Zehnder Group achieves sales of EUR 762.1 million with an EBIT margin of 7.9%

• Group sales decreased by 6% to EUR 762.1 million in the reporting year 2023
• Operating result (EBIT) declined by 16% to EUR 60.2 million; corresponding to an EBIT margin of 7.9%
• Cash flow from operating activities increased by 48% to EUR 87.8 million due to lower trade receivables and inventories
• Board of Directors proposes a dividend of CHF 1.30 per registered share A

Graenichen (CH), 28 February 2024: Zehnder Group (SIX: ZEHN), a leading international provider of complete solutions for a comfortable, energy-efficient and healthy indoor climate, generated sales of EUR 762.1 million (previous year: EUR 812.5 million) in the 2023 financial year, and therefore 6% (organically - 7% [1]) less than in the previous year. Acquisitions made a positive contribution of 2% to sales, while currency effects negatively impacted sales by 1%. The supply chain situation improved in the first half of 2023. The resulting reduction in order backlog in the ventilation segment compensated for the decline in radiator volumes. In the second half of the year, the ventilation segment reported a decrease in sales as well.

Slight decline in sales in the ventilation segment

Sales in the ventilation segment amounted to EUR 441.1 million in 2023, which corresponds to a decline of 2% (organically -3%). The acquisitions of Airia in Canada and Filtech in the Netherlands made a positive contribution of 3%, while negative currency effects of 2% weighed on sales. The ventilation segment accounted for around 58% of the Group's total sales, an increase of 3 percentage points compared to the previous year. The two product lines residential ventilation and air cleaning solutions developed positively – the former due to the aforementioned acquisitions and reduction of order backlog from 2022. In contrast, the heat exchanger business declined.

The EMEA region (Europe, Middle East and Africa) accounted for EUR 336.2 million (previous year: EUR 349.4 million) of ventilation sales. Sales started to decrease in the second half of the year due to weakening demand. Still, positive growth rates were recorded for the full year in the Netherlands, the UK, France, and Switzerland. Thanks to a good penetration rate and a high market share, the Netherlands achieved the highest country sales in the ventilation segment in absolute terms in the reporting year. In Switzerland, the service business was expanded with maintenance contracts and ventilation system cleaning. In the UK, continued strong ventilation sales in new buildings and renovations in social housing supported sales.

EUR 69.1 million (previous year: EUR 59.4 million) of ventilation sales came from the North American region. Supported by the first-time consolidation of the full-year sales of the Canadian company Airia, the ventilation share of sales in North America rose from 57% to 60%, once again contributing to the further expansion of the business. The Asia-Pacific region generated lower sales of EUR 35.8 million (previous year: EUR 41.6 million). The Chinese market was affected by a further decline in demand due to lower construction activity within the country.

Continued decline in sales in the radiator segment

The radiator segment generated sales of EUR 321.0 million in the reporting year. This corresponded to around 42% of the Group's total sales. Revenue fell by 11% (organically -11%). Price increases had only a minor positive impact on segment sales. Due to a combination of increased construction prices, an uncertain legislative environment, and a difficult economic situation, the radiator segment also recorded a decline in sales in the second half of the year.

A total of EUR 268.2 million (previous year: EUR 310.1 million) of sales in the radiator segment came from the EMEA region. Important markets such as France, the UK, Germany, and Italy recorded significant declines in sales. The discontinuation of sales in Russia as a result of the termination of business activities there in 2022 also contributed to lower segment sales. Contrary to the general trend, Switzerland recorded a growth in sales thanks to our strong market position. The North American region generated slightly higher sales of EUR 45.5 million (previous year: EUR 44.3 million). The continued robust demand for radiators and stable online sales supported sales there. The Asia-Pacific region contributed EUR 7.2 million (previous year EUR 7.8 million) to total sales in the radiator segment. The repeated sales decline followed the weak development of the construction sector in China.

Lower operating result in a challenging environment

Zehnder Group's operating result (EBIT) fell by 16% to EUR 60.2 million in the 2023 fiscal year. This corresponds to an EBIT margin of 7.9% (previous year: 8.8%). Significantly lower volumes and rising personnel costs led to a decline in EBIT. Zehnder Group systematically counteracted the decline in demand with increased cost-reduction measures. This in turn resulted in restructuring costs totalling EUR 2.8 million. At the same time, investments continued to be made in strategically important areas such as innovation, digitisation, market development, and sustainability.

EBIT in the ventilation segment fell by 3% to EUR 53.0 million in 2023 compared to the previous year. The EBIT margin slightly decreased to 12.0% (previous year: 12.2%). In the first half of 2023, the resolution of global delivery difficulties led to a noticeable improvement in delivery capacities. This had a positive effect on profitability. As a result, EBIT rose by 24% in the first half of the year to EUR 36.1 million. A significant decline in demand was recorded in the second half of 2023, with EBIT falling by 34% to EUR 16.9 million. This trend gained additional momentum due to increased destocking on the customer side. Investments in new products and digitisation continued unabated.

