Datwyler expects ‘challenging second half’ as Ukraine war impacts growth

Altdorf, Switzerland – Elastomer components manufacturer Datwyler Group expects a challenging second half in 2022 as the ongoing Russian war on Ukraine continues to create further uncertainty.

The Swiss group anticipates "low visibility, tighter supplies, and high prices for upstream products globally" in the second half, in addition to fears of natural gas shortage and electricity supply in Europe, said Datwyler in its first half financial report 24 Aug.

“Datwyler plants themselves have only a minor direct dependency on Russian natural gas, but there may be indirect impacts through customers and suppliers,” the group added.

During the first half of the year, Datwyler said margins were under pressure due to "geopolitical developments and rising inflation which pushed input costs up sharply at all sites."

Sales from continuing operations grew by nearly 12% year-on-year to CHF542 million (€556 million), while operating result (EBIT) declined to CHF72.5 million, down 27% compared to the first half of last year.

EBIT margin fell to 13.4% from 18.3% reported in 2021, while earnings (EBITDA) from continuing operations decreased 9% to CHF110 million.

During the reporting period Datwyler posted a 13% increase in healthcare revenue to CHF266 million, reflecting “a slight rise in revenue from components for Covid vaccines.”

Due to the sharp rise in prices of all input factors, the segment’s operating result (EBIT) was up only slightly at CHF58 million, from the previous year’s CHF57 million.

For the second half of the year, Datwyler expects product mix effects in healthcare solutions to dampen margin development.

“Datwyler anticipates slowing growth, and hence a temporary negative change in the product mix, as a result of declining revenues from components for Covid vaccines,” said the Swiss supplier.

“This, together with the costs of implementing the growth strategy, is dampening the potential for the EBIT margin for the company as a whole, despite the price increases successfully implemented in all business units,” it added.

In the connectors, general industry, and food & beverage business units, the group expects the trend in demand to stay positive in the second half of the year.

In the mobility business unit, which has been hit by the automotive industry slowdown, Datwyler anticipates increased car production to benefit margins.

This is while global car industry production in 2022 is still set to be at least 10% below the pre-pandemic levels.

For the full year 2022, Datwyler – including its recently acquired businesses of QSR and Yantai Xinhui Packing acquisitions – expects achieve a revenue of between CHF 1,150 million and CHF 1,200 million and an EBIT margin of between 13% and 16%.