The 2012 financial year confirmed the strategy of Georg Fischer: thanks to its global presence the Corporation was able to compensate the slowdown in Europe. GF Piping Systems and GF AgieCharmilles managed to make up for this with their large presence in Asia and Americas, and the shift of turnover towards these markets is taking place. GF Automotive was affected by the low level of truck production and the decrease in compact car sales in Europe. Despite the success of the foundries in China, the division couldn’t completely compensate.
Georg Fischer in 2012
Georg Fischer reduces its net foreign currency exposure which amounted to roughly CHF 300 million at the end of 2011. At the end of 2012, the currency exposure was reduced to approximately 5 percent of turnover. The remaining exposure is driven primarily by USD and dollar-related currencies. Per year-end the currency development had a positive impact of CHF 24 million on sales and CHF 12 million on EBIT.
The top line grew 3 percent to CHF 3.6 billion. On a like-for-like-basis sales reached the 2011 level. The three divisions showed dissimilar growth pattern in 2012. GF Piping Systems increased its sales by 11 percent (3 % on a like-for-like basis), reporting sales of CHF 645 million in the first six months and CHF 654 million in the second half. The slowdown in the truck and compact car business hit GF Automotive in the second half. Sales were down by 5 percent. GF AgieCharmilles had a much stronger second half of 2012, with sales of CHF 444 million compared to CHF 398 million in the first six months. Overall the division reported a sales increase of 5 percent.
EBIT in 2012 decreased slightly to CHF 221 million, down from CHF 233 million in 2011. GF Piping Systems contributed around 60 percent of the total. The operating result in the first half was as usual higher (CHF 113 million) than in the second half (CHF 108 million) due to seasonal differences in sales. The EBIT margin (return on sales or ROS) came to 6.1 percent versus 6.6 percent in 2011.
The divestment of the non-core activities of GF Automotive led to a
non-cash impact of CHF 28 million. After this impact, the net profit
amounted to CHF 127 million versus CHF 168 million in 2011 (-24 %).
All three divisions continued to generate value for the shareholders
of Georg Fischer with an ROIC clearly above the cost of capital.
After the strong improvement from 9.1 percent in 2010 to 13.4 percent in 2011, the ROIC of the Corporation reached 12.1 percent in 2012.
Free cash flow
Cash flow from operational activities came to CHF 229 million corresponding to 6 percent of sales. After the acquisition costs for the two US companies Harvel Plastics and Independent Pipe Products (IPP) in the amount of CHF 78 million free cash flow stands at CHF 19 million. Without these acquisitions free cash flow amounts to CHF 97 million and is slightly below previous year’s figure of CHF 103 million.
Net debt increased from CHF 294 million to CHF 334 million, mainly due to the acquisitions and the dividend payment.
The Board of Directors proposes to the Annual Shareholders’ Meeting an unchanged dividend payment of CHF 15 per registered share from the reserves from capital contribution. The dividend payment is equal to a pay-out ratio of 50 percent.
The gross value added reached CHF 1.23 billion in 2012 (previous year: CHF 1.22 billion). 77 percent of gross value added (previous year: 82 %) stemmed from Europe, mainly Switzerland (32 %), Germany (24 %), and Austria (14 %). Asia and the Americas contributed 23 percent. Personnel expenses increased from CHF 853 million to CHF 883 million.
The Corporation negotiated a new syndicated loan facility of CHF 250 million in 2011, replacing the previous one at better terms. The new facility, so far untouched, also increases the capacity of Georg Fischer to proceed with acquisitions at GF Piping Systems in line with its strategy.
Total assets remain unaltered with CHF 2.9 billion. The equity ratio stood at a high 44 percent at year-end, 2 percent more than in 2011.
The number of employees went up by 259 to 13,412. Due to the two
acquisitions of Harvel and IPP, the headcount increased in America.
