Financial year 2015: Positive business trend despite headwinds
June 07, 2016
Burckhardt Compression, one of the world’s leading manufacturers and service providers of reciprocating compressor systems, again passed in the financial year 2015 (as per March 31, 2016) the CHF 500 mn mark with slightly increased order intake. Sales hit the record high of the previous year with an increase of 3%. Operating income declined by 2% year-on-year and net profit by 4%. An unchanged dividend of CHF 10.00 per share will be proposed at the Annual General Meeting.
Order intake slightly higher than in previous year
Order intake at Burckhardt Compression again passed the CHF 500 million mark and, at CHF 523.2 mn, exceeded the figure reported for the previous year (CHF 514.1 mn). Incoming orders at the Compressor Systems (CS) business were slightly lower at CHF 351.4 mn (CHF 355.6 mn), while the Components, Services & Support (CSS) business reported an increase of 8.4% to CHF 171.8 mn (previous year CHF 158.5 mn). Growth at the CSS business was mainly driven by orders for retrofit and engineering services as well as new customers.
Renewed sales growth
Burckhardt Compression’s sales hit another record high of CHF 487.2 mn in the fiscal year 2015 (plus 2.9%, at constant exchange rates plus 3.9%). Unlike in the previous years, sales were fairly evenly divided between the first and second half of the reporting period. CSS reported a 5.7% increase in sales from CHF 146.5 mn to CHF 154.8 mn, fueled by replacement part orders. Sales at the CS business area grew by 1.6% to CHF 332.4 mn.
Gross profit amounted to CHF 151.7 mn, incrementally below the figure of CHF 152.8 mn reported for the previous year. The resulting gross profit margin was 31.1%, compared to 32.3% in the previous year. The margin at the CS business declined, whereas the CSS business remained at prior year level.
Slight decrease in operating income
Operating income declined by 2.1% year-on-year, from CHF 74.6 mn to CHF 73.0 mn. Net income amounted to CHF 55.5 mn, a decline of 3.6% from the prior-year level (CHF 57.6 mn), and the resulting net income margin was 11.4%. Net income per share amounted to CHF 16.34 (previous year CHF 16.93).
Strong balance sheet
Total assets rose by 3.9% to CHF 708.0 mn in the fiscal year 2015. Shareholders’ equity increased by 4.9%, leading to a slightly higher equity ratio of 50.2% compared to 49.7% in the previous fiscal year. Non-current assets rose by a total of CHF 63.4 mn to CHF 247.2 mn, primarily due to the construction of the two new assembly plants in South Korea and the US. The CHF 58.1 mn decline in the net financial position to CHF 93.2 mn is attributed primarily to the investments made in connection with the increase in manufacturing capacity in the US and South Korea, and to the purchase of a minority interest in Arkos Field Services.
Market position expanded
In December 2015, Burckhardt Compression acquired a 40% stake in Arkos Field Services, a highly experienced provider of compressor services and components to the natural gas industry. Acquiring a stake in the US based Arkos improves the access to the US compressor services market, which is the world’s largest installed base of reciprocating compressors.
In March 2016, the company signed an agreement to acquire a 60% majority interest in Shenyang Yuanda Compressor, the number one manufacturer of reciprocating compressors in China. This acquisition extends Burckhardt Compression’s local presence in China to new segments of the market, widens its product range so it can address a broader range of market needs, and gives it
direct access to a well-established local supply network from which its other manufacturing sites can benefit.
Growth of the company requires new organizational structure
The company’s growth in recent years requires a revision of its organizational structure. In order to meet customer needs even better, Burckhardt Compression will adopt a new divisional structure consisting of two divisions, effective June 1, 2016. The Systems Division (new compressor business) and the Services Division (service and components business) will be managed by COOs who will report directly to the CEO. At the same time the size of the Executive Board will be reduced from eleven to five members. It will comprise the CEO, the CFO, the CHRO and the two division heads. Sandra Pitt was hired as the new CHRO on June 1, 2015.
Outlook for the fiscal year 2016
The key markets continue to show positive trends despite economic and geopolitical uncertainties. Full-year order intake for Burckhardt Compression Group (excl. Shenyang Yuanda Compressor) is projected to be around the level of the previous year. Group sales are forecast to be well above CHF 500 mn and the operating profit margin (excl. Shenyang Yuanda Compressor) is expected to recede temporarily to 11% to 13% in the fiscal year 2016 before rising again in the fiscal year 2017
(excl. Shenyang Yuanda Compressor) to 14% to 16%. A more detailed financial outlook (including Shenyang Yuanda Compressor) will follow in the coming months when Burckhardt Compression will have made more progress with the implementation of the new organizational structure and the integration of Shenyang Yuanda Compressor.
The Board of Directors will propose an unchanged dividend of CHF 10.00 per share at the Annual General Meeting. This corresponds to a payout ratio of 61.2% (previous year 59.1%) of net income, which is in the middle of the targeted payout range of 50% to 70%.