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The Rupp Report: OC Oerlikon Reports Promising Q3 Results

Jürg Rupp, Executive Editor

According to information from a recent press briefing, Switzerland-based Oerlikon Group's recovery has continued and strengthened in the third quarter (Q3) of 2010. The number of incoming orders for January through September 2010 increased by 39 percent to 3.2 billion Swiss francs compared with the first three quarters of 2009. Order intake rose to 1.6 billion Swiss francs, compared to 1.1 billion Swiss francs the previous year. In spite of negative exchange rate effects totaling 131 million Swiss francs, turnover increased by 14 percent to 2.5 billion Swiss francs within the first three quarters of 2010 compared with 2009.

"The results for this periodare considerably better than expected for the first nine months," said OC Oerlikon CEO Dr. Michael Buscher. "Since the upswing of OC Oerlikon became more important, we can raise the forecast for the year as a whole." For the entire year, the Group expects an increase of 20 percent in sales and an operational profit.

The major reason for this revitalization and the increased turnover, says the company's management, is the strong and continuous recovery of most markets in which OC Oerlikon is active -- primarily the textile and automotive industries, but also the semiconductor market.

Textiles: Strongest Sector
Oerlikon Textile showed the biggest increase in the group's segments: the increase in turnover rose 56 percent up to 1.1 billion Swiss francs compared with the same period of 2009. Other segments such as Oerlikon Coating -- up 28 percent; Vacuum -- up 32 percent; and Advanced Technologies --73 percent -- netted positive results.

In the first three quarters of 2010, Oerlikon Textile's orders rose by 112 percent to 1.8 billion Swiss francs compared to the year-earlier period. Q3 2010 incoming orders decreased a little compared with Q2 2010; however, they are still higher compared with the previous year. Incoming orders at the end of Q3 2010 totaled 1.1 billion Swiss francs -- lower than Q2 orders, but a considerable improvement compared to 0.5 billion Swiss francs at the end of September 2009. The book-to bill ratio for the nine-month period was 1.6.

Oerlikon reports that customers' high willingness to invest is also seen in some important projects Oerlikon Textile could gain, for example, one order totaling more than 200 million Swiss francs for a man-made staple fiber plant and another order for a staple fiber plant with a daily capacity of 300 metric tons, which will make it the largest plant of its kind worldwide. In this favorable position, the greatest challenge for the textile segment is to complete the necessary operational restructurings and structural adjustments as well as to build up in a flexible way the required production capacities and supply chains.

Asia: Major Stimulus
Boosting the growth was the extremely strong demand in both the man-made and natural fibers sectors, primarily in China, India, Turkey, Indonesia and Pakistan. Some bookings of incoming orders go as far as the year 2012 -- good news for the Oerlikon Barmag and Oerlikon Schlafhorst business units. But also Oerlikon Neumag improves its performance considerably by the revitalization of the bulk-continuous-filament carpet-fiber and staple-fiber markets. Oerlikon Textile Components, as a component supplier for the entire textile machinery industry, also profited from the general upswing in this sector. On the other side, Oerlikon Saurer did not show any considerable rebound, particularly within the segments of twisting and embroidery.

The strongest impulses for the overall upswing came from Asia, whose share of turnover for the first three quarters of 2010 increased to 43 percent compared with 31 percent the previous year. The growth was also strong because the high volume of incoming orders of the first six months convert now into turnover.

Better Forecast
This positive development of the first nine months as well as the high order backlog led Oerlikon management to raise the forecasts for the year 2010. The company now anticipates a turnover increase of some 20 percent, whereas the estimates after six months were only 15 percent. Furthermore, an improvement in earnings results is also expected. CEO Michael Buscher assumes that "due to the predominantly positive market development and our progress so far, we now anticipate an operational profit for the year as a whole."

For the fourth quarter of 2010, Oerlikon expects the continuation of the positive trend on the group level, thanks to the fact that the incoming orders will stay on a high level and the large amount of incoming orders will convert into real turnover.

October 26, 2010

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