Schaffner with strong increase in profitability in the first half of 2022/23

Ad hoc announcement pursuant to Art. 53 LR

The Schaffner Group can look back on an exceptionally successful first half of 2022/23. The medium-term targets were exceeded in terms of both sales development and profitability at EBIT level. Net sales rose by 7.4% year-on-year to CHF 84.8 million. Adjusted for currency effects, net sales were up by as much as 11.0%. Both divisions, Industrial and Automotive, were able to increase net sales. The operating result (EBIT) increased disproportionately by 50.5% to CHF 10.7 million, corresponding to an EBIT margin of 12.6%. For the year as a whole, Schaffner expects growth in local currencies in line with the medium-term target of 5% and an EBIT margin above the medium-term target of 10 to 12% Despite challenging conditions worldwide, the financial year 2022/23 is expected to be the most profitable year in the history of the Schaffner Group.

The good business performance was primarily driven by the very high order backlog from industrial markets, which gave Schaffner a good start to the financial year 2022/23. This order backlog was the result of the recovery effect after the Corona pandemic, customer concerns about supply bottlenecks, and Schaffner's good positioning in the market with shorter delivery times than its competitors. After the situation in the supply chains eased in the course of the reporting period and concerns about an impending recession arose, some customers – especially in distribution – reduced their orders despite continued high sales to lower existing inventories. Towards the end of the first half of 2022/23, however, we saw a gradual recovery in customers' ordering behavior. In the Automotive Division, a pick-up in demand was already noticeable at the end of the financial year 2021/22 after the bottlenecks for components had gradually eased. This trend continued in the first half of 2022/23, although the recovery was not yet quite as strong as had been hoped.

Double-digit sales growth in local currencies

The Schaffner Group reported net sales of CHF 84.8 million for the first half of 2022/23, an increase of 7.4% compared with the same period of the previous year (H1 2021/22: CHF 78.9 million). Adjusted for currency effects, the increase was 11.0% – significantly more than the medium-term target of over 5% growth. The negative currency impact of -3.6 percentage points is primarily attributable to the depreciation of the euro and the Chinese renminbi against the Swiss franc.

The European region developed particularly strongly in the first half of the year, due both to continued high demand from industrial markets and a gradual recovery in the automotive sector. Sales in Asia and the Americas declined slightly, mainly due to currency effects. Overall, 62% of net sales came from Europe, 24% from Asia and 14% from the Americas.

Sharp increase in profitability

Based on its excellent positioning in the market, the price increases implemented in the previous year and further improvements in organizational efficiency, the Schaffner Group achieved a sharp increase in profitability compared with the same period of the previous year. The operating result (EBIT) increased disproportionately by 50.5% to CHF 10.7 million (H1 2021/22: CHF 7.1 million). The EBIT margin increased by 3.6 percentage points to 12.6%, thus exceeding the medium-term target range of 10 to 12% (H1 2021/22: 9.0%). Also very pleasing is the 89.8% improvement in net profit for the first half of 2022/23 to CHF 9.8 million (H1 2021/22: CHF 5.2 million).

With the result for the first half of 2022/23, Schaffner was able to impressively demonstrate that the strategic reorientation towards filter solutions for growth-oriented future markets is paying off – on the one hand through solid growth and on the other hand through a sharp increase in profitability.

Industrial Division continues growth path

In the first half of 2022/23, the Industrial Division was able to continue the dynamic business development of the previous semesters and increase net sales by 6.0% to CHF 67.4 million compared to the same period of the previous year (H1 2021/22: CHF 63.6 million). In local currencies, the increase amounted to 9.2%. Growth was driven not only by the high order backlog from the previous year, but also by the lifting of the lockdown measures in China, which enabled Schaffner to deliver again without any difficulties. The availability and cost of transport capacity also normalized, while raw material prices stabilized mostly at a high level. In Europe, Schaffner again implemented certain price increases at the beginning of the year to reflect higher energy costs and rising labor costs. Nevertheless, the Industrial Division clearly recorded the strongest growth in the Europe region with an increase in net sales of 14.1%. By contrast, the Americas region – due to destocking by distributors – and Asia, as a result of the Covid lockdown in China, which was still ongoing at the beginning of the semester, started weaker. From February onwards, these regions also returned to the growth path. As a result, order intake of CHF 58.8 million was lower than in the prior-year period (H1 2021/22: CHF 75.0 million). The book-to-bill ratio was 0.9. Overall, however, Schaffner still has a very good order backlog in the Industrial Division.

