Half-Year Report 2022
Half-Year Report 2022

Strategic acquisitions
for the future

Datwyler, the specialist in system-critical elastomer components, put in a solid performance in the first half of 2022 thanks to its strong market position, despite a difficult environment with war in Ukraine and COVID lockdowns in China. During the reporting period Datwyler strategically further strengthened the basis for future profitable growth by acquiring QSR and Xinhui and expanding the manufacturing facility in India.

All key figures
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All key figures

Review

Revenue growth in four
out of five business units

Overall, revenue from continuing operations was up 11.7% year on year to CHF 541.6 million (previous year: CHF 485.0 million).Adjusted for negative currency effects of CHF 5.9 million and CHF 34.1 million of revenue from QSR and Xinhui consolidated for the first time, this is equivalent to organic growth of 5.9%.

With the exception of Mobility, all business units exceeded last year's revenue. Datwyler coped well with the supply bottlenecks for raw materials and upstream products and was fully able to deliver at all times.

Margin pressure due
to higher input costs

Half-Year Report 2022
5.9%
Organic growth

Geopolitical developments and rising inflation pushed Datwyler's input costs up sharply at all sites in the first half. Due to the delayed effect of the implemented price increases and cost savings, the margin came under pressure. The operating result (EBIT) from ongoing operations declined to CHF 72.5 million (previous year: CHF 88.8 million). This equates to an EBIT margin of 13.4% (previous year: 18.3%). It includes negative non-recurring effects from markdowns on inventories written up to market value in acquisition balance sheets and write-downs on assets due to the temporary closure of the Ukrainian subsidiary totaling some CHF 7.5 million. The net result amounted to CHF 57.4 million (previous year: CHF 66.8 million).

Healthcare Solutions

Double-digit revenue growth in Healthcare Solutions

The Healthcare Solutions business area increased its revenue in the first half of 2022 to CHF 265.7 million (previous year: CHF 238.7 million). Adjusted for currency and acquisition effects, this equates to organic growth of 12.6% year on year. There was a slight rise in revenue from components for COVID vaccines.

Because of the sharp rise in prices of all input factors, the operating result (EBIT) was up only slightly to CHF 58.0 million (previous year: CHF 56.9 million). As the price increases implemented only have an impact on the customer side with some delay, the EBIT margin was 21.8% (previous year: 23.8%).

Integration of the Xinhui acquisition going to plan

The strategically important acquisition of Yantai Xinhui Packing opened up direct access to the rapidly growing Chinese healthcare market for Datwyler in the first half. Work on the integration is going to plan despite the pandemic, thanks to the existing local Datwyler employees. However, it will take some time to shift the product portfolio towards higher-value components with higher margins. 

Newspaper icon More about the acquisition of Yantai Xinhui Packing
Half-Year Report 2022
Half-Year Report 2022

Manufacturing capacity
in India doubled

The second facility at our existing site in India will come on stream in the third quarter. This will double our capacity – a key foundation for the revenue growth we are targeting over the coming years. The medium-term project pipeline for high-value components from our FirstLine® standard performed well as a result of more intensive market coverage and the new customer contacts established during the pandemic, along with a much broader customer base.

Newspaper icon More about doubling of capacity at the Indian plant

Industrial Solutions

Industrial Solutions includes QSR for the first time as the Connectors business unit

The Industrial Solutions business area increased its revenue in the first half of 2022 by 12.1% to CHF 279.5 million (previous year: CHF 249.3 million). Adjusted for CHF 2.5 million of positive currency effects and the CHF 28.7 million of revenue from QSR for two months that was consolidated for the first time, this equates to a slight organic decline in revenue from the previous three business units of 0.4%.

Because of the materially higher input costs and the fact that price increases and cost-saving measures only take effect with a delay, the operating result (EBIT) fell to CHF 14.5 million (previous year: CHF 31.9 million), equivalent to an EBIT margin of 5.2% (previous year: 12.8%). This includes the negative non-recurring effects mentioned from the QSR acquisition and the Ukrainian site.

Strategic acquisition of QSR

Half-Year Report 2022

The strategic acquisition of QSR in the first half of 2022 has made Datwyler the leading global supplier of system-critical sealing solutions for electrical connectors for a wide range of industries. QSR now forms the independent Connectors business unit within the Industrial Solutions business area. There are attractive growth opportunities for QSR seals and components arising from several megatrends, such as electrification, connectivity, the Internet of Things, and Industry 4.0. QSR has five plants and support units in the US, Mexico, and China, and generated USD 164 million of revenue in 2021.

