June 06, 2023 | Ad hoc announcement pursuant to Art. 53 LR
Burckhardt Compression with record-level financials, accelerating its growth in new energy markets
Burckhardt Compression achieved in fiscal year 2022 the following record financials:
– Order intake of CHF 1.27 bn, +29.9 % year-on-year
– Sales of CHF 829.7 mn, +27.5 % year-on-year
– Operating income (EBIT) of CHF 95.0 mn, +35.0 % year-on-year
Earnings per share of CHF 20.64, +39.3 % year-on-year.
Dividends of CHF 12.00 proposed, an increase of 60.0% year-on-year.
Achieved targets of Mid-Range Plan 2018-2022, with clear progress on the company’s sustainability commitments and roadmap.
Kaspar W. Kelterborn proposed as new board member. Urs Leinhäuser decided to not stand for reelection.
Guidance for fiscal year 2023: sales between CHF 950 mn and CHF 1’000 mn, with an operating margin at a similar level as in fiscal year 2022.
Despite the challenges stemming from the macroeconomic and political environment, Burckhardt Compression achieved a record- level order intake of CHF 1.27 bn, exceeding the CHF 1 bn mark for the first time in its history. Strong deliveries throughout the year underpinned sales growth of 27.5 % versus the previous year, reaching a new record of CHF 829.7 mn, while the focus on operational excellence supported an improved operating margin of 11.4 % and a new record operating income of CHF 95.0 mn. With these strong results, the Group achieved its Mid-Range Plan for the period 2018 to 2022, delivering on its stated ambitions to reach CHF 700 mn in sales and a 10 % to 15 % operating margin. On the strategic and operational side, Burckhardt Compression made significant advances in transforming the business and developing new growth avenues with the hydrogen mobility and energy market, made further progress on its digitalization and sustainability agenda, and set a new Mid-Range Plan for 2023 to 2027, focusing on creating leading compression solutions for a sustainable energy future.
Well positioned in highly dynamic markets
Burckhardt Compression further positioned itself with innovative solutions in markets supporting the transition to more secure and sustainable energy sources, which contributed to the exceptional order intake of the Systems division. The growth was driven by an exceptional demand for low density polyethylene (LDPE) and ethylene- vinyl acetate (EVA) compressors to support the solar panel industry, exceptional orders for Liquefied Natural Gas (LNG) applications, and a high growth in hydrogen mobility and energy applications. The Services division also had an exceptional Sales growth of 22 %, driven by pent-up demand after Covid-19, anticipated spare parts procurement from customers, a few large revamp projects and by exceptional orders for its PROGNOST® digital product line. From a geographical perspective, China, Korea and USA have driven the growth of the Group’s order intake.
Demonstrating resilience amid ongoing macroeconomic challenges
The fiscal year 2022 has not been without its challenges, and the Group continued to see headwinds stemming from the macroeconomic and political environment. Lockdowns in China, ongoing supply chain tensions and inflationary pressures on energy and specific material categories continued to present operational challenges. As a direct result of the war in Ukraine, Burckhardt Compression has refrained from accepting any orders from the Russian market since March 2022. Growth in other markets has more than compensated for the loss of volume in Russia, and the one-off costs related to the wind-down of the Russian backlog have been more than offset by global profitable sales growth, a favorable product mix in the Systems division and strong operational performance.
Strong financials in fiscal year 2022 and significant increase of dividends proposed
Gross profit was up 28.1 % to CHF 244.5 min, yielding a gross profit margin of 29.5 % (previous year: 29.3 %). Research & Development expenses increased by CHF 4.2 mn to CHF 23.9 mn to develop innovative solutions for the marine and hydrogen mobility and energy markets. Selling, marketing and general administrative expenses amounted to CHF 117.0 mn, or 14.1 % of sales (previous year: 16.4 %). Other operating income and expenses (net) were at CHF -8.6 mn, including non-recurring costs related to the exit from the Russian market in the amount of CHF 7.1 mn. Despite these one-off costs, the consolidated operating profit (EBIT) rose substantially by 35.0 % to CHF 95.0 mn, corresponding to an EBIT margin of 11.4 % (previous year: 10.8 %). Net profit of CHF 70.0 mn clearly exceeded the previous year’s figure by 38.9 %, while earnings per share attributable to Burckhardt Compression Group shareholders rose likewise by 39.3 %, from CHF 14.82 to CHF 20.64.
