The Metall Zug Group increased gross sales by 24.4% in the first half of 2018 to CHF 554.2 million (H1 2017: CHF 445.4 million). Acquisitions contributed 18.8% to growth in sales. Of this, 16.4% was due to the successful acquisition of the Haag-Streit Group, which forms the fourth Business Unit Medical Devices. Currency effects accounted for 0.7%. Organic growth in local currencies amounted to 4.9%. The Household Appliances and Wire Processing Business Units achieved higher gross sales, while gross sales of the Infection Control Business Unit matched the previous year’s level.

The Metall Zug Group generated operating income (EBIT) of CHF 36.4 million (H1 2017: CHF 28.2 million), equivalent to an increase of 28.9%. Operating income also includes the contribution made by the Haag-Streit Group since its consolidation on March 1, 2018. The build-up of structures geared to growth, investments in the modernization of the production facilities and in the digital core, the development of V-ZUG’s production site in Zug and the costs of integrating the acquired companies all had a negative impact on operating profitability in the first six months of 2018. Nevertheless, the EBIT margin rose from 6.3% to 6.6%.

The reduction in cash, cash equivalents and securities required to finance the acquisition of Haag-Streit lessened the impact of the poorer performance of the financial markets on Metall Zug's financial result. The financial result declined to CHF -2.0 million (H1 2017: CHF 14.4 million). In contrast, the cash and cash equivalents invested in Haag-Streit contributed EBIT of CHF 10.1 million since the first-time consolidation on March 1, 2018.

The Metall Zug Group achieved net income of CHF 22.6 million in the reporting period (H1 2017: CHF 33.8 million), a decrease of 33.1% compared with the prior-year period.

The net cash position was CHF 203.8 million as at June 30, 2018, and therefore CHF 321.3 million below its level of December 31, 2017 (CHF 525.1 million), following the distribution of a dividend of CHF 31.4 million and the acquisition of Haag-Streit Holding AG and adaptronic Prüftechnik GmbH. The Metall Zug Group has a solid balance sheet with equity of CHF 727.1 million (December 31, 2017: CHF 919.6 million) and an equity ratio of 69.3% (December 31, 2017: 77.4%). The decline in equity is mainly attributable to the offsetting of goodwill against equity in connection with the acquisitions that were made.

The first half of 2018 was characterized by acquisitions, with the Haag-Streit Group forming the fourth Business Unit – Medical Devices – since March 1, 2018. In addition, the acquisition of adaptronic Prüftechnik GmbH allowed the Schleuniger Group to add customized testing solutions to its existing product and service range in wire processing.

Furthermore, the Metall Zug Group has decided to separate the activities of the Life Science Business Area of its Infection Control Business Unit from January 1, 2019, in order to create a new Business Unit.

Household Appliances: High Organic Growth; Stronger Euro Burdens Operating Income

The Household Appliances Business Unit generated gross sales of CHF 293.2 million, representing an increase of 6.6% on the prior-year period (CHF 275.0 million). Organic growth in local currencies came to 6.4%. The Business Unit generated operating income (EBIT) of CHF 21.7 million (-18.2% compared with the prior-year period at CHF 26.5 million).

The digitization of internal process flows led to an additional rise in personnel expenses in the first semester. Higher material costs resulting from the stronger euro and the development of the V-ZUG production site created a further constraint on operating income.

The Household Appliances Business Unit generated higher sales in the Swiss home market. V-ZUG continued to grow in most international markets in the Asia-Pacific region and Europe in which it had established its own structures in recent years. The sales generated with the OEM partner in the U.S. experienced a significant increase compared with the same period of the previous year.

Infection Control: Strategic Decision Regarding Belimed Life Science

At CHF 87.4 million, gross sales of the Infection Control Business Unit (Belimed Group) remained unchanged (H1 2017: CHF 87.3 million). Given the currency effect of 1.9% and an acquisition effect of 0.1%, this resulted in an organic decline in sales in local currencies of 2.0%. While the Medical and Life Science Business Areas posted slightly lower sales, the Service and Consumables businesses reported growth in sales. At CHF -8.3 million, operating income (EBIT) improved compared to the first half of 2017 (CHF -10.1 million). Provisions of net CHF 0.5 million were released during the reporting period.

On June 5, 2018, the Metall Zug Group announced its intention to separate the activities of the Life Science Business Area into a new Business Unit with effect from January 1, 2019. The transaction will also entail a restructuring of the Life Science Business Area. As part of this restructuring, the Life Science Business Area will cease activities in Mühldorf, Germany. Certain functions will be taken over by the existing organization in Sulgen, Switzerland, while the Grosuplje site in Slovenia will be further expanded. It is currently assumed that – as far as possible – provisions recognized as at mid-2018 will be sufficient to cover the restructuring costs.

Wire Processing: Continuing Growth Momentum

The Wire Processing Business Unit (Schleuniger Group) posted a 21.2% rise in gross sales to CHF 101.8 million in the first six months of 2018 (H1 2017: CHF 84.0 million). The EMEA and Asia/Pacific market regions were the primary contributors to growth. Excluding the acquisition effect of 12.4% and currency effect of 1.9%, organic growth in local currencies amounted to 6.9%. Operating income (EBIT) rose by 6.2% from CHF 11.1 million in the prior-year period to CHF 11.8 million. Integration costs and investments in structures and processes had a negative impact on operating profitability in the first semester.

Medical Devices: Attractive Operating Margin

The Haag-Streit Group has been consolidated with effect from March 1, 2018. Gross sales of the Medical Devices Business Unit in these four months came to CHF 73.0 million. The operating income (EBIT) of CHF 10.1 million (margin: 13.8%) includes a largely one-time negative impact of CHF 2.6 million resulting from the acquisition of Haag-Streit by Metall Zug as the acquired assets had to be revalued as part of the first-time consolidation. The revaluation of inventory and tangible assets to fair value has a temporary negative impact on operating income.

Overall, integration costs and extraordinary expenses in connection with the first time-consolidation in the mid to high single-digit million range are expected in the year now underway.

Development Plan Provides Necessary Flexibility to Create a Sustainable, Modern and Urban Location for Industry in Zug

Brand-new production concepts employed in the strategic modernization of the V-ZUG production site, such as the “vertical factory”, will reduce the floor space required and boost floor productivity. The freed-up floor space will enable the development of the Technology Cluster Zug. This ecosystem of companies engaged in innovative production and users from trade, commerce and science is an important element in building a successful future for V-ZUG and for Zug itself as a location for industry.

V-ZUG intends to invest in a number of new production buildings over the coming years on the basis of a legally binding development plan. In this regard, Metall Zug is planning to set up the Mobility Hub Zug Nord on the northern part of the site. A multi-energy hub to be created with partners will supply the Technology Cluster Zug with local, renewable energy. And lastly, Metall Zug will join forces with the city and cantonal authorities and additional partners to launch an international competition to build a unique wooden residential high-rise – also including affordable apartments – immediately next to the Technology Cluster Zug.

Outlook

The Metall Zug Group expects operating income for 2018 as a whole to be significantly higher than in the previous year (adjusted operating income of CHF 73.8 million). The conditions for this will be no significant change in the business environment, stable currencies, no material effects resulting from likely procurement bottlenecks, and no extraordinary events.

Key figures of Metall Zug Group