Burckhardt Compression results for fiscal 2009: Sustained high earnings despite lower order intake and sales
June 08, 2010
Burckhardt Compression, one of the world’s leading manufacturers of reciprocating compressors, experienced a considerable drop in orders received in fiscal 2009 (closing March 31, 2010) while sales did not decline as much thanks to the high order intake of previous years. EBIT and bottom-line profit were below the corresponding figures from the prior-year period. Nevertheless, in view of the difficult economic environment, they remained remarkably high compared to industry levels and competitors' margins. The Board of Directors will propose a dividend of CHF 5.00 per share at the Annual General Meeting. With regard to the current fiscal year, Burckhardt Compression expects order intake and sales to be higher and margins lower.
Order intake for the year under review declined by 26.7% to CHF 285.9 million; foreign currency translation had an only minimal effect on the reported figure. New orders in the service business (CSS) increased slightly to CHF 90.9 million (+3.3%) while orders for new machines declined 38.3% to CHF 171.3 million, reflecting widespread hesitancy throughout the sector to invest in capital goods.
Thanks to the high order backlog, sales showed a proportionately lower decline of 19.2% to CHF 343.2 million, of which CHF 241.5 million was from new machines, CHF 80.7 million from CSS and CHF 20.9 million from compressor components.
Margins remain high
Gross profit declined by 13.2% to CHF 126.9 million. The higher gross margin of 37.0% (previous year 34.4%) is attributable to the greater contribution of the CSS and the compressor component business lines to consolidated sales as well as to a significantly higher margin in the new machine business. Administrative and selling expenses were virtually unchanged in a year-on-year comparison.
Operating profit of CHF 74.2 million was 21.2% below the previous year’s level, bringing the margin to 21.6% (previous year 22.2%), which was once again above the 20% mark. With a net income of CHF 56.0 million, corresponding to 16.3% of top-line revenue, Burckhardt Compression again achieved an above-average net income margin. Earnings per share were down 22.3% to CHF 16.68. In view of the challenging economic environment, the company’s operating performance in 2009 is considerable, especially in comparison with the industry as well as individual competitors.
Thanks to this good operating performance, the company’s equity base increased by 15.2% to CHF 234.9 million, resulting in a solid equity ratio of 50.0% (previous year 47.3%). Cash and cash equivalents declined by only CHF 11.6 million to CHF 119.3 million despite the cash outflow for the purchase of commercial property (CHF 30.8 million) and the share buyback program (CHF 6.2 million).
Package of measures
The downturn in Burckhardt Compression’s markets worldwide beginning in the final quarter of the 2008 fiscal year necessitated in June 2009 the implementation of a package of measures to reduce both capacity and operating expenses. This entailed the loss of 54 jobs in Winterthur. These measures were implemented in consultation with employee representatives and our social partners.
Extension of share buyback program
The ongoing share buyback program that had initially been scheduled to expire on December 16, 2009 was extended for one year. The shares held by the company may be used to finance acquisitions. In addition, shareholders at the 2009 Annual General Meeting approved the creation of authorized capital of up to CHF 1.275 million. This additional share capital gives the Board of Directors greater freedom in the current economic environment to quickly leverage the company’s financial strength through the use of company shares to make acquisitions.
Reelection to the Board of Directors
The term of all current Board members ends with the upcoming Annual General Meeting. All Board members are available for reelection. The Board of Directors proposes to the Annual General Meeting the reelection of all Board members, however with different terms.
Outlook for fiscal 2010
From today’s standpoint, Burckhardt Compression expects order intake to pick up in all business lines during the current fiscal year (closing March 31, 2011). New machine orders are likely to experience the strongest recovery. In view of the still high order backlog, an increase in full-year sales is also expected. However, the overall gross margin is expected to decline compared to the 2009 fiscal year because margins in new machines, in particular, will be much lower as a result of changes in the product mix and lower capacity utilization. Consequently, the operating and net profit margins are also expected to decline, resulting in lower profits in absolute terms despite the increase in sales. Burckhardt Compression sees itself as well positioned, both strategically and operationally, to benefit from the anticipated economic upswing or, if necessary, to make further adjustments to weather a prolonged economic downturn.
The Board of Directors will propose a dividend of CHF 5.00 per share at the Annual General Meeting (previous year CHF 6.00). This corresponds to a payout ratio of 30%, in line with the company’s long-term dividend policy.
About Burckhardt Compression
Burckhardt Compression is one of the worldwide market leaders in the field of reciprocating compressors and the only manufacturer that offers a complete range of Laby (labyrinth piston), Process Gas, and Hyper Compressors. The compressors are used to compress, cool or liquefy gases. Burckhardt Compression’s customers include multinational companies active in the chemical, petrochemical, refinery, industrial gas and gas transport and storage industries. With the leading compressor technology, the high-quality compressor components and the comprehensive range of services Burckhardt Compression supports its customers in their effort to minimize the life cycle costs of their reciprocating compressor systems.
Valentin Vogt, CEO
Tel.: +41 (0)52 262 55 00
Fax: +41 (0)52 262 04 08
E-mail: [email protected]