Datwyler adapts to market pressures, loss of Covid business

Altdorf, Switzerland – Despite a “favourable start,” Datwyler has been impacted by a weakening economy and negative external effects in the first half of 2023.

The Swiss polymer group reported a 7.3% year-on-year dip in earnings (EBIT) to CHF60.5 million (€63 million) in the first six months, on 11% higher sales of CHF603 million.

Higher sales reflected 5.6% organic growth, including a positive pricing effect of 4.7%, offsetting a negative 4.5% effect from a strong Swiss franc, Datwyler reported.

Earnings margin fell from 13.4% to 10.0% due to capacity under-utilisation at recently expanded plants in the healthcare business, added the 24 July statement. 

Revenue growth was slowed by an "almost complete loss of 'Covid business" as well as customers reducing high stock levels in nearly sectors, said Datwyler.

Margins were further impacted by energy cost rises in 2023 as well as the "temporary unfavourable development" of the product-mix.

However, Datwyler said its Healthcare Solutions business compensated for the slump in Covid-related business through 4.7% growth in regular business and by price increases.

Nevertheless, segment revenue fell 4.4% year-on-year, due mainly to a “very strong” first half of 2022 and currency effects.

Earnings declined 31% to CHF39.8 million and the earnings margin to 15.7% from 21.8% last year.

Datwyler, however, added that it is working on many new projects with pharmaceutical companies, that offer “considerable future revenue potential”.

Furthermore, the group's 2022 acquisition and integration of Xinhui has strengthened its position in the rapidly growing healthcare market in China.

Overall, Datwyler said it would benefit from medium-term growth forecast for the market and "from scaling effects as soon as the environment normalises.”

Industrial gains

Datwyler’s industrial segment saw a 26% year-on-year increase in revenue to CHF352 million, helped by the first-time inclusion of newly acquired QSR.

At CHF20.7 million, segment earnings were up 42% year-on-year, driven by a ‘substantial increase in revenue’ within its automotive-related business.

“By strengthening the presence in China with local development engineers," Datwyler said it gained leading electric vehicle manufacturers as new customers.

The product pipeline, continued Datwyler, is developing “encouragingly” with the share of electric vehicle projects increasing continuously.

The Swiss group said it is working to optimise and consolidate plants within its mobility business to enhance production and portfolio.

The general industry business unit also gained “promising new projects” with existing and new customers in the first half of 2023.

Due to the inflationary environment and destocking by customers, the unit’s revenues were down year-on-year, especially in Europe.

Datwyler’s food & beverage business unit grew “much faster than the market average” in the first six months of the year.

However, changes in the product-mix and contract-based increases in electricity costs at the Swiss plant limited the margin potential in 2023.

Full year forecast

For the full year, Datwyler expects negative external one-time effects to impact its business performance in the second half of 2023.

Personnel cost-inflation, for example, remains high, while the risk of a further weakening of the economy and currency trends “continue to call for caution”.

“Datwyler’s short-term revenue and margin potential is therefore limited in the seasonally weaker second half of the year,” the group concluded.