The favorable economic climate prevailing worldwide during 2006 drove strong sales growth in all business units of the Conzzeta Group, especially in Sheet Metal Processing Systems. Organic growth far outweighed the effect of divesting the construction-related operations - which eliminated net revenue of CHF 102 million - with Group revenues rising 10.4% to CHF 1273.6 million.

 

As a result of the changes in the portfolio of holdings and the strong organic growth, the share of Machinery and Systems Engineering in the Conzzeta Group activities rose to 71%.

The disposal of the construction-related businesses, which were geared to the domestic market, also had an impact on the geographic distribution of Group net revenues. The share of revenues generated in Switzerland declined from 22% to 13%. The rest of Europe accounted for 58% of Group revenues, North America for 15%, Asia for 12% and the other continents for 2%.

 

Operating profit (EBIT) surged by 20.6%, reflecting an improvement in profitability. The pace of improvement slowed in the final months of the year because the second half of 2005 had already seen a steep increase in profits, and the effect of higher costs due to production bottlenecks was making itself felt.
Moreover, the Glass Processing Systems and Automation Systems business units had to absorb special costs for complex customer projects, which ate into their earnings.

 

On balance, profit before taxes rose by CHF 13.5 million. Since most of this profit was generated in companies that cannot offset their earnings, tax expenditure rose by a disproportionately high CHF 6.1 million. Group profit after tax rose by CHF 7.5 million to CHF 71.1 million. The impact of the divested operations on ordinary profit was negligible, yet these transactions generated an extraordinary profit of CHF 9.4 million. Group profit in the previous year also contained an extraordinary profit of a similar amount, but from real estate transactions.

 

With an equity ratio of 70.1% at the end of 2006, the financing of the Conzzeta Group is still on a very solid footing. Its comfortable liquidity position, consisting of cash, cash equivalents and securities amounting to CHF 212.4 million (previous year: CHF 170.2 million) allows further expansion, though this is to be undertaken with all due caution.

 

The Board of Directors proposes increasing the dividend from CHF 40 to CHF 45 per bearer share on the strength of the Group's improved profitability.

 

 

The largest business unit, Sheet Metal Processing Systems (Bystronic), reported record sales last year of CHF 632.0 million, equivalent to a 29.0% increase. It generated the revenue growth by its own efforts and in all market regions and product groups. Order intake also rose in the course of the year, and the order backlog at the end of 2006 was well above the previous year's level. The investments made in past years to strengthen our international market presence, develop new products and streamline processes are the basis for the present growth.

 

The 11.6% revenue increase in Glass Processing Systems (Bystronic glass) to CHF 219.2 million stems mainly from heavier demand for facilities for the manufacture of insulating glass. Growth in Europe was particularly strong. A new distribution company was founded in China to improve local delivery of customer services. The unit is continuing to focus intensively on growth markets, particularly in Eastern Europe.

 

Revenues in the Automation Systems business unit (ixmation) were not comparable with the previous year. Owing to the acquisition of Cox Automation Systems in September 2005, sales leapt to CHF 49.6 million. The net sales acquired with the new addition came to CHF 27.8 million. The business unit reinforced its presence in the ever more important Asian market by acquiring Excel Precision Sdn. Bhd., located in Malaysia and China, as per November 2006.

 

For the Foam Materials business unit (FoamPartner), the year-on-year improvement in the business environment continued, though it was less marked. The firmer demand along with necessary price increases led to a 9.1% rise in net sales to CHF 147.5 million. Rising raw material prices eroded margins. In the year under review, one of the focuses was on expansion in non-European markets. FoamPartner founded a distribution company together with Otto Bock GmbH in Shanghai and forged ahead with plans to build a joint production facility for foam materials in China. Market coverage in North America was strengthened by the founding of a joint venture with the Canadian firm Woodbridge Foam Corporation.

 

The upbeat signals from the economy had a positive effect on consumer sentiment and hence also on the Sporting Goods business. Sales at Mammut Sports Group rose in the reporting year by 13.6% to CHF 164.7 million. Most markets contributed to this growth, with Austria, Eastern Europe and the Far East being particularly dynamic. Mammut is still the most important brand and it further strengthened its market position.

 

Following the disposal of the Swiss Lack Group and the business activities of Siegfried Keller AG and Prebeton SA, the only company remaining under Other Industrial Activities is Schmid Rhyner AG, which specializes in print finishing products. In the reporting year, Schmid Rhyner stepped up its marketing efforts and launched new products, enabling it to raise revenues to CHF 36.5 million, an increase of 15.5%.

 

The Real Estate business unit posted revenues of CHF 21.2 million on the strength of full letting of its residential properties and a relatively low level of vacancy in the commercial sector. This traditional cornerstone of Conzzeta Holding's portfolio, which operates exclusively in Switzerland, is an important source of revenue for the Group.

 

Investments in property, plant and equipment, software and licenses rose slightly from CHF 28.5 million to CHF 31.8 million. A major part of the investment, CHF 18.1 million, was in Switzerland. The largest investment in property, plant and equipment was for a new production facility for natural latex products in Döttingen, Switzerland, made by the Foam Materials business unit. Important investments in production expansion were made by Bystronic at Niederönz, Switzerland and Gotha, Germany, and at the Bystronic glass company Lenhardt in Neuhausen-Hamberg, Germany.

 

The number of employees at year-end remained practically unchanged from the previous year. At December 31, 2006, the overall payroll of Conzzeta Group companies stood at 3273, compared with 3280 a year ago. The disposal of certain operations meant that some 300 people left the Conzzeta Group. By contrast, headcount was increased in the Sheet Metal Processing Systems business unit and as a result of the acquisitions made by Automation Systems. The proportion of staff employed abroad rose to 57%.

 

After 26 years in office, Christoph Spoerry, Vice-Chairman of the Board, has announced his retirement as of the date of the next Annual General Meeting on April 24, 2007. The Board of Directors proposes the election of Philip Mosimann, CEO of Bucher Industries, Niederweningen, to succeed Christoph Spoerry.

The healthy order backlog in the various business units give Conzzeta confidence about the future. However, the signs of an overheating economy should not be disregarded. For this reason, it is important to remain very flexible in order to be able to react to market developments. Raw material prices are not expected to fall in 2007 either.

 

A challenge facing the company is the ongoing shift of markets to other regions. That is why Conzzeta is giving priority to further improving productivity and its cost structure, developing products that the market wants and expanding its presence in key markets.

 

We remain confident about the fundamental economic situation of our Group, particularly in Europe. The planned investments and the targeted improvements will also generate expenses, which explains our cautious guidance as regards earnings.