11.4%). This figure includes negative one-off effects resulting from inventories in the acquired balance sheets and impairments on assets due to the temporary closure of the Ukrainian subsidiary totaling some CHF 7.5 million.
Strategic topics
Value-adding strategic acquisitions
Through its takeover of QSR, Datwyler became a leading global supplier of system-critical seals for electrical connectors for a wide range of industries at the start of May 2022. Several megatrends such as electrification, connectivity, the Internet of Things and Industry 4.0 offer attractive growth opportunities for QSR's seals and components. The acquisition of QSR has strengthened Datwyler’s market positions in North America and Asia and reduced its dependence on the European market due to QSR’s pro forma annual revenue of CHF 168.5 million and its workforce of some 1'500 employees. QSR is the ideal fit for Datwyler in terms of strategy, core competencies and culture. This has also become evident in the integration work, which is going according to plan and has already led to several cross-selling projects with the Mobility business unit.
At the beginning of March 2022, Datwyler completed the takeover of the Chinese company Yantai Xinhui Packing, which has around 200 employees and generates an annual revenue of over CHF 15 million. With Xinhui, Datwyler now has its own local plant providing direct access to the fast-growing Chinese healthcare market. The integration work is going to plan despite the pandemic. The process of upgrading the production standard and the product portfolio to higher-quality components is on track. With the help of Xinhui’s customer contacts and sales organization, Datwyler was already able to substantially increase healthcare revenue in China in the year under review.
Promising growth and innovation projects
Datwyler also made good progress with and in some cases completed a number of important and promising growth and innovation projects in 2022. The existing site in India successfully put a second healthcare plant into operation, for example, and at the Swiss site, the expansion of production facilities for the Food & Beverage business unit has been largely completed. These capacity expansions are an important basis for the profitable revenue growth in low cyclical, long-term growing markets that Datwyler is targeting over the coming years. The Mobility business unit is working successfully on the transformation to electromobility and continuously increasing the share of projects focused on products for use in electric vehicles. Various new technologies such as smart rubber components and thermally conductive and electrically insulating materials are opening up attractive new applications in the vehicle of the future. In the form of electroactive polymers in a stacked design, Datwyler secured an important technology with patents in the year under review. The company is confident that, due to their many advantages, the electroactive polymers in a unique stacked design have the potential to become one of the highest-revenue product lines over the long term. At its Swiss site, Datwyler opened new central technology and innovation labs for the chemical and physical analysis of materials and surfaces in the year under review.
Sustainability and operational excellence now an Executive Management function
With effect from 1 November 2022, Datwyler combined its existing activities to enhance sustainability and operational excellence in a new Executive Management function and appointed Sabrina Gérard as a new member of the Executive Management in the role of Chief Sustainability Officer. This underlines the fact that Datwyler views sustainability as an integral component of its business and advances it for the benefit of its customers and all other stakeholders. Among other things, the company also worked on the implementation of its climate strategy and on eco-design in 2022. A good example is the research into replacing petrochemical-based materials with those made from renewable raw materials. As part of the climate strategy, Datwyler installed its own photovoltaic systems at five further sites. As a result, the electricity that the company obtains from renewable sources increased by 16.4% to 87'729 MWh. CO2 emissions, waste volumes and the consumption of electricity, heating fuels and water per revenue unit were further reduced in the year under review. You can find more information on our sustainability achievements in our Sustainability Report.
Outlook 2023
Encouraging order book – many uncertainties
Datwyler has made a successful start to the new year, with good performance in all business units, solid demand and an encouraging order book. At the same time, however, the numerous geopolitical and macroeconomic uncertainties such as the war in Ukraine, the course of the pandemic in China, rising input costs and a possible economic downturn call for caution. In this context, Datwyler is aiming to improve its business result in 2023. From today's perspective, revenue from COVID components will continue to decline in 2023. However, success in acquiring new customers and projects should be able to compensate for these effects.
Profitable growth potential intact
Datwyler remains confident with regard to the medium-term outlook. On the assumption that the environment will normalize, the company confirms its medium-term objectives with annual revenue growth of 6% to 10% and an EBIT target range of 18% to 21%. Thanks to its value-adding acquisitions, the associated potential synergies and the progress made in its growth and innovation projects, Datwyler is in a strong strategic position. The company has a clear focus on system-critical elastomer components that make a key contribution to the functionality and quality of its customers’ systems while at the same time accounting for a very low proportion of these systems’ overall costs. Datwyler occupies leading positions in the markets it serves thanks to its products and its longstanding, close customer relationships with the market leaders. Global megatrends, long-term growth drivers and high barriers to entry create profitable growth potential. At the same time, over 70% of revenue come from markets that are low cyclical but are nevertheless growing. In the near future, Datwyler’s focus will be on achieving organic growth by scaling the business model and production capacities and on strengthening the balance sheet.