Among the customer markets, fast-charging systems for electric vehicles performed particularly well, both in Europe and in North America. Demand for Schaffner solutions for the infrastructure at new semiconductor factories in Asia was also strong. This market will remain at a high level as a result of the ongoing semiconductor conflict between the USA and China. Schaffner sees interesting opportunities for the future in the heat pump sector, where enormous investments are being made and the demand for EMC filters will increase significantly. The Industrial Division is systematically developing this growth area and is pushing ahead with various projects with leading heat pump manufacturers that will generate additional sales in the future.

Recovery in the Automotive Division

The Automotive Division recorded a noticeable recovery after the challenging previous year. Net sales rose by 13.4% to CHF 17.3 million, an increase of 18.3% in local currencies. The bottlenecks in semiconductor chips and other key components such as cable harnesses have now eased somewhat, but are far from being eliminated. As a result, the previous production volume of new vehicles has by no means been regained. Schaffner was able to implement price increases in the period under review, justified by the higher costs of materials and logistics. These measures will have a positive effect on profitability with a certain time lag. In the first half of 2022/23, the Automotive Division won numerous new projects for EMC filter solutions for electric vehicles and antennas for keyless entry systems.

Strong cash flow generation

The Schaffner Group generated a free cash flow of CHF 10.7 million in the first half of 2022/23, compared to a negative free cash flow of CHF -4.4 million in the same period of the previous year. The main reason for this is the significant reduction of inventories, which were built up in the previous year's period to ensure the ability to deliver and which could now be reduced to a normal level. The improved availability of transport capacity also resulted in a reduction in goods in transit, i.e. products in the supply chain. Net liquidity as of 31 March 2023 amounted to CHF 8.0 million (30 Sept. 2022: CHF 3.9 million).

The Schaffner Group continues to be very solidly financed. Shareholders' equity amounted to CHF 74.5 million at the end of the period (30 Sept. 2022: CHF 69.9 million). This represents a further significant increase in the equity ratio from 57.8% to 68.6%. The return on capital employed (ROCE) reached 33.5% on an annualized basis.

Changes in management

Martin Lütenegger, Head of the Automotive Division, left the Schaffner Group at the end of the first half of 2022/23. He made an important contribution to the repositioning of the division by establishing EMC filter solutions for electromobility as a second pillar. He also succeeded in securing various new projects, meaning that the division has a better-filled pipeline of new orders. The Board of Directors and Group Management of Schaffner thank Martin Lütenegger for his great commitment. Until a permanent solution is found, the Automotive Division will be managed on an interim basis by Manfred Kwade. Manfred Kwade has many years of experience in management functions at international automotive suppliers.

Outlook

The current economic environment is subject to the conflicting influence of divergent factors: while lower energy costs, the reopening of the Chinese economy and declining inflation are giving rise to some confidence, lingering fears of recession, continuing high inflation and the ongoing war in Ukraine are creating uncertainty. Against this backdrop, it is difficult to make precise forecasts regarding the economic trends over the next six months.

The Schaffner Group expects the good demand from the industrial markets to persist and the recovery in the automotive sector to continue. Consequently, the Schaffner Group's business should continue to develop solidly, resulting in growth for the full year in local currencies in line with the medium-term target of 5%. The EBIT margin for the full year should be above the medium-term target of 10-12%. Free cash flow is expected to develop in line with the first half of 2022/2023.

Despite challenging conditions worldwide, the financial year 2022/23 is expected to be the most profitable year in the history of the Schaffner Group.

Key financials

Half-year report and presentation

You can download the half-year report 2022/23 of Schaffner Holding AG and the presentation using this link.

Conference call and audio webcast

Today, 4 May 2023, at 10.00 a.m., Schaffner Holding AG will hold a conference call and live audio webcast for the media, investors and analysts.

Conference call

To participate in the conference call, you can register here. After registration you will receive a confirmation e-mail with individual dial-in data. As a participant in the telephone conference, you can follow the presentation here.

Audio webcast

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Financial Calender
6 December 2023        Publication of annual results 2022/23
9 January 2024          28th Annual General Meeting

Schaffner plays a vital role in building a sustainable future in the new era of electrification. Headquartered in Switzerland and with subsidiaries around the world, Schaffner is a global leader in electromagnetic solutions that ensure the efficient and reliable operation of electronic systems. The Schaffner Group are experts in EMC filter solutions, harmonic filters, electromagnetic components and electromagnetic solutions. Our passionate and knowledgeable employees empower our customers to develop reliable electronic devices and systems that meet compliance standards and deliver increased energy efficiency.

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Contact
Schaffner Holding AG, Investor Relations and Media Office: c/o Dynamics Group, Zurich
Thomas Balmer, +41 79 703 87 28 / Edwin van der Geest, +41 79 330 55 22
investor-relations@schaffner.com