V-ZUG increases profitability despite a difficult market situation

Zug, 13 March 2024

MEDIA / INVESTOR RELEASE 

Ad hoc announcement pursuant to Art. 53 LR

Full-year results for 2023:
Declining sales volumes, increased gross profit and targeted cost management

In 2023, the V-ZUG Group generated net sales of CHF 585.4 million, 8.0 % lower than the previous year (CHF 636.3 million). During the pandemic-induced boom in 2021–2022, sales volumes were extraordinarily high. In addition to this base effect, inflation, rising interest rates and a corresponding decline in demand had a negative impact on sales volumes in the reporting year. This development was exacerbated by the reduction of inventory levels at V‑ZUG partners. To address the market-related decline in volume, additional measures to increase sales and cost-saving initiatives were implemented that had a positive effect on the operating result and cash flow. The operating result (EBIT) amounted to CHF 16.8 million (previous year: CHF 10.3 million, + 63.1 %). Free cash flow improved to CHF 18.2 million (previous year: CHF – 52.2 million). For the year 2024, V-Zug expects the market environment to remain challenging and continues to be committed to its medium-term targets through investments in market development and positioning, production as well as ongoing projects to increase innovation and efficiency.

Lower demand and higher gross margin

In the past financial year, net sales amounted to CHF 585.4 million (previous year: CHF 636.3 million). The substantially lower sales volume, at – 16 %, were partially offset by sales price increases. In addition to the pricing discipline, the increase in the gross margin was achieved as it was possible to largely refrain from expensive purchases on spot-buy markets and the development of purchase prices stabilised overall.

Increased profitability in the second half of the year

The operating result (EBIT) in 2023 amounted to CHF 16.8 million, which is substantially higher than the previous year (CHF 10.3 million, + 63.1^{%). The EBIT margin was accordingly 2.9 % (previous year: 1.6 %). The Group net result rose overall by 47.2 % to CHF 11.7 million (previous year: CHF 7.9 million).}

The situation in the market for household appliances remained challenging. The sluggish development of new construction projects and the reluctance to invest in renovations had an impact on V-ZUG’s sales volumes. Sales volumes came under greater pressure in the second half of the year in particular. Net sales amounted to CHF 287.3 million in the second half of the year, which was CHF 10.9 million, or 3.6^{%, lower than net sales in the first half of the year. Operating income (EBIT), on the other hand, was at CHF 11.7 million and thus substantially higher than in the first half year (CHF 5.1 million, +128.8%). This was due to no more purchases on spot-buy markets in the second half of 2023 and consistent sales pricing, which lead to a higher gross margin. In addition, the adjustment to the number of employees in production, process optimisations and further cost-saving initiatives bolstered the operating income. The EBIT margin amounted to 4.1% in the second half of 2023.}

The number of employees as of 31 December 2023 amounted to 2,066 (previous year: 2,193), 89 of whom were apprentices.

The cash flow from operating activities was CHF 80.5 million in the reporting year (previous year: CHF 1.0 million). The improvement resulted from the reduction of inventory at the Zug and Sulgen production sites, lower trade receivables and consistent cash management. The cash flow after investment activities (free cash flow) was CHF 18.2 million (previous year: CHF –^{52.2 million). The high investment expenses are predominantly attributable to investments in the site transformation. As with the operating result, the situation with regard to free cash flow improved considerably in the second half of the year at CHF + 25.7 million, compared to the first half of 2023 (CHF – 7.5 million). The reduction in net operating working capital amounting to CHF – 35.6 million in the second half of the year played an important role here.}

Strong balance sheet without debt financing

The balance sheet of the V-ZUG Group as of 31 December 2023 continues to be very solid with an equity ratio of 74.9 % (previous year: 74.8 %) as well as cash and cash equivalents including securities of CHF 81.0 million (previous year: CHF 64.5 million). Thanks to the positive free cash flow, no debt financing has been necessary so far, despite the ongoing investment programme in the site transformation in Zug.

Focus on market development and operational improvements

The net sales of V-ZUG as market leader in the Swiss domestic market fell by 7.3 % to CHF 481.4 million compared to the previous year (CHF 519.5 million). In International Markets, net sales decreased by 10.9 % to CHF 104.1 million (previous year: CHF 116.8 million); Adjusted for currency effects, the development in the international own-brand business was stable. Operating and organisational improvements went hand in hand with further intensified market development. Structures and processes were optimised in the Swiss market organisation and in Marketing, Engineering and Operations in order to respond more quickly to market changes. Temporary employees were reduced and recruitment for vacancies took place selectively. In addition, an initiative called “Simplify V-ZUG” was launched. The initiative involves streamlining processes and routines and further improving product, delivery and service quality. Throughout the entire company, projects have been reviewed and prioritised and possible cost reductions implemented.

