Mikron increases sales and EBIT

Net sales and capacity utilization

Posting annual sales of CHF 256.0 million, the Mikron Group clearly exceeded the prior-year result (CHF 228.6 million, +12%) as expected. Both business segments lifted sales, with the increase at Mikron Automation (+21%) much more pronounced than at Mikron Machining (+2%). The growth seen at the Automation business segment is attributable to the healthy order backlog at the start of the year (CHF 99.5 million) and the gratifying order intake levels of CHF 128.9 million, although the segment could not match 2015's record order intake level. Virtually all of the business segments' sites reported a good mix of new customer projects and repeat orders.

The order backlog at Mikron Machining was CHF 43.8 million at the start of the year, and the order intake for the year under review CHF 114.8 million. This resulted in unsatisfactory production capacity utilization rates for individual product lines. Practically throughout the entire year, order intake levels for Mikron Machining's machines business were unbalanced, extremely volatile and generally too low. This ultimately led to personnel adjustments, while maintaining or even strengthening innovativeness. Despite securing some significant orders in the fourth quarter of 2016, the Mikron Machining business segment expects capacity utilization in the machines business to remain unsatisfactory at the beginning of 2017.

Service business held up well in both segments in 2016. However, pressure on margins for spare parts and on hourly rates for service technicians continued to grow. 2016 was another successful year for Mikron Machining's tool business. Up 8%, tool sales now account for over 25% of the business segment total.

Order backlog

At CHF 122.9 million, the Mikron Group's order backlog at the end of 2016 was around 14% lower than the prior-year figure. The backlog of orders at both business segments was very unevenly distributed over the companies. Mikron Automation's order backlog at the beginning of 2017 was equivalent to almost 60% of last year's sales, while the corresponding figure for Mikron Machining (without taking into account the tools business) was only approximately 50%. To achieve the targeted growth, Mikron needs to attract some substantial new orders in early 2017. Despite existing potential for customer projects, it is very hard to assess the strength of clients' resolve to go ahead.

Innovation offensive

In the year under review, Mikron Machining launched an innovation offensive in the machines business for the years 2016 to 2018. The business segment is investing a total of more than CHF 10 million in modernizing and streamlining its machine portfolio in line with the new market conditions. Last year the Automation business segment saw the successful launch of its new control software on the European market. In a subsequent step, the software is to be expanded with further modular elements for a wide range of production processes. The new software offers customers additional features and better utilization of the production data generated by the assembly system - fully in keeping with Industry 4.0.

Profitability

In the 2016 business year, the Mikron Group reported EBIT of CHF 4.1 million, surpassing the prior-year result (CHF 2.5 million) as expected. Whereas the EBIT of CHF 7.5 million (prior year: CHF 4.3 million) posted by the Automation business segment represents a further significant improvement in profitability, the Machining business segment suffered another setback, reporting EBIT of CHF -5.2 million (prior year: CHF -4.3 million). This reflects the significant fluctuations in order intake at a disappointingly low level and the related capacity utilization problems. The operating result was impacted not only by an uneven distribution of workload, but also by lower margins and by additional staff to support especially the growth of the tools business, and by expenses related to innovation initiatives. Neither could Mikron Automation fully benefit from the significantly higher sales volume as the margins on projects were further under pressure and some work peaks created inefficiencies. In addition, several complex and thus risky projects were under way, which had to be reflected in the accounts accordingly.

Net earnings

Mikron's net earnings for 2016 were CHF 2.3 million, compared to CHF 0.9 million in the prior year. The Board of Directors will be proposing to the Annual General Meeting a distribution from reserves from capital contributions of CHF 0.05 per share (prior year: CHF 0.05 per share).

Outlook

To formulate an outlook for 2017 is challenging. The Mikron Group expects ongoing positive stimuli to come from the service and tools business plus a volatile trend in order intake for machining and automation systems. Given that the order backlog is satisfactory overall - though unevenly distributed among the locations