Datwyler improves margin in a weak market environment

Datwyler was once again confronted with predominantly weak sales markets and the ongoing reduction in security stocks by healthcare customers in the first half of 2024. In addition, there was a lack of CHF 7.5 million in revenue from components for COVID vaccines compared to the prior year period. Overall, revenue decreased to CHF 572.5 million (previous year: CHF 602.7 million). Adjusted for negative currency effects, this translates to a decline of 2.4%.

Despite persistent weak demand and the resulting ongoing underutilization at several production sites, Datwyler succeeded in increasing the operating result (EBIT) by 11.6% to CHF 67.5 million (previous year: CHF 60.5 million). As a result, the EBIT margin improved by 180 basis points to 11.8% (previous year: 10.0%). Due to the higher EBIT, the net result also increased to CHF 38.6 million (previous year: CHF 32.1 million). The slightly higher tax expenses were almost compensated by the slightly lower financial expenses. The net result per share increased to CHF 2.27 (previous year: CHF 1.89). The strong Swiss franc also had a negative impact on the profit figures.

Datwyler is using the current market phase to further optimize its structures and processes. The optimization of its cost structures, the price adjustments implemented and lower energy costs form the basis for an improved profit margin. In the first half of 2024, the company was once again able to acquire promising projects with existing and new customers in all business units. Encouraged by this, Datwyler is driving forward its activities in the healthcare area and the transformation to e-mobility with high priority. Furthermore, Datwyler is investing consistently in its innovation and growth projects. Examples of these include film-coated healthcare products, magnetically active or electroactive polymers and soft dry electrodes for wearable applications. An industrial-scale pilot production line for electroactive polymers will go into operation in the second half of 2024.

Datwyler is continuously developing its sustainability measures. The globally recognized rating agency EcoVadis awarded the company the platinum standard for its sustainability performance for the first time in the reporting period. The highest standard available, this places Datwyler in the top 1% of more than 130,000 companies from 180 countries that are rated by EcoVadis each year. Moreover, Datwyler also undertook with effect from the end of June 2024 to have its commitment to reducing its environmental footprint validated in accordance with the Science Based Targets initiative (SBTi). The SBTi commitment and the EcoVadis rating are highly important to customers, especially in the healthcare industry.

In the first half of 2024, the Healthcare Solutions business area once again felt the impact of a weak market environment and destocking by customers. As a result, revenue decreased to CHF 230.7 million (previous year: CHF 253.8 million). Adjusted for currency effects, this equates to a decline of 6.4%. The first half of 2023 still included some CHF 7.5 million in revenue from components for COVID vaccines. In comparison with the first half of 2019, currency-adjusted revenue is currently around 35% above pre-pandemic levels. This corresponds to a CAGR of 6.5%.

Despite lower revenues and the current under-utilization of production capacities, Datwyler succeeded in keeping the EBIT margin stable at 15.4% (previous year: 15.7%). This can be explained by the price adjustments implemented, a slightly improved product mix and consistent cost management. In absolute terms, the operating result (EBIT) decreased to CHF 35.6 million (previous year: CHF 39.8 million). Datwyler is gradually expanding its market position by further developing its product portfolio and collaborating with the world’s leading glass manufacturers and system integrators.

The slight decline in sales revenues in the Industrial Solutions business area to CHF 343.4 million (previous year: CHF 351.8 million) is primarily attributable to negative currency effects. The Mobility and Food & Beverage business units slightly outperformed their markets. Due to the slowdown in the expansion of the e-mobility market and a weak market environment in the US oil and gas industry, the Connectors and General Industry business units fell short of their sales and revenue targets. By consistently passing on cost increases, improving productivity and with sustainable lower energy costs, the business area was able to increase its operating profit (EBIT) by 54.1% to CHF 31.9 million (previous year: CHF 20.7 million). The EBIT margin increased accordingly by 340 basis points to 9.3% (previous year: 5.9%).

The Mobility business unit was able to acquire attractive new business in the e-mobility segment for applications involving air suspensions, brake systems and powertrains and further strengthen its pipeline for vehicle battery components. Operational improvements at its production sites enabled the Connectors business unit to largely compensate for the negative effect of lower sales revenues. The General Industry business unit further optimized its production concept and reorganized its various product lines within the existing sites. This will improve profitability as soon as demand rises again. The Food & Beverage business unit grew significantly faster than the market average thanks to the strong positioning of its customers. The new EU regulation on packaging materials underlines the importance of aluminum as an ideal material for coffee capsules.

Reliable short-term forecasts remain difficult in most markets. Datwyler is expecting the weak demand and the destocking by healthcare customers to continue in the second half of the year. Probable exceptions to this are the Mobility and Food & Beverage business units, which are expected to maintain their positive business performance in the second half of 2024. For the Group, this means that performance in the second half of the year is likely to be broadly in line with the first half. For 2024 as a whole, Datwyler expects an EBIT margin above the prior year and revenue in the range of the prior year.

In the medium term, Datwyler is confident of the growth potential in its markets. As soon as the markets normalize and the quantities purchased begin to rise again, the company will start to benefit from economies of scale thanks to the advanced investments it has brought forward. Datwyler is using the current market phase to further improve both its commercial and operational excellence and the standards. Among other things, this will free up resources, which the company can use to accelerate the commercialization of its innovation projects and further strengthen its innovation capabilities. The large number of new orders from existing and new customers shows that the long-term growth drivers in the markets are intact and that Datwyler is a preferred development partner for system-critical elastomer components.