Datwyler reports earnings dip due to economic pressures in first half

ALTDORF, Switzerland—Despite a "favorable start," Datwyler reported being impacted by a weakening economy and negative external effects in the first half of 2023.

The Swiss polymer group reported a 7.3-percent year-on-year dip in earnings (EBIT) to $69.5 million (CHF 60.5 million) in the first six months, on 11-percent higher sales of $693 million.

Higher sales reflected 5.6-percent organic growth, including a positive pricing effect of 4.7 percent, offsetting a negative 4.5-percent effect from a strong Swiss franc, Datwyler reported July 24.

Earnings margin fell from 13.4 percent to 10.0 percent due to capacity under-utilization at recently expanded plants in the health care business, the company added.

Revenue growth was slowed by an "almost complete loss of 'COVID business' " as well as customers' reducing high stock levels in nearly all sectors, said Datwyler.

Margins were further impacted by energy cost rises in 2023 as well as the "temporary unfavorable development" of the product-mix.

Datwyler said, however, that its Healthcare Solutions business compensated for the slump in COVID-related business through 4.7-percent growth in regular business and by price increases.

Nevertheless, segment revenue fell 4.4 percent year-on-year, due mainly to a "very strong" first half of 2022 and currency effects.

Earnings declined 31 percent to about $45.8 million, and the earnings margin to 15.7 percent from 21.8 percent last year.

Datwyler, however, added that it is working on several new projects with pharmaceutical companies that offer "considerable future revenue potential." It added that its 2022 acquisition and integration of Xinhui has strengthened its position in the rapidly growing healthcare market in China.

Overall, Datwyler said it would benefit from medium-term growth forecast for the market and "from scaling effects as soon as the environment normalizes."

Datwyler's industrial segment saw a 26-percent year-on-year increase in revenue to $404 million, helped by the first-time inclusion of newly acquired QSR.

At $23.8 million, segment earnings were up 42 percent year-on-year, driven by a "substantial increase in revenue" within its automotive-related business.

"By strengthening the presence in China with local development engineers," Datwyler said it gained leading electric vehicle manufacturers as new customers. It added that the product pipeline is developing "encouragingly" with the share of EV projects increasing continuously.

The Swiss group said it is working to optimize and consolidate plants within its mobility business to enhance production and portfolio.

The general industry business unit also gained "promising new projects" with existing and new customers in the first half of 2023.

Due to the inflationary environment and destocking by customers, the unit's revenues were down year-on-year, especially in Europe.

Datwyler's food and beverage business unit grew "much faster than the market average" in the first six months of the year. However, changes in the product-mix and contract-based increases in electricity costs at the Swiss plant limited the margin potential in 2023.

For the full year, Datwyler expects negative external one-time effects to impact its business performance in the second half of 2023.

Personnel cost-inflation, for example, remains high, while the risk of a further weakening of the economy and currency trends "continue to call for caution."

"Datwyler's short-term revenue and margin potential is therefore limited in the seasonally weaker second half of the year," the group concluded.