Datwyler hit by loss of Covid business, underutilisation

Altdorf, Switzerland – Datwyler Group has reported a significant decline in earnings (EBIT) for 2023, due mainly to underutilisation, loss of Covid-related business and higher costs.

The Swiss polymer engineering group saw earnings fall 20% year-on-year to CHF 120.4 million (€126 million) while earnings margin dropped to an ‘unsatisfactory 10.5% level’, from 13.0% reported last year.

Despite the almost complete loss of the high-margin Covid business and a significantly negative currency effect, Datwyler maintained revenue at CHF 1.1 billion, the group announced 7 Feb.

The year, said Datwyler, was also marked by “the reduction of high security stocks among customers from nearly all sectors”.

The loss of Covid business and destocking weighed on revenue development and led to underutilisation of the group’s recently expanded production capacities.

These factors also led to "an unfavourable development" in the product mix, the group added.

However, helped by “megatrends”, Datwyler said it was able to gain “a large number of promising new projects with new and existing customers.”

“By sustainably optimising our cost structure, we are convinced that we have emerged from the low point,” said CEO Dirk Lambrecht.

As soon as the environment “normalises”, he added, Datwyler will benefit from economies of scale, helped by the advanced investments.

“We are strongly positioned, with many promising new projects, to build over the medium term on the profitable growth of the past,” he said.

The group, Lambrecht said, has acquired several new customers “which have the potential to develop into long term major customers.”

In terms of segments, Datwyler’s healthcare solutions saw revenue fall by nearly 20% year-on-year to CHF 469.0 million, reflecting a “substantial negative currency effect”.

Segment earnings fell 30% year-on-year to CHF 74.4 million, while earnings margin declined to 15.9% from 20.4% last year.

Datwyler said it implemented measures to improve the margin to 16.1% in the second half of the year, despite negative seasonal effects.

The 'industrial solutions' business area increased revenue by 8.2% to CHF 688.2 million, largely helped by the acquisition of QSR in 2022.

Segment earnings, the Swiss group said, increased “in absolute terms” from CHF43 million in 2022 to CHF46 million in 2022 with the margin unchanged at 6.7%.

However, Datwyler noted that operational improvements and positive effects from the restructuring measures were more than offset by "shifts in the product mix and higher one-off energy costs, especially at its Swiss plant".

For 2024, the group said it was cautiously optimistic about the outlook, expecting “revenue growth in the low single-digit percentage range and an improvement in the earnings margin.”

Datwyler expects its “sustainably optimised cost structures”, lower energy costs, the recovery of its connectors business, and the decline in the price of raw materials should support the margin this year.

These, however, might be impacted by the ongoing geopolitical uncertainties, the strengthening of the Swiss franc, continued destocking by customers and “recessive tendencies”.

In the immediate future, the group said it would focus on organic growth by scaling the business model and production capacities and on strengthening the balance sheet.

In the process, Datwyler intends to increase the penetration of its existing customers and markets, and expand “the addressable markets”.

These include new countries and regions with the healthcare and connectors business.

“The large number of promising new projects with existing and new customers shows that the growth trends are intact in the markets with high entry barriers that Datwyler serves,” Lambrecht concluded.