Schlatter Group results for the first half of 2010

Order intake improves but remains at a low level. Sales slightly below same period of 2009. Positive operating result of CHF 1.9 million.

Despite positive signs, the Schlatter Group once again felt the effects of the economic crisis in the first half of 2010 in the form of continued very low market volumes. The order intake rose by 99.3 percent to CHF 60.8 million compared to the first half of 2009 (CHF 30.5 million) but remained significantly below earlier levels.

At CHF 62.4 million, net sales for the first six months of the year were lower than in the same period of 2009 (CHF 68.3 million). The order backlog altered only marginally versus December 31, 2009, to stand at CHF 47.0 million. Operating income (EBIT) of CHF 1.9 million (CHF -5.1 million) was positively impacted by further cost-reduction measures as well as a gain on the sale of land not used for operational purposes. The weakness of the euro resulting from the euro crisis had a strong negative impact on all exports from Switzerland. Net profit for the first six months of the current financial year totaled CHF 2.4 million (CHF -3.9 million).


Schlatter Group

The situation regarding the order intake was mixed: In the Weaving segment, a clear recovery was visible that will have a positive impact on sales in the second half of the year. This primarily reflects new orders in the Chinese emerging market. In the Welding segment, it is still too early to talk of a real recovery, although the order intake was higher than in the previous year. In view of the positive signs from the markets, a further improvement in orders is to be expected going forward.

Net sales declined to CHF 62.4 million in the first half of 2010 compared to the same period of 2009 (CHF 68.3 million). Following the impact of the global economic crisis, the euro crisis caused renewed uncertainty among the Schlatter Group's customers. This resulted in further delays in decisions about capital spending that mainly affected the Welding segment, which is strongly focused on the European market. However, a significant increase in the sale of spare parts was reported. During the period under review, both segments experienced a marginal decline in net sales compared to the first half of 2009.

As of June 30, 2010, the Schlatter Group had an order backlog of CHF 47.0 million, which is approximately in line with the backlog as of December 31, 2009 (CHF 48.6 million).

The measures introduced to adapt the business to the changed economic environment proved effective. They include restrictive cash management, the adjustment of headcount, the intro-duction of short-time working and various cost-reduction initiatives in the areas of procurement and administration. The weak euro had a negative impact on sales and margins.

A plot of land in Schlieren not used for operational purposes was sold in the first half of 2010. The first-half result benefited from an exceptional gain on this sale in the amount of CHF 4.6 million.

The Schlatter Group continued to invest in the development of new products during the period under review. It is currently testing a new welding system for reinforcing mesh that should help it to enter new segments of the market. The first orders for the new system are expected to be placed during the current year. Schlatter is also in the process of developing new equipment for the area of rail welding and the Weaving segment, which is due to be launched in 2011.


Welding segment

The order intake in the Welding segment totaled CHF 37.4 million in the first six months of the current financial year (CHF 25.9 million). While a continued good level of demand for rail welding equipment was reported, orders in the Wire Welding and Radiators product segments were below expectations. Net sales amounted to CHF 48.7 million (CHF 53.4 million). The order backlog as of June 30, 2010, was CHF 26.9 million (CHF 35.3 million). EBIT for the first half of 2010 was negative at CHF -2.2 million (CHF -5.0 million).


Weaving segment

The Weaving segment reported a pleasing order intake totaling CHF 23.4 million (CHF 4.6 million), reflecting a significant increase in the second quarter. Net sales of CHF 13.6 million (CHF 14.9 million) were recorded. The order backlog was CHF 20.1 million (CHF 16.8 million) as of June 30, 2010. A marginal operating loss (EBIT) of CHF -0.1 million (CHF 0.3 million) was incurred in the period under review.

At present it remains difficult to provide a reliable outlook regarding the future development of the markets. However, there are signs that capital spending is recovering to some extent and the Schlatter Group is optimistic that the order intake will increase further in the course of the year.

The Board of Directors and the Executive Board expect the operating environment to remain challenging in the second half of 2010 as well as in the financial year 2011. The future performance of the euro will also have a significant impact on the business.

The Half-Year Report 2010 is available on the Schlatter Group's website.

Financial calendar

18.08.2010 Publication of half-year 2010 results
15.03.2011 Publication of full-year 2010 results
10.05.2011 Annual General Meeting of Shareholders
16.08.2011 Publication of half-year 2011 results


Schlatter Group (www.schlattergroup.com)

The Schlatter Group is one of the world's leading specialists in plant engineering for resistance welding systems as well as weaving and finishing equipment for the production of paper machine clothing, wire fabrics and wire mesh. Thanks to its many years of experience in the field of plant technology, its innovative strength and its reliable service, the Schlatter Group – which is listed on the SIX Swiss Exchange – guarantees its customers a range of powerful and high-quality production equipment.