As a result of the acquisition, debt rose by CHF 627.1 million compared to the end of 2021. At the same time, equity fell by CHF 578.5 million due to the direct offset of goodwill. As of 30 June 2022 the equity ratio was 28.2%. As demonstrated in the past, Datwyler constantly endeavours to reduce borrowing and restore the equity ratio.

Newspaper icon More about the acquisition of QSR

Mobility held back by
decline in car production

Our largest business unit, Mobility, had to deal with declining demand as well as higher input costs. The supply bottlenecks for raw materials and semiconductors meant that fewer cars were produced in the first half, 2% fewer globally and 12% fewer in our most important geographical market, Europe. Car production in China was also hit by COVID lockdowns. Despite the temporary pressure on margins, Datwyler is successfully working on shifting towards electromobility and winning a pleasingly large number of orders for new product lines in this market of the future. The Mobility business unit is also exploiting cross-selling opportunities with existing customers in the new Connectors business unit (QSR). 

Strong demand in General Industry and Food & Beverage

The General Industry and Food & Beverage business units continued to enjoy strong demand in the first half. General Industry saw strong demand for O-rings from a wide range of market segments, especially in the US oil and gas industry. In Food & Beverage, Datwyler maintained profitable revenue growth thanks to its leading position, although market growth has slowed after two strong years.

Outlook

Challenging second half

We assume that the ongoing Russian war of aggression in Ukraine will continue to cause a great deal of uncertainty, low visibility, tighter supplies, and high prices for upstream products globally in the second half. On top of that comes the feared shortage of natural gas and electricity in Europe, which will lead to considerably higher costs. The Datwyler plants themselves have only a minor direct dependency on Russian natural gas, but there may be indirect impacts through customers and suppliers.

Negative product mix effects in Healthcare Solutions dampen margin development

Assuming an orderly supply of energy, the situation in the markets relevant to Datwyler is varied. In the Connectors, General Industry, and Food & Beverage business units, we assume the trend in demand will stay positive. The Mobility business unit should benefit from increased car production in the second half as well, according to independent forecasts. Even so, global car industry production in 2022 will still be at least 10% below the pre-pandemic level.

In our Healthcare business, we anticipate slowing growth, and hence a temporary negative change in the product mix, as a result of declining revenues from components for Covid vaccines. This, together with the costs of implementing the growth strategy, is dampening the potential for the EBIT margin for the company as a whole, despite the price increases successfully implemented in all business units.

For the full year 2022, Datwyler, including the QSR and Yantai Xinhui Packing acquisitions, continues to aim for revenue between CHF 1'150 million and CHF 1'200 million and an EBIT margin of between 13% and 16%.

Once again this year, we would like to thank our employees all over the world for their great commitment to the success of our customers and our company.

Particular thanks go to our Chinese staff, who have kept their plants able to deliver despite the extensive COVID restrictions. We would also like to take this opportunity to thank our shareholders for their confidence and the solidarity they show with Datwyler.

On behalf of the Board of Directors and the Executive Management

Signature Dr. Paul Hälg, Chairman
Dr. Paul Hälg, Chairman
Signature Dirk Lambrecht, CEO
Dirk Lambrecht, CEO

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Published, edited and designed by:

Dätwyler Holding Inc.
Gotthardstrasse 31, 6460 Altdorf, Switzerland
T +41 41 875 11 00, F +41 41 875 12 28
info@datwyler.com, www.datwyler.com

Disclaimer

The Half-Year Report contains forward-looking statements. These statements reflect the Group's current assessment of market conditions, economic developments and future events. However, these forward-looking statements are subject to economic, regulatory and political risks, uncertainties, assumptions and other factors over which Datwyler has no control. Unforeseen events could therefore cause actual developments and report to differ materially from those anticipated and from the information published in this report. To that extent, all forward-looking statements contained in this report are qualified in their entirety and Datwyler cannot guarantee that they will prove to be correct. Datwyler is under no obligation, and assumes no liability, to update any such forward-looking statements. This document is neither an offer nor a solicitation to buy or sell Datwyler securities.

This Half-Year Report is available in English and German. The German version is binding.

All trademarks mentioned herein are the property of their respective owners.

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