Press Release: Feintool: Challenging market environment impacts net sales and earnings

In a challenging market environment, the technology company Feintool

recorded a slight decline in revenue in the first half of 2019, falling

by 1.6 percent year over year to CHF 332 million. The decrease in the

ongoing parts production and equipment business and negative currency

effects were largely offset by additional net sales from the newly

acquired electro lamination stamping business and ramp-ups of new parts

orders. EBITDA amounted to CHF 34.8 million, and Feintool continues to

expect a sustained positive net result for the entire 2019 financial

year.

Feintool is pursuing a long-term strategy focusing on precision

fineblanking and forming combined with systematic internationalization

and technical innovation. With the manufacture of electric motor

components, Feintool is successfully developing and expanding into the

fast-growing electrification market, which represents another strategic

business field.

Uncertain market environment

Whereas 2018 was a record year for Feintool, economic and political

uncertainties are now increasingly weighing on the market environment.

More stringent environmental requirements and associated test cycles are

delaying market launches and deliveries of new car models. Changing

trade flows and discussions about the future of the internal combustion

engine, hybrid technology, electric vehicles, and mobility in general

are having an impact on the development of the industry and the behavior

of market participants.

All of these factors are having different effects on sales in the

company's most important regions. For example, according to the German

Association of the Automotive Industry (VDA), sales in the passenger car

market fell worldwide in the first half of 2019. In Europe and the

United States, the number of vehicles sold declined year over year by

three percent and two percent, respectively. Sales in the Chinese market

even dropped by 14 percent. The capital goods market followed this trend

with low investment confidence around the world.

Feintool is closely monitoring the market situation and has initiated

measures adapted to the individual regions. As such, Feintool is

reacting to current market conditions and optimizing its locations to

meet the respective challenges, while at the same time driving

innovation forward.

Market environment heavily impacts business performance

During the reporting period, the Feintool Group generated net sales of

CHF 331.9 million. Of this total, CHF 19.5 million resulted from the new

electro lamination stamping business. EBITDA fell to CHF 34.8 million in

the first half of the year (previous year: CHF 45.4 million). The

decline in revenues -- caused by market changes in the existing parts

production and equipment business - resulted in overcapacity as well as

preproduction costs for new orders had a negative impact.

Newly installed capacities for acquired orders, particularly in China,

reinforced this effect through increased depreciation and amortization.

Therefore, the operating earnings (EBIT) amounted to CHF 10.5 million

(previous year: CHF 25.7 million). This corresponds to an EBIT margin of

3.2 percent. The Group net result for the reporting period stood at CHF

4.7 million.

Cash flow improved

Operating cash flow totaled CHF -5.5 million, compared to CHF -25.2

million during the same period last year. This was due to a sharp

reduction in capital expenditures.

Parts production driving growth

System Parts -- in which Feintool is globally active with the

high-volume production of high-precision fineblanked and formed

components -- accounted for the largest share of revenues. The segment

grew by 2.2 percent to CHF 299.4 million in local currency in the first

half of the year -- thanks to an acquisition in the field of electro

lamination stamping as well as new orders -- and thus generated almost

90 percent of consolidated sales. Net sales generated in Europe totaled

CHF 177.2 million. Adjusted for currency effects, this corresponds to

growth of 6.8 percent. The new acquisition accounted for 11.4 percent.

As a result, adjusted for the acquisition and currency effects, net

sales also fell by 4.8 percent in Europe, despite the company receiving

new orders. Currency-adjusted revenues generated in the United States

fell by 3.1% to CHF 91.7 million, due in particular to falling steel

prices. Not adjusted for currency effects, revenues generated in the

United States stood at the previous year's level. Revenues generated in

Asia fell to CHF 31.7 million, a decrease of 3.8 percent in local

currency terms. Thanks to receiving numerous new orders, the decrease in

revenues generated in Asia is significantly smaller than the overall

market decline.

Fineblanking technology driving innovation

Net sales generated in the Fineblanking Technology segment -- in which

Feintool offers end-to-end technological solutions for fineblanking --

fell by 18.9 percent to CHF 43.2 million. Lower press sales were the

primary cause of this decline in revenue. During the reporting period,

the company received new orders with a value of CHF 31.6 million

(previous year: CHF 57.9 million).

Despite the market participants' reluctance to invest in capital goods,

Feintool is pushing its future oriented projects. A special focus was

given to the development of the new hydraulic press generation "FB one".

With regard to research and development projects, Feintool was also able

to make considerable progress in the project to manufacture bipolar

plates for use in fuel cells. The company has succeeded in proving its

feasibility and developing a production concept.

Cautious outlook

Due to the existing political and increasing economic uncertainties,

Feintool expects these to have a depressive impact on the anticipated

net sales in all regions and markets. The extent and duration of these

negative influences are currently difficult to assess, therefore

Feintool is refraining from issuing a quantitative outlook for the

financial year 2019 for the time being. Feintool expects the market

situation to remain difficult in the second half of 2019, but

nevertheless expects to generate sustained positive net result for the

2019 financial year.

Feintool expects further growth in all regions in the coming years, due

to customer projects and new market share acquired in the current

financial year.

Overview of key financial indicators

January

1 to

June January 1

Change 30, to

in local Change 2019 in 6/30/2018

currency in CHF in CHF

in %(1) %(1) million million

---------------------------------------------- -------- ------- ------- ---------

Net sales -0.9 -1.6 331.9 337.3

---------------------------------------------- -------- ------- ------- ---------

EBITDA -23.2 -23.3 34.8 45.4

---------------------------------------------- -------- ------- ------- ---------

Depreciation and amortization +24.3 +23.3 -24.3 -19.7

---------------------------------------------- -------- ------- ------- ---------

Operating earnings (EBIT) -59.7 -59.0 10.5 25.7

---------------------------------------------- -------- ------- ------- ---------

Group result -74.9 -72.4 4.7 16.9

---------------------------------------------- -------- ------- ------- ---------

Free cash flow -5.5 -25.2

---------------------------------------------- -------- ------- ------- ---------

Total assets

(comparison period ending December 31, 2018) +2.9 725.4 705.3

---------------------------------------------- -------- ------- ------- ---------

Shareholder's equity

(comparison period ending December 31, 2018) -4.2 307.3 320.8

---------------------------------------------- -------- ------- ------- ---------

Net sales(1)

---------------------------------------------- -------- ------- ------- ---------

-- Fineblanking Technology segment -19.1 -18.9 43.2 53.3

---------------------------------------------- -------- ------- ------- ---------

-- System Parts segment +2.2 +1.4 299.4 295.2

---------------------------------------------- -------- ------- ------- ---------

Consolidated Feintool Group total -0.9 -1.6 331.9 337.3

---------------------------------------------- -------- ------- ------- ---------

Orders received -- capital goods -45.6 -45.5 31.6 57.9

---------------------------------------------- -------- ------- ------- ---------

Orders backlog -- capital goods -45.4 -45.4 25.8 47.2

---------------------------------------------- -------- ------- ------- ---------

Expected releases -- high-volume parts

production -5.6 -8.3 271.4 295.9

---------------------------------------------- -------- ------- ------- ---------

April 1 to April 1 to

Change in June 30, 2019 June 30, 2018

local currency in CHF in CHF

in %(1) Change in %(1) million million

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August 21, 2019 01:00 ET (05:00 GMT)