The supply difficulties that were triggered by disrupted supply chains in the previous year are now history. Since the beginning of February 2023, our delivery quality has been back at the usual high level.

Site transformation – a commitment to Switzerland

Having commissioned Europe’s most cutting-edge refrigerator factory in Sulgen in 2022 and by constructing a new vertical factory in Zug, V-ZUG is underscoring its commitment to Switzerland. The new “Zephyr Ost” production building was constructed in 2023. The basic fit-out was completed at the beginning of the first quarter of 2024 and the building handed over to V-ZUG for the installation and commissioning of operating equipment. This strengthens the Swiss identity and provides an important contribution to the local economy. Moreover, V-ZUG is investing in an extensive training programme to equip the skilled workers of today and tomorrow with essential industry expertise.

Sustainability as a main pillar: Our ongoing commitment

V-ZUG has been voluntarily disclosing information about non-financial aspects in the form of a sustainability report since 2012. Reporting has followed the guidelines of the Global Reporting Initiative (GRI) since 2020. The reporting of non-financial matters relating to social and environmental issues has been a legal requirement for listed companies of a certain size in Switzerland since 2023 (Article 964a et seq. CO); This information is now integrated in the Annual Report.

V-ZUG has always been committed to quality, precision and longevity. Sustainability forms part of the business strategy and is managed via an interdisciplinary Sustainability Workforce. A number of projects were driven forward in the reporting year, including:

• The V-ZUG circular economy factory, which is operating as a prototype.
• Over 30 product life cycle assessments showing which measures can be used to reduce the environmental footprint of V-ZUG appliances.
• The “Product as a Service” business model, in which washing machines and dryers are rented out instead of sold, is likewise contributing to longevity and the circular economy.
• Launched in December 2022, the CO₂ web shop was rolled out internationally in the reporting year and saw extensive use. V-ZUG production in Switzerland has been CO₂ neutral since 2020.

Marcel Feurer becomes new Chief Swiss Market Officer

The V-ZUG Group has appointed Mr Marcel Feurer as Chief Swiss Market Officer (CSMO) and Member of the Executive Committee. He will start in his new role at latest by 1 June 2024. He has many years of experience in sales, service and business development in the B2B and B2C business in Switzerland and abroad. Marcel Feurer is currently National Sales Director and Member of the Executive Committee of Hilti Schweiz AG. He previously held a range of positions at Hilti, including Director of Business Development and Member of the Executive Committee of Hilti Belgium.

2024 outlook

In the light of persistent global uncertainty, delayed planning approval procedures and the current level of interest rates, V-ZUG does not expect an improvement in consumer behaviour and in the real estate industry in particular. The “Simplify V-ZUG” initiative will continue, reducing complexity as well as simplifying and automating collaboration and processes. This is also expected to have a positive impact on customer focus and product quality. A number of new products, particularly in the mid segment, will be launched in 2024. For the year 2024, V-ZUG expects the market environment to remain challenging. It continues to be committed to its medium-term targets through investments in market positioning and development, production as well as in ongoing projects to increase innovation and efficiency.

Annual General Meeting 2024

The Board of Directors will submit a motion to the Annual General Meeting to not pay a dividend for the 2023 financial year. This is the result of an in-depth review of the situation, which is characterised by the persisting market difficulties and continued high investments in the site transformation.

Key figures

This ad hoc announcement is available at www.vzug.com/ch/en/investor-relations-news and the 2023 Annual Report at www.vzug.com/ch/en/financial-reports.
 

Further information

Key dates

Media release (PDF)

About the V-ZUG Group

“Bringing simplicity into your home and creativity into your kitchen.”

V-ZUG is Switzerland’s leading brand in household appliances and markets its products in selected premium markets abroad. V-ZUG has been developing and manufacturing kitchen and laundry appliances in Switzerland for over 110 years and offers a comprehensive service in all its markets. The SIBIRGroup AG, which focuses on the Swiss-wide provision of all-brand servicing and the retail of household appliances, is also part of the V-ZUG Group. The V-ZUG Group currently employs around 2,100 people.

V-ZUG Holding AG is listed in the Swiss Reporting Standard of SIX Swiss Exchange in Zurich and represented in the Swiss Performance Index (SPI) (securities number 54 248 374, ISIN CH0542483745, ticker symbol VZUG).

Legal notes

The expectations expressed in this ad hoc announcement/media/investor release are based on assumptions. Actual results may deviate from these assumptions. This ad hoc announcement is published in German and English. The German version is binding. V-ZUG Holding AG processes personal data in accordance with its privacy statement, which is available at www.vzug.com/ch/en/privacy-statement.