Asia required a larger number of employees based on its growth. Owing
to the divestment of the two GF Automotive foundries in Germany
(around -450 employees) and the difficult market conditions, the
headcount in Europe declined to 8,871.
Strategy and targets
The strategy of Georg Fischer, defined in 2010, has been implemented since 2011. The main trusts are the increase of performance and the reduction of cyclicity. Due to the Swiss franc appreciation and the slowdown in the eurozone, our profitability objectives have become more challenging (see chapter “Outlook”). Nevertheless, we stick to them because we are convinced that the implementation of our key initiatives is on track.
While the focus in Europe is on gains in productivity and efficiency, all our divisions enhanced their presence in Asia. The contribution of the Asian market to total sales rose from 19 percent (2011) to 21 percent, China’s stake accounts for 15 percent. The portion of GF Piping Systems in our turnover increased from 33 to 36 percent. GF AgieCharmilles remains stable with 23 percent, meanwhile the stake of GF Automotive decreased from 44 to 41 percent in 2012 compared to 2011, not least through the divestment of the aluminum sand casting foundries.
With the acquisition of Independent Pipe Products (IPP), the leading US provider of large diameter pipes and fittings in polyethylene, GF Piping Systems laid the foundation for further growth in the US water infrastructure market. We will pursue acquisition opportunities especially where we have still white spots on the map, looking for complementary products and the access to new markets.
For 2013, we do not expect a major improvement of demand in Europe and we will therefore continue to expand in Asia and the Americas whilst focusing on productivity in Europe.
Despite signs of demand improvement in China and in the US, the overall economic development remains difficult to predict at least in our relevant sectors of activity. However, we confirm our mid-term profitability objectives for 2015 of a ROIC in the 15 percent range and an ROS between 8 and 9 percent.
GF Piping Systems
GF Piping Systems boosted its top line to CHF 1.3 billion (+11 %),
also thanks to its two acquisitions in the US market. Due to the
appreciation of the US dollar, the impact this year was positive. The
division’s operating profit slightly decreased from CHF 137
million to CHF 130 million, corresponding to a margin of 10 percent.
The division posted an ROIC of 13.9 percent, which is again the
highest of all three divisions.
Growing market segments like energy, cooling, shipbuilding, mining, and hygiene solutions showed a promising high growth rate and helped to compensate the downturn in semi-conductors and solar panel production. Following a clear trend, demand for safe transport of water remained high. The main issue in 2012 was the downturn in the industrial markets in Western Europe and worldwide regarding the microelectronics business. The Southern European (Italy, Spain) market declined further and the utilization of our European production plants was affected. The demand for utility and building technology products in those two countries was significantly lower and affected the capacity utilization of our European plants.
In order to respond to the growing demand in China and South-East Asia, plants both in China and Malaysia were enlarged. In October 2012, GF Piping Systems inaugurated its 12th facility in China, a new plant specialized in the production of nylon pipes for the automotive industry. Earlier that year, two successful strategic acquisitions could be realized. The acquisition of Harvel Plastics was closed as of January 2012 and strengthens the position in the industrial markets in the USA and Asia. In May 2012, GF Piping Systems acquired Independent Pipe Products Inc (IPP) in Dallas, Texas (USA).
While the situation in Southern Europe remains subdued, we expect a solid growth in key segments in the northern and western hemisphere. China will remain a strong engine of growth. GF Piping Systems is therefore planning to increase the investment in the new facility in Zhuozhou (China) and a local industrial production in Shanghai. We also see further opportunities in water cycle applications, both in the industrial and utility side of our activities as well as in the growing mining segment. In the water and gas utility business, a recovery of the global infrastructure market is expected to continue in all parts of the world. According to its Strategy 2015, GF Piping Systems will realize further strategic acquisition to strengthen its position in existing markets and to penetrate new markets.
Sales fell from CHF 1.54 billion to CHF 1.46 billion. The downturn in car sales led to a reduced capacity utilization at several plants. Operating profit reaches CHF 54 million for an ROS of 3.7 percent against 4.5 percent (CHF 69 million) in 2011. ROIC stood at 10.3 percent.
