Fiscal year 2011: Order intake significantly higher – slightly lower sales – improved profitability and substantial increase of the dividend
June 05, 2012
Burckhardt Compression, one of the world’s leading manufacturers of reciprocating compressors, booked 12% more orders (+15% at constant exchange rates) during the fiscal year 2011 (ending March 31, 2012). Sales for the year were down 8% (–4% at constant exchange rates). Operating profit and net income increased and the corresponding margins widened to 20% and 15%, respectively. A dividend of CHF 7.00 per share will be proposed at the annual general meeting (previous year CHF 5.00). In the current fiscal year management expects a further increase in order intake, significantly higher sales and a slightly lower operating profit margin.
Burckhardt Compression’s order intake in the year under review rose by 11.7% to CHF 404.9 mn. At constant exchange rates, order intake rose by 14.8%. The considerable appreciation in the value of the Swiss franc against most other currencies had a negative impact on reported order intake and the resulting gross profit margin. Nevertheless, order intake has risen steadily since hitting a low in the second half of the fiscal year 2009.
Orders for compressor systems grew by 9.9% to CHF 159.3 mn. The positive order inflow in the service and components business (CSS) in the preceding three years gained considerable momentum in the year under review, resulting in better-than-expected growth of 15.0% to CHF 145.6 mn.
Sales amounted to CHF 328.9 mn, a decline of 7.5% from the previous year or –4.0% at constant exchange rates. Compressor systems accounted for CHF 206.0 mn of total sales, which corresponds to a y-o-y decline of 7.4%, and the service and components business contributed the remaining CHF 122.9 mn (–7.7%).
Higher margins at the gross profit, operating profit and net income lines
Gross profit increased by 5.8% to CHF 122.3 million during the year under review, resulting in a gross profit margin of 37.2% (32.5% in the previous year). Both the compressor systems and the service and components business contributed to the margin expansion. Operating profit rose by 5.4% to CHF 64.8 mn, lifting the operating margin to 18.9% from 17.3% in the previous year. Net income amounted to CHF 50.5 mn (CHF 45.1 mn in the previous year) or 15.4% of sales (12.7%), a respectable achievement considering how challenging the market environment was last year. Earnings per share (undiluted) amounted to CHF 15.22 (previous year CHF 13.56).
Difficult exchange rate situation
Thanks to the company’s high rate of innovation, productivity gains and increased sourcing from foreign countries, Burckhardt Compression has maintained a sharp competitive edge even though much of the added value it offers its customers is created in Switzerland and despite the unrelenting headwinds on the forex front. The sudden and sharp movements on the currency front during the past fiscal year nevertheless left their mark on the company’s results for the past year. Despite extensive efforts to mitigate the situation, it was not possible to completely offset the effect of the tremendous appreciation in the value of the Swiss franc versus the euro and the US dollar. The minimum exchange rate to the euro imposed by the Swiss National Bank provided some relief by lowering exchange rate volatility and enhancing planning certainty.
Strong balance sheet
The company strengthened its capital base during the year under review. Equity rose to CHF 282.8 mn or a high 53.3% of the balance sheet total (51.3%). Holdings of cash and cash equivalents grew as well and amounted to CHF 185.0 mn at the end of the reporting year (CHF 149.1 mn in the previous year).
Mid Range Plan reviewed and redefined
The Executive Board and the Board of Directors thoroughly evaluated the company’s medium-term development during the year under review. This ultimately resulted in a new Mid Range Plan that affirms the company’s independence and internal growth ambitions. Expanding the service and components business, entering new application areas and broadening the company’s geographic footprint are the operational priorities. The overall objective is to grow faster than the market and maintain the company’s status as the compressor industry benchmark.
New presentation of results with two business areas
The business activities of Burckhardt Compression revolve around two different sales processes: Selling new machines (building new plants and upgrading existing plants) and providing services, compressor components and technical support. The latter activities target the same compressor operators. Consequently, Burckhardt Compression is regrouping its activities into two business areas instead of the former three: Compressor Systems (CS) and Components, Services & Support (CSS).
Recruiting personnel where markets are growing
The number of employees rose by 66 to 983 full-time equivalents during the reporting year. Most of these jobs were created as part of our continuing efforts to expand the service and components business.
Change in the Board of Directors
Heinz Bachmann, a Director on the Board of Burckhardt Compression since 2002, will not be available for re-election at the upcoming annual general meeting, because he reached the statutory age limit. Dr. Monika Krüsi will be proposed as his successor. With this nomination, the Board of Directors is enhancing its competencies in the areas of strategic development and implementation, innovation, growth and process management.
Outlook for fiscal year 2012
Despite various imponderables, Burckhardt Compression expects another increase in order inflow at both business areas in the current fiscal year. Sales will be substantially higher than in the year under review thanks to the high order backlog. A somewhat lower operating profit margin is expected compared to the previous year. This is because of the lower average margin on orders for compressor systems that will be delivered during the current fiscal year. As a result of the price concessions that were granted when these orders were placed – because of the strength of the Swiss franc at that time – margins will be lower.
Increase of dividend
As part of the review and revision of the Mid Range Plan, an increase of the payout ratio to 40% to 60% is foreseen. Therefore, the Board of Directors is proposing a dividend of CHF 7.00 (CHF 5.00 in the previous year) per share at the annual general meeting, which corresponds to a payout ratio of 46% (37% in the previous year) of basic earnings.
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 Labyâ (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.
- Key figures at a glance
- Consolidated income statement
- Statement of comprehensive income
- Consolidated balance sheet
- Consolidated cash flow statement
- Key dates for 2012 and 2013
The complete 2011 annual report has been published on our website at www.burckhardtcompression.com/financial-reports.