Fiscal year 2014: Order intake at high prior-year level – renewed increase in sales – higher operating profit – dividend unchanged
June 09, 2015
Burckhardt Compression, one of the world’s leading manufacturers of reciprocating compressors, passed the CHF 500 million mark again with an only marginally lower order intake in the fiscal year 2014 (ending March 31, 2015). Sales rose by 6% y-o-y and exceeded the previous record high set in 2013. Operating profit was 6% higher y-o-y, and net income 7% higher. An unchanged dividend of CHF 10.00 per share will be proposed at the Annual General Meeting. From today’s standpoint, management expects order intake for the fiscal year 2015 to be around the level reported in 2014 while sales are expected to exceed CHF 500 mn. Operating and net income are expected to be higher compared to the levels from fiscal year 2014 and margins are expected to be similar.
Full-year order intake surpasses the half-billion mark again
Order intake was marginally lower at CHF 514.1 mn (previous year: CHF 517.1 mn) but passed the CHF 500 million mark for the second time in the company’s history, as in 2013. The CSS business (Components, Services & Support) was a major contributor to this strong performance, having received new orders of CHF 158.5 mn, or 21.2% more than the figure of CHF 130.8 mn reported in the previous fiscal year. Growth at CSS was primarily fueled by orders for replacement parts.
The CS (Compressor Systems) business, in contrast, did not quite reach the level from the previous year, which, however, was very high. Its order intake declined by 7.9% to CHF 355.6 mn (CHF 386.3 mn) and this is mainly attributable to customer decisions to postpone some large projects.
Renewed sales growth thanks to Compressor Systems
At CHF 473.6 mn (plus 6.4%, plus 6.8% at constant exchange rates), Burckhardt Compression’s sales hit another all-time high, beating the previous record high set in 2013. The CSS business reported a slight decline in sales of 3.7% from CHF 152.1 mn to CHF 146.5 mn. This is primarily because no major revamp and engineering orders were received during 2013 and 2014. CS made a significant contribution to the renewed growth in Group sales (plus 11.7% to CHF 327.1 million). Gross profit of CHF 152.8 mn surpassed the previous year’s figure by 9.8% or CHF 13.6 mn. This resulted in a slightly higher gross profit margin of 32.3% (31.3%). Gross profit margins increased in both the CS and CSS business areas.
Operating profit tops year-ago figure
Operating profit increased by 6.3% from CHF 70.2 mn to CHF 74.6 mn. This amount includes significant foreign exchange losses of net CHF –6.4 mn mainly attributable to the negative static currency impact on various items in euro in the balance sheet. This negative impact is a direct consequence of the Swiss National Bank’s decision to abandon the EUR/CHF exchange rate floor of CHF 1.20, as announced on January 15, 2015.
An adjustment to defined benefit pension plan obligations resulted in a positive impact of CHF 5.9 mn on the income statement. This adjustment was mainly a result of the decision by the pension plan’s independent board of trustees to gradually lower pension conversion rates. Net income of CHF 57.6 mn was 6.9% above the prior-year level (CHF 53.9 mn), resulting in a net income margin of 12.2%. Net income per share amounted to CHF 16.93 (previous year CHF 15.87).
Solid balance sheet
The adjustment of defined benefit pension plan obligations due to the significantly lower discount rate was recognized in Group equity and had a negative impact of CHF 36.5 mn (after tax) on Burckhardt Compression’s consolidated equity. As a result of this negative effect, total equity declined by CHF 19.9 mn, which, together with the increase in non-current assets and working capital, led to a lower equity ratio of 49.7% (previous year: 55.5%). Expansion projects in several countries, higher working capital and the increase in the dividend resulted in a 8.7% decline in the net financial position to CHF 151.3 million (previous year: CHF 165.8 million).
Continued strengthening of market presence – success in new application areas
Burckhardt Compression has been steadily expanding its global market presence in recent years to improve the local services it offers to customers around the world. After establishing two new subsidiaries with Service Centers in Singapore and South Africa in 2013, another subsidiary with a Service Center was established in Saudi Arabia and construction work on two new assembly facilities in South Korea and the US commenced during the year under review.
Burckhardt Compression booked its very first sales of compressors for an export terminal in the US during the past fiscal year. Further significant orders were also received for propulsion systems for LNG tankers, which are increasingly using boil-off gas as fuel for their propulsion systems.
Board of Directors and Executive Board
Dr. Stephan Bross was elected to the Board of Directors at the Annual General Meeting on July 4, 2014. As announced earlier in February, Sandra Pitt assumed the position of Head of Human Resources Management on June 1, 2015 and is now a member of the Executive Board.
Workforce expanded to accommodate strong growth
The number of employees rose by 153 or 12.4% to 1’385 full-time equivalents during the reporting year. About two-thirds of the new jobs were created abroad with the objective of further expanding the local services and components business as well as local manufacturing activities. The remaining jobs were created in Winterthur, primarily to increase production capacity.
Outlook for fiscal year 2015
The markets addressed by Burckhardt Compression continue to show a positive trend overall despite some economic uncertainty and geopolitical tension. From today’s standpoint, Burckhardt Compression expects order intake for fiscal year 2015 to be around the same level as in the previous year while sales should exceed CHF 500 mn. Operating and net income are expected to be higher compared to the levels from fiscal year 2014 with similar margins.
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 59.1% (previous year 63.0%) of net income, which is in the middle of the targeted payout range of 50% to 70%.