Datwyler reports decline in earnings, anticipates challenging second half

ALTDORF, Switzerland—Elastomer components manufacturer Datwyler Group expects a challenging second half in 2022 as the ongoing Russian war on Ukraine continues to create further uncertainty.

The Swiss group anticipates "low visibility, tighter supplies and high prices for upstream products globally" in the second half, in addition to fears of natural gas shortage and electricity supply in Europe, said Datwyler in its first half financial report Aug. 24.

"Datwyler plants themselves have only a minor direct dependency on Russian natural gas, but there may be indirect impacts through customers and suppliers," the group added.

During the first half of the year, Datwyler said margins were under pressure due to "geopolitical developments and rising inflation which pushed input costs up sharply at all sites."

Sales from continuing operations grew by nearly 12 percent year-on-year to $552.8 million, while operating result (EBIT) declined to $73.9 million, down 27 percent compared to the first half of last year.

EBIT margin fell to 13.4 percent from 18.3 percent reported in 2021, while earnings (EBITDA) from continuing operations decreased 9 percent to $112.2 million.

During the reporting period, Datwyler posted a 13-percent increase in health care revenue to $271.3 million, reflecting "a slight rise in revenue from components for (COVID-19) vaccines."

Due to the sharp rise in prices of all input factors, the segment's operating result (EBIT) was up only slightly at $59.2 million, from the previous year's $58.1 million.

For the second half of the year, Datwyler expects product mix effects in health care solutions to dampen margin development.

"Datwyler anticipates slowing growth, and hence a temporary negative change in the product mix, as a result of declining revenues from components for COVID vaccines," said the Swiss supplier.

"This, together with the costs of implementing the growth strategy, is dampening the potential for the EBIT margin for the company as a whole, despite the price increases successfully implemented in all business units," it added.

In the connectors, general industry, and food and beverage business units, the group expects the trend in demand to stay positive in the second half of the year.

In the mobility business unit, which has been hit by the automotive industry slowdown, Datwyler anticipates increased car production to benefit margins.

This is while global car industry production in 2022 is still set to be at least 10 percent below the pre-pandemic levels.

For the full year 2022, Datwyler—including its recently acquired businesses of QSR and Yantai Xinhui Packing acquisitions—expects to achieve a revenue of between $1.17 billion and $1.22 billion and an EBIT margin of between 13 percent and 16 percent.