Fiscal year 2013: Order intake at all-time high – strong sales growth – net income slightly lower than in prior year – dividend increased – outlook positive
June 10, 2014
Orders received by Burckhardt Compression, one of the world’s leading manufacturers of reciprocating compressors, rose 21% to a new record high in fiscal 2013 (ending March 31, 2014). Sales rose 21% and also reached a new all-time high. Operating profit and net income remained strong slightly below the levels achieved in the previous year. A CHF 1.00 increase in the dividend to CHF 10.00 per share will be proposed to shareholders at the annual general meeting. For the current fiscal year management expects an increase in order intake and substantial sales growth. Operating and net profit are likewise expected to be clearly higher.
Annual order intake exceeds half a billion francs for the first time
Order intake of CHF 517.1 mn topped the previous record high set in fiscal year 2012 (CHF 427.8 mn) by 20.9% (22.8% at constant exchange rates) and exceeded the CHF 500 million mark for the first time. This strong growth was driven by a surge in business at Compressor Systems (CS), where orders received jumped 41.7% to CHF 386.3 mn. The Components, Services & Support (CSS) business area was unable to repeat its strong performance from the previous year as its order intake declined 15.7% to CHF 130.8 mn. This was mainly due to the absence of new contracts for major revamp/engineering projects.
Strong sales growth thanks to Compressor Systems
Full-year sales of CHF 445.0 mn (plus 21.3%, at constant exchange rates plus 22.4%) marked the highest full-year sales figure Burckhardt Compression has ever achieved in its entire history. As in the preceding two years, sales were higher in the second half than in the first half due to the compressor systems delivery schedules set by our customers. The Components, Services & Support business area achieved marginal sales growth of 0.7% to CHF 152.1 mn. The strong sales growth is largely attributable to the Compressor Systems business (plus 35.8% to CHF 292.9 mn).
Shift in product mix with lower margins
Gross income of CHF 139.2 mn was 2.4% higher than in the previous year. This resulted in a gross profit margin of 31.3% (37.1% in the previous year). A shift in product mix and two larger compressor systems projects that closed with a negative margin prevented both the CS and CSS business areas from maintaining their high gross profit margins from the previous year. Operating profit of CHF 70.2 mn was 4.3% less than in the previous year, mainly because of the only slight increase in gross profit, and the operating profit margin slipped to 15.8% (20.0% in the previous year). Net income declined by 1.8% to CHF 53.9 mn and net income per share amounted to CHF 15.87 (CHF 16.42 in the previous year).
Balance sheet remains strong
The equity ratio rose once again to a high 55.5% at the end of the reporting period (54.7% in the previous year). The net financial position increased by CHF 15.0 mn to CHF 165.8 mn (March 31, 2014).
Expansion of market presence
Burckhardt Compression’s global footprint was further expanded in fiscal year 2013 with the aim of enhancing local business relations and providing customers with first-class service capabilities. The new subsidiaries with Service Centers in Singapore and South Africa and soon in Saudi Arabia plus the new Service Center in Calcutta, India, bring the compa ny even closer to where its customers are and will allow it to provide more efficient compressor operation and maintenance services for its own products as well as for those made by other manufacturers.
Further success in new application areas
In the year under review Burckhardt Compression sold a large number of Laby®-GI boil-off gas compressor systems for use on LNG carriers. Orders were also received for a smaller version of Laby®-GI for use on smaller-sized LNG tankers. With this new product the company now offers compressor solutions for all sizes of LNG carriers. Its subsidi ary in Korea is being expanded to enhance the technical expertise offered to Korean shipbuilders. Further growth was achieved in the oil and gas production industry with orders for sour gas compressors that are used to improve oil recovery.
Change in the Board of Directors
Dr. Stephan Bross will be proposed for election to the Board of Directors at the upcoming annual general meeting as the successor to Urs Fankhauser, who passed away in February. Dr. Bross, Head of the Pump division at KSB AG in Frankenthal (Germany), will actively support Burckhardt Compression in building up its service business with his knowledge and international experience.
Workforce expanded in line with organic growth
The workforce was increased by another 154 full-time employees, or 14.3%, to 1’232. Almost half of these new positions were created abroad with the objective of further expanding the local service and components business. The remaining jobs were created in Winterthur, primarily to increase production capacity.
Positive outlook for fiscal year 2014
Most of the markets Burckhardt Compression is active in continue to show positive developments, especially the application areas petrochemical industry and gas transport and storage. From today’s standpoint, Burckhardt Compression expects both the CS and CSS business areas to increase their order intake. We also expect a renewed substantial increase in sales compared to the year under review. Operating and net profit are likewise expected to be clearly higher. The second half year will be clearly stronger than the first half year in terms of sales, operating and net profit.
Higher dividend payment
The Board of Directors will propose a dividend of CHF 10.00 (previous year CHF 9.00) per share at the upcoming annual general meeting. This corresponds to a payout ratio of 63.0% (previous year 54.8%) of net income per share, which is in the middle of the targeted payout range of 50% to 70%.