Value creation was further enhanced, with a Return on Net Operating Assets (RONOA) substantially increased from 19.7 % to 25.7 %. The balance sheet total at the end of March 2023 was at CHF 940.6 mn, 12 % higher than in the previous year, mainly due to the increase in advance payments from customers and the growth in inventories on the back of the high order intake. The net financial position at the end of fiscal year 2022 improved to CHF -7.1 mn (CHF -56.8 mn at the end of fiscal year 2021). Total equity increased to CHF 261.6 mn (+18.7 mn), while the equity ratio of 27.8 % remained slightly below the mid-term ambition level of over 30.0 %.
Based on these strong results, the Board of Directors will propose at the Annual General Meeting a dividend of CHF 12.00 per share, within the Group’s overall attractive dividend policy of 50 % to 70 % pay-out ratio and representing an increase of 60.0 % compared with the previous year.
Confidence into 2023 and beyond, with sustainability at the core of Burckhardt Compression’s new strategy
Burckhardt Compression enters fiscal year 2023 in a solid financial position, with good momentum in both divisions, a strong team and an ambitious plan.
As the world transitions towards more sustainable and secure energy sources, the Group expects to continue benefiting from its strong positioning in related applications. A key ingredient to its success in the past and the future is its people. The Group increased its workforce globally by 8.8 % to 2’973 FTE and further ramped-up its training and development activities to deliver its increased order backlog and achieve its growth ambitions. In addition, it added bench strength with two new members of the Executive Management team that bring a wealth of experience from world-class industrial companies. On April 1st, 2022, Fabrice Billard took over as CEO and was succeeded as Systems Division President by Andreas Brautsch. In addition, Vanessa Valentin joined the Executive Management team as Chief Human Resources Officer.
Guidance for fiscal year 2023
The Group expects supply chain tensions in certain material categories to persist in the coming year as well as some uncertainty about the development of the global economy. However, based on the strong order intake over the past two fiscal years, it expects sales to reach between CHF 950 mn and CHF 1’000 mn at the Group level for fiscal year 2023. Operating margin is expected at a similar level as in fiscal year 2022, considering no further oneoff costs for Russian projects, an increased share of Systems business in the overall sales mix as well as a less favorable product mix within the Systems Division. Within the fiscal year, the second half is expected to be stronger than the first half due to the distribution of project deliveries.
Mid-Range Plan 2023–2027 started
Burckhardt Compression communicated its new Mid-Range Plan in November 2022, targeting CHF 1.1 bn in sales and a 12 % to 15 % operating margin in fiscal year 2027. Sustainability now sits at the core of its strategy, with implications on target markets, R&D projects, CAPEX investments, operational KPIs and long-term incentive plans for senior management. This new strategy is a step forward in achieving its purpose of creating leading compression solutions for a sustainable energy future. The Group aims, in particular, to achieve 40 % of its order intake from applications that support the world’s energy transition and to reduce its greenhouse gas emission intensity by 50 % (Scope 1 and Scope 2) by fiscal year 2027 compared to fiscal year 2021. Acknowledging the scale and urgency of combatting climate change, the Group has also made a commitment and developed a roadmap to achieve operational net-zero for its Scope 1 and Scope 2 emissions by 2035. The achievement of these goals will be supported by integrating sustainability into its operational excellence activities and continuous investments in innovation and digitalization. On the financial side, in addition to the growth and profitability targets, the Group’s ambition is to reach a Return on Net Operating Assets (RONOA) of more than 25 %, and it intends to keep an attractive dividend policy, with a 50 % to 70 % payout ratio.
Changes in the Board of Directors
After 15 years of active contribution in the development of Burckhardt Compression, Urs Leinhäuser decided to not stand for re-election as a member of the Board of Directors of Burckhardt Compression Holding AG. As a successor, the board of directors will propose to the shareholders the election of Kaspar W. Kelterborn (1964). Mr Kelterborn was ad interim Group CFO of Dormakaba AG until end 2022, Group CFO of Conzzeta AG from 2006 to 2021 and he is an experienced board member. His international leadership experience in several industrial companies and his strong finance and controlling background make him a highly suitable person to join the board of directors of Burckhardt Compression.
The annual report 2022 and further information on the fiscal year 2022 are available on the website on: www.burckhardtcompression.com/financial-reports.