Phoenix Mecano posts further increase in profitability

Profitable growth in the industrial business offset continuing economic headwinds in the furniture industry, which the DewertOkin Technology Group took robust action to counter. 

Kloten/Stein am Rhein, 3 November 2022. The Phoenix Mecano Group's performance in the first nine months of 2022 varied between divisions. The Industrial Components and Enclosure Systems divisions saw high-level increases in sales and incoming orders, while demand in North America, the most important end market for the DewertOkin Technology Group (DOT Group), remained weak. Despite this, the Phoenix Mecano Group maintained steady sales and recorded a further increase in profitability.

In the first three quarters of 2022, the Phoenix Mecano Group's consolidated gross sales fell by 0.7% from EUR 611.4 million to EUR 606.9 million. Organic growth in local currency was -5.3%. Net sales stood at EUR 600.5 million (previous year: EUR 606.0 million) while incoming orders declined from EUR 646.1 million to EUR 620.6 million. The book-to-bill ratio for the first nine months was 102.3%.

Excluding the one-off impact of special items, the operating cash flow increased by 8.3% year-on-year to EUR 62.2 million. The operating result rose by 6.3% to EUR 43.7 million.

Including special items, the operating cash flow fell by 1.9% from EUR 57.5 million to EUR 56.4 million and the operating result shrank by 8.0% from EUR 41.1 million to EUR 37.8 million.

The result of the period after taxes was EUR 25.7 million, down 5.8% on the previous year (EUR 27.3 million).
 

Division performance

In the DewertOkin Technology Group division, sales in the first three quarters of 2022 were down by 17.2%, at EUR 242.2 million. Adjusted for acquisitions and measured in local currency, the decline was 23.3%. Incoming orders fell by 24.8% to EUR 208.6 million. The operating cash flow declined by 55.7% to EUR 5.8 million, while the operating result stood at EUR -0.8 million.

The leading supplier of drive systems for electrically adjustable comfort and healthcare furniture faced further economic headwinds. In its core US market, end-customer demand continued to decline due to reduced purchasing power as a result of high inflation. With furniture dealers' warehouses full and product sales slow, furniture manufacturers curtailed their production. The high inventories in the DOT Group's downstream supply chain are expected to return to normal levels in the course of 2023.

The division responded immediately to these developments, adjusting capacities and cost structures along the entire value chain. The new industrial park in Jiaxing (greater Shanghai area) is currently being brought into operation on schedule. The merging of several production facilities at the new location and the further promotion of vertical integration will drive economies of scale and help to cut costs. At the same time, the division is forging ahead with digitalisation and innovation activities for new areas of business.

In the Industrial Components division, the first nine months of financial year 2022 saw gross sales increase by 14.5% to EUR 193.1 million (previous year: EUR 168.7 million) and incoming orders rise by 11.2% to EUR 229.5 million (previous year: EUR 206.3 million). Organic, local-currency gross sales were up by 10.9%. Before one-off items related to irregularities at a US subsidiary, the operating cash flow increased to EUR 24.9 million and the operating result climbed by 36.9% to EUR 19.0 million. Including special items, the operating cash flow fell by 4.4% to EUR 19.0 million and the operating result was EUR 13.1 million.

In the Automation Modules business area, supply bottlenecks affecting electronic products in the third quarter prevented an even better result.

The Measuring Technology business area saw sustained high demand for renewable energy and smart grid applications. There were also new projects in the field of high-voltage direct current (HVDC) transmission.

In the Enclosure Systems division, gross sales in the first three quarters of 2022 rose by 14.3% to EUR 171.6 million. In organic, local-currency terms, the increase was 11.6%. Incoming orders climbed by 12.5% to EUR 182.5 million. The operating cash flow was EUR 32.6 million (up 26.0%). The operating result increased by 30.6% from EUR 21.3 million to EUR 27.8 million.

One product area that performed extremely dynamically was electronic enclosures with human-machine interfaces (HMIs), especially the industrial PCs business. Component and freight capacity availability has returned to normal, enabling orders to be processed swiftly.

Expansion of Group management

For the new financial year 2023, Phoenix Mecano is adding two new members to its Group management team, which currently comprises Rochus Kobler (CEO) and René Schäffeler (CFO). Ines Kljucar and Dr Lothar Schunk have worked for the Phoenix Mecano Group since 2016 and have been members of the Extended Group Leadership Committee since 2019. Both currently hold operational line management responsibilities.

From 1 January 2023, Ines Kljucar will become Chief Commercial Officer (CCO) and Dr Lothar Schunk Chief Operating Officer (COO) of the Phoenix Mecano Group. In close collaboration with CEO Rochus Kobler, they will initiate strategic projects for Phoenix Mecano's business divisions and Group-wide functions and lead their implementation.

As CCO, Ines Kljucar will lead Group-wide digitalisation initiatives as well as strategic initiatives on international marketing and sales and the development of new business models. She will continue to have operational line management responsibility for Phoenix Mecano international sales companies and the Phoenix Mecano Linear product area.

As COO, Dr Lothar Schunk will take on strategic management of the Phoenix Mecano Group's global network of production, technology and competence centres. He will retain operational line management responsibility for parts of the Industrial Components division.

Outlook

High energy prices, in some cases double-digit Inflation rates and rising interest rates have led to a noticeable deterioration in economic prospects in key markets of the Phoenix Mecano Group. This is as yet barely being felt within the Group, with the exception of the DOT Group division. While industrial activity is likely to continue to slow in the coming months, long-term trends such as industrial digitalisation and automation are expected to provide further positive momentum.  

Against this backdrop and despite continuing weak demand in the DOT Group's most important end market, the management and Board of Directors assume that the goal of a double-digit improvement in operating result excluding the one-off impact of special items remains achievable. This still applies even if sales growth expectations for financial year 2022 were to be narrowly missed.

Results Q1 Q3 2022 in figures (in EUR million)