During the 2023 fiscal year, EBIT in the radiator segment fell by 57% to EUR 7.2 million. The EBIT margin declined accordingly to 2.2% (4.6% in the previous year). The trend of declining order volumes in the face of a more difficult economic environment was also clearly evident in the second half of the year. The weaker demand in Europe and China in particular led to lower production capacity utilisation. In Switzerland and France, selective short-time working was already introduced in the radiator production in the first half of the year. Production in China was partially outsourced. In addition, the headcount was reduced at our German, Turkish, and Polish operations. This resulted in additional costs of EUR 2.2 million for 2023.

Solid net liquidity despite share buyback

Expenditures on research and development totalled EUR 25.5 million in the 2023 reporting year (previous year: EUR 24.7 million). Thereof around 70% was attributable to the ventilation segment.

Various new products and innovations from the ventilation segment were successfully rolled out during the fiscal year. In 2023, cash flow from operating activities increased by 48% from EUR 59.3 million to EUR 87.8 million. Trade receivables fell due to the reduction in sales. Inventories also decreased as a result of lower purchase prices. Investment activities in fixed and intangible assets declined from EUR 27.1 million to EUR 23.1 million while investment activities in acquisitions declined from EUR 63.9 million to EUR 0.1 million. In addition, share buybacks totalling EUR 17.1 million were carried out. Net liquidity[2] increased to EUR 70.8 million at the end of 2023 (previous year: EUR 45.4 million). Equity totalled EUR 347.3 million (previous year: EUR 340.8 million), corresponding to a high equity ratio of 67% (previous year: 64%).

As part of the completed share buyback programme, Zehnder Group acquired 487,800 listed registered shares A for a total value of EUR 33.8 million (of which EUR 10.5 million in 2023). In addition, 101,500 listed registered shares A were bought back in 2023 for employee participation programmes for a total of EUR 6.6 million.

Dividend 2023

At the Annual General Meeting on 11 April 2024, the Board of Directors will propose the distribution of a dividend, based on the result for the 2023 reporting year, of CHF 1.30 (previous year: CHF 1.80) per registered share A. The payout ratio of 35% is in line with Zehnder Group's previous dividend policy, which stipulates a pay-out of 30-50% of the consolidated net income.

Outlook for the 2024 financial year

In the current environment, Zehnder Group expects the market situation to remain challenging. The 2024 fiscal year will be difficult due to the ongoing downturn in the construction industry. Zehnder Group assumes that high interest rates and increased construction costs will continue to lead to a decline in new construction activities and a challenging environment for renovation activities. Both the radiator and ventilation segments will be affected by this development.

Zehnder Group is continuously strengthening the cost reductions it introduced in 2022 in the form of targeted structural measures and adapting them to the current market environment. The measures introduced are aimed at further improving operational efficiency and increasing resilience. Looking ahead, Zehnder Group is well prepared for various economic scenarios. Owing to its strong market positioning, outstanding customer loyalty, and high level of innovation, Zehnder Group is in a solid position to emerge stronger from the current drop in the construction industry.

Due to the current market uncertainties and the associated limited visibility, the 2024 financial year cannot be reliably forecasted at present. Zehnder Group plans to communicate its outlook for the full year at the latest when it publishes its half-year figures.

In the long term, Zehnder Group continues to assess growth prospects as positive, particularly in the ventilation segment. The backlog in new construction and renovation activities, new building regulations for better insulated buildings, the increasing demand for energy-saving and efficient climate solutions, and the desire for healthy indoor air quality, together with increasing penetration rates in various countries, will favour growth, particularly in the ventilation sector. The medium-term targets of an average annual sales growth of 5% and an EBIT margin of 9–11% thus remain in place.

The complete Annual Report 2023 can be found on our website under the following link:

https://documents.zehndergroup.com/ar-2023-en

Annex: Five-year overview 2019-2023

Next dates to note

Contact

René Grieder
Member of the Group Executive Committee, CFO
Zehnder Group AG, 5722 Gränichen (Switzerland)
T +41 62 855 15 21, rene.grieder@zehndergroup.com

Alexander Kamb
Senior Manager Investor Relations & Communications
Zehnder Group AG, 5722 Gränichen (CH)
T +41 62 855 15 36, alexander.kamb@zehndergroup.com

This media release is published in German and English. The German version is binding. For further information about the Zehnder Group, please visit www.zehndergroup.com.

Company profile

Zehnder Group provides worldwide leading solutions for a comfortable, energy-efficient and healthy indoor climate. The products and services of the Group include heating, cooling, indoor ventilation and air cleaning. The Group develops and manufactures its products at its own factories in Europe, China, and North America. In the financial year of 2023, the Zehnder Group had about 3500 employees and achieved sales of EUR 762 million. The company is listed on the SIX Swiss Exchange (symbol: ZEHN, number: 27 653 461). The unlisted registered shares B are held by Graneco AG, which is controlled by the Zehnder families.