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Swissmetal increased its gross sales in fiscal 2010 despite negative annual result. Satisfactory operating result for Q1 2011. The economic upturn boosted Swissmetal's incoming orders and sales practically across the board in 2010, with particularly strong growth shown by demand for special alloys used for connectors in the electronics, aviation and automotive industries. Swissmetal achieved consolidated gross sales of CHF 270.8 million, representing a year-on-year increase of 41%. However, operating results continued negative at CHF -7.7 million due to factors including the unfavourable exchange rate caused by the weak euro, lower sales resulting from the strong Swiss franc, and a less than optimum product mix. Swissmetal is optimistic about 2011. Swissmetal's consolidated gross sales for 2010 showed a 41% rise for continuing operations year-on-year, at CHF 270.8 million compared to CHF 191.7 million in 2009. This strong sales growth is primarily due to improvements in general business operations throughout the year and rising metal prices.
The annual result was burdened by extraordinary expenses related to Swissmetal's subsidiary, Swissmetal Design Solutions AG (SDS). As previously announced, Swissmetal will discontinue SDS operations. The first market launch phase showed that the innovative product requires significant further efforts to establish it successfully on the market. Swissmetal is currently not in a position to supply the necessary funds to support the launch. The sale of the subsidiary is in progress. The effects of this discontinuing operation, which are shown separately in the Annual Report, total CHF -11.7 million in terms of EBIT. Consolidated EBIT from both continuing and discontinuing operations totalled CHF -19.4 million.
The operating result (EBIT) from continuing operations was thus CHF -7.7 million, an increase of CHF 6.7 million year-on-year. This figure includes an inventory value adjustment resulting from the Swissmetal Group's changeover from LIFO to the moving average method*. The operating result includes CHF 3.2 million in negative effects caused by the strong Swiss franc impacting on product sales within the euro zone.
The gross margin of continuing operations for 2010 was CHF 98.3 million, a rise of CHF 4.7 million or 5% year-on-year.
Personnel expenses for 2010 totalled CHF 60.9 million, an increase of CHF 3.3 million or 6% year-on-year. The rise in personnel costs resulted from the termination of short-time working benefits. Despite the increase in production volume, operating expenses for 2010 fell by CHF 4.0 million to CHF 33.7 million as process optimization activities showed success.
In 2010 the company generated cash flow from operating activities (continued operations) of CHF -7.0 million, a decrease of CHF 6.1 million year-on-year, owing to expansion of net current assets (increase in inventory at the end of the year).
Future prospects
Swissmetal is optimistic for 2011. Markets are showing strong growth, particularly in the connector and power plant construction industries, and this increased demand is generating excellent capacity utilization and full order books. The company has responded to the weak euro by planning changes to its portfolio to increase the focus on niche products. Swissmetal's result for the first quarter of 2011 was on target.
Swissmetal anticipates an overall improvement in business operations in fiscal 2011/2012. The company's strategic growth program has identified additional sales potential for new products in the coming years. Swissmetal has thus laid the foundations for exploiting future opportunities in global competition.
The full Annual Report was published today on the company's website at www.swissmetal.com.
*The Swissmetal Group adopted the moving average method in 2010, necessitating adjustments to individual items for 2009. Swissmetal anticipates that the changeover will smooth the effect of metal prices, over which the company has no control, on the annual result.
Swissmetal produces and sells worldwide high-quality special products made of copper and copper alloys which are mainly used in the electronics, telecommunications, air travel, petroleum, automobile, stationery and watch/clock industries and in the architectural sector. In the financial year 2010, Swissmetal achieved gross sales of CHF 270.8 million. As at the end of December 2010, the company had 626 full-time employees. Swissmetal, with its registered office in Dornach (Switzerland) is quoted on the SIX Swiss Exchange as Swissmetal Holding Ltd.
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