In Europe, GF Automotive faced a weaker demand from the truck and compact car manufacturers. Premium car demand remained stable. Sales in China increased again but did not fully compensate the downturn in Europe. As a result capacity was adjusted by reducing the amount of temporary workers and overtime at all plants in Europe.
GF Automotive is setting benchmarks in lightweight manufacturing for its customers. The demand for solutions to reduce weight is steadily growing and ensures a high demand for the solutions GF Automotive provides. The new state-of-the-art molding line in Mettmann, which started operations in October 2012, will boost productivity and will ensure competitiveness in the core market Germany. To meet the high demand in China, the capacity of the two GF Automotive foundries in Kunshan and Suzhou (China) will be further increased.
GF AgieCharmilles’ 2012 results showed the success of different measures to boost sales and profitability. The division reached top line growth of 5 percent to CHF 842 million. Operating profit was significantly boosted from CHF 37 million in 2011 to CHF 45 million, the equivalent of an EBIT margin of 5.3 percent compared to 4.6 percent in 2011. ROIC improved to 13.4 percent.
At the beginning of 2012, a well-known Chinese manufacturer of components for electronic devices placed the largest single order ever in GF AgieCharmilles’ history. The contract called for delivery of about 100 EDM and milling machines for a total value exceeding CHF 20 million. A major follow-up order for 55 machines came in at the end of 2012. Asia clearly drove the growth in 2012, enhancing its share of GF AgieCharmilles’ turnover from 29 to 32 percent, while Europe declined from 53 to 50 percent. Today, a majority of machines are being produced in China. In general, the adaption of the product range for the key market segments of electronics, mobile phones, aeronautics and medtech is leading to an increase in sales, which was driven mainly by milling machines. Their sales rose from CHF 188 million in 2011 to CHF 227 million.
In 2013, GF AgieCharmilles will expand again its coverage of the Chinese market to further strengthen its position there. Furthermore, several new products will be launched early 2013 to meet the need for higher precision. Customers are demanding ever more support regarding their machining process and not merely the supply of products. GF AgieCharmilles will therefore intensify the training of its service and application engineers in this respect, supported by the newly established customer academy in Geneva.
Market and Customers
During the ACHEMA trade fair in Frankfurt in June, a jury of experts conferred an award on the new generation of check valves to GF Piping Systems in the category valves / seals / pipes / fittings. Chinaust, jointventure partner of Georg Fischer in China, was recognized as the only “excellent supplier” for PE piping products by Towngas and Hua Yan Water. Towngas has been the industry leader for gas in China and it is Chinaust’s biggest customer as well. For its campaign underpinning the launch of a new generation of diaphragm valves, GF Piping Systems won a special prize at the 2012 Swiss Marketing Trophy awards. The jury praised the “outstanding ideas” and “innovative aspects”.
GF Automotive in Suzhou received in May the “World class
performance level“ evaluation by ThyssenKrupp Elevator and in
September the “Excellent Quality Performance 2012” award
from ThyssenKrupp Presta. Both prizes from ThyssenKrupp reward GF
Automotive products and services for their best grade for quality. In
October, GF Automotive took second place in the raw materials, work
materials and process optimization category at the ÖkoGlobe
awards in Germany. This award highlights groundbreaking innovations in
sustainable mobility. In November the European Association of
Magnesium Research (EFM) gave the second prize to GF Automotive for
the innovative casting design of the magnesium boxed swingarm used in
In 2012 GF AgieCharmilles received two awards for innovations: the “Techni-Show Platinum Award” for the high-speed milling machine HSM 400U LP; and third place in the PRODEX Awards for significantly speeding up the machining process with a new Automatic Wire Changer in EDM machines.
For the foreseeable future, Asia, with a strong focus on China, will remain Georg Fischer’s most important growth market. In the year under review, all divisions maintained or grew their sales volume in Asia. In China, Georg Fischer has two dozen companies, of which 16 are production plants. The sales volume in Asia grew from 19 to 21 percent in total, with China’s proportion rising from 13 to 15 percent. Almost one in four GF employees is currently working in Asia. Despite this steady portfolio shift, Germany remained the leading market with a 32 percent share of total sales compared to 36 percent in 2011. The stake of all European companies, however, sank from around 65 to 59 percent.
The Georg Fischer corporate brand with its long-existing tradition enjoys an excellent reputation and widespread recognition. Corporate Communications analyzes the image of the corporate brand in Switzerland and in Europe by conducting annual surveys. To reflect the company’s change in recent years and to support the Strategy 2015, the branding strategy will be slightly amended. The new positioning will be supported by a modernized corporate design, which is visible in this Annual Report 2012 for the first time.
All three divisions use the corporate brand in their communication efforts and this is reflected in a coherent perception of the company by the public. The logo has been a protected trademark worldwide since 1902. Corporate Legal takes forceful legal action against imitations and forgeries.
The divisions took part in 107 trade fairs and exhibitions. A special highlight was the joint participation of GF Automotive and GF AgieCharmilles at the 7th International Suppliers fair in Wolfsburg (Germany), the leading exhibition for automotive suppliers – a winwin situation both for customers and Georg Fischer. At the Geneva motor show, visitors experienced GF AgieCharmilles’ innovation in action. The concept car of designer Pininfarina was an example of the distinct difference GF AgieCharmilles’ laser texturing solutions bring to the design of car components.
In 2013, attendance at around 100 fairs is planned by the divisions. Highlights will be the ISH in Frankfurt, the world’s leading trade fair for Building, Energy, Air-Conditioning Technology, Renewable Energies, in which GF Piping Systems will take part. At the world’s largest machine tool fair EMO, to be held in September in Hanover (Germany), GF AgieCharmilles will show again innovative new products.
Research & development
Every division has its own centers for research & development worldwide: decentralization is a core element of the R & D strategy. It serves to accelerate the whole process. Georg Fischer invested CHF 93 million in R & D in 2012. It filed more than 44 patent applications in various countries. Around 600 employees work in research & development centers worldwide.
Promising new market segments such as water supply for mines or water hygiene solutions for large facilities show the growing demand for efficient piping solutions for the safe transport of clean water. GF Piping Systems spent CHF 27 million on R & D in 2012. The division’s own corporate research network is reinforced by valuable cooperation projects, longterm collaboration and regular exchanges with leading universities, scientific institutes, and research facilities.
The R & D spending of GF Automotive came to CHF 19 million in 2012. The trend towards reduction of CO2 emissions supports light-weight solutions on which GF Automotive has focused for many years. It is the GF Automotive unique offering of design, material and process that lead to the best solution when it comes to reducing weight.
R & D at GF AgieCharmilles focuses on high efficiency and precision as well as utmost reliability. These are essential factors for a smooth and economical production process on the customer’s premises. Innovation efforts are also focused on precision and miniaturization, the relevant innovations highlight in the future. GF AgieCharmilles’ spending on R & D amounted to CHF 47 million, same level as 2011.
Each of the three divisions pursues its individual strategic and operational targets. However, significant synergies in terms of financing, cash pooling, tax optimization, legal services, human resources, communications, branding, support process, and information technology (IT) are being actively exploited.
Products and Processes
Algae is expected to be one of the raw materials of the future. GF Piping Systems is closely involved in the research and development of the first commercial bioreactors for algae production available in Europe and the USA. The new piping system specially designed for this new application is made of transparent plastic. The successful collaboration with development partners LGem (Netherlands), TH Wildau (Germany), Texas University in Austin (USA), and AlgEternal (USA) has led to the release of the first bioreactors for algae cultivation.
The new generation of check valves from GF Piping Systems guarantees long-term process stability in chemicals processing: a new and intelligent valve solution to prevent media backflow in piping systems offers numerous maintenance-friendly, reliable and efficiency-enhancing opportunities for industrial applications. Preventing failure-free backflow of media presents a major challenge for check valves in the chemical process industry. Due to the mechanical and chemical stress, the valves are subjected to considerable wear and tear. The new generation of check valves from GF Piping Systems is the perfect example of how an innovative valve concept can eliminate this problem, as proven in use in the chemical treatment industry.
Through bionic design, a combination of biology, technology and abstract approaches taken from nature, GF Automotive can develop efficient and cost-effective casting solutions. In keeping with this principle, engineers in the Research & Development department at GF Automotive are using bionic design to reduce the weight of its recently developed cast-iron steering knuckle by more than 32 percent compared to a standard part.
Milling / Laser
In November, GF AgieCharmilles launched two new milling solutions for
the production of small, precise parts. With three and five axes, the
Mikron HSM 200 LP and HSM 200U LP are candidates for awards in the
areas of compact footprint, built-in flexibility for dedicated
automation requirements and productionproof axis design and chip
management solutions. In order to cope with customer demand, the
division increased its production capacity for high-speed milling
machines and in parallel opened a new demo center in Nidau
(Switzerland) as well as a new state-of-the-art training academy in
Geneva (Switzerland). LASER 4000, launched in 2012, is another example
of the division’s innovativeness. The world’s biggest
laser texturing machine enables the texturing of large molds, e.g. in
the automotive business.
Georg Fischer controls risks by means of risk management. Risk management includes systematic identification, evaluation, and reporting of strategic, operational, financial, market and management and resources risks as well as determination of adequate measures in order to mitigate the risks identified at the level of the Corporation, the divisions and the Corporate Companies. The criterias applied in assessing risks include their impact and the probability of their occurrence.
The strategic risks are assessed primarily by the Board of Directors, whereas all other risks are handled by the management of each Corporate Company, the management of each division and finally by the CEO and the Executive Committee. Risk management is largely integrated in existing planning and management processes. To coordinate all activities in the field of risk management and to improve the quality of risk reporting, a Risk Council consisting of representatives of the divisions and the Corporate Staff under the leadership of the Chief Risk Officer has been established. The Risk Council coordinates all activities in the area of risk management and secures the quality of the risk management data.
In production, risks can never be completely ruled out. The careful analysis and minimization of risks increases process security and thus improves reliability of delivery to customers. Georg Fischer attaches great importance to these aspects. The standard of risk management at virtually all production sites is either HPR (Highly Protected Risk) or HMP (Highly Managed Prevention) and is regularly audited by external specialists. In the year under review, 15 production sites (previous year: 15) out of a total of 48 (previous year: 50) underwent such audits.
In consultation with the Corporate Companies and divisions, the Service Center Risk, Tax & IP Services has implemented technical and organizational standards as well as guidelines regarding Business Continuity Management for the entire Corporation. The Highly Protected Risk (HPR) standard applied to 85 percent (previous year: 81 %) of the Corporation’s insured assets at the end of the year under review, the Highly Managed Prevention (HMP) to 9 percent (previous year: 13 %).
Property, plant and equipment
The investments in property, plant and equipment amounted to CHF 132 million. The bulk of this sum – 63 percent of the total – was invested by GF Automotive, while GF Piping Systems accounted for 27 percent and GF AgieCharmilles 8 percent. The new state-of-the-art manufacturing line in Mettmann accounted for around CHF 45 million or almost a third of the total, while the remainder was spent primarily on modernization of other European foundries to foster competitiveness. Around 80 percent was invested in Europe and 14 percent in Asia.
For 2013, investments are expected to remain at the same level. The bulk of investment spending is again planned in Europe, but the market shift to Asia demands a significantly higher proportion for Asia in order to increase production capacity.