Wolfhausen, 17 August 2010 – As already reported in a media release on 15 July 2010, Schulthess Group sales during the first half of 2010 were down by CHF 22.4 million from CHF 162.0 million to  CHF 139.6 million (-13.8%). In terms of operating profit (EBIT), the overall result of CHF 9.7 million was CHF 6.0 million lower (-38.2%) than the CHF 15.7 million reported last year. After a deduction for extraordinary restructuring costs amounting to CHF 6.6 million, EBIT stood at CHF 3.1 million. Profit for the first half amounted to CHF 0.9 million (2009: CHF 11.4 million). Investments were reduced from CHF 6.1 million to CHF 3.3 million. The equity ratio on 30 June 2010 stood at 65.8% (31.12.09: 69.7%).
 
The tail-off in sales and the resulting fall in operating profit are due on the one hand to the fact that in the first half of 2009 the Heating Technology division had an order backlog amounting to CHF 16.0 million, which was not the case during the first half of this year.
On the other hand, the Group’s decision to move out of the high-risk cooling plant business and the necessary restructuring measures had an effect on both sales and profit. The transfer of cooling technology operations to the Kasendorf heat pump factory and resizing of the workforce will be completed by the end of 2010. This means the Group will be well positioned for sustainable profitable growth in 2011 and subsequent years.
 
Stable improvements in sales and margins for washing technology operations
The Washing Technology division acquitted itself well and, thanks to a new line of energy-saving, easy-to-operate machines, reported moderate growth in Switzerland. Total sales rose by 2.4% during the first six months of the year to CHF 54.9 million, and operating profit (EBIT) was up by 20.3% to CHF 8.8 million. This was equivalent to an improvement in the EBIT margin during the first half from 13.6% to 16.0%. A streamlined product range and effective cost management led to reductions in both material and personnel costs.
 
In the wake of an expansion of operations in Switzerland, a start was made on the development of new products in the home automation sector. Together with washing machines and dryers, this sector will now be developing new sources of income in the form of energy-efficient convenience ventilation systems and heat pump hot water systems. Sales are to be handled by Group-owned companies and OEM customers.
 

Encouraging developments for heating technology on the Swiss market – investment on the European market remains subdued

The Heating Technology division closed the first half-year with sales of CHF 66.0 million, which represented a decrease of 19.3% or CHF 15.7 million. This should, however, be considered in the light of the order backlog of CHF 16.0 million in 2009, which had a significant effect on last year’s result. Incoming orders were actually up slightly on last year. The operating result (EBIT) was only CHF 3.4 million, compared with CHF 10.1 million in 2009. Apart from the drop in sales, the disappointing result was due primarily to increases in personnel costs and expenditure on property, plant and equipment.

Demand for heat pumps in Europe, with the exception of the Swiss market and the Benelux, was below expectations. In Germany, the Group’s principal market, we have two forms of distribution: the principal one of these is a two-stage channel, where installation companies buy directly from us; the second is a three-stage channel, where sales to installers go through a wholesaler. Sales through the first channel developed in line with the rest of the market. Those through the second were down slightly because of the intense competition.
 
In Switzerland, our second-largest area for sales, our solid positioning enabled us to expand our market share and to push up sales by over 10%. At the same time, we succeeded in winning market share for professional heat pumps – i.e. in the growing market for machines with an output of more than 20 kilowatts – from the competition in all our main markets
 
In view of the challenges facing us, a comprehensive raft of measures has been introduced in our heating technology operations to improve and secure our competitiveness in the long term. To coincide with the international building and energy technology fair ISH 2011, we will be unveiling a new range of energy-efficient heat pumps that will also have a positive influence on the division’s future profitability.
 

Wide-sweeping restructuring of cooling technology operations – work to be completed by the end of 2010

The Cooling Technology division, which is currently undergoing reorganization, generated sales of CHF 18.7 million in the first half of the year, compared with CHF 26.6 million in 2009 (-29.7%). Before extraordinary expenses, this resulted in an operating loss of CHF -1.7 million (2009: CHF -0.6 million). Extraordinary expenses resulting from the relocation of operations and our discontinuation of cooling plant business amounted to CHF 6.6 million.
Relocation of both cooling system production facilities in Lauf (Bavaria) to the heat pump factory in Kasendorf 100 kilometres away commenced in spring and is proceeding as planned. From December 2010, the production of cooling systems will take place entirely at the new location. By the end of 2010, the workforce and cost structure will have been adjusted to capacity requirements for 2011. There are numerous opportunities for synergy with heating technology operations in the same location and these are already being exploited widely now.
 

Outlook

Developments in the heat pump market during the second half of 2010 will be similar to last year. Despite prevailing caution on the European markets, the Board of Directors and management expect sales of around CHF 300 million for the entire year.
 
The full Schulthess Group Annual Report is available on the Internet at
http://www.schulthess-group.com/eDownload/HalbBer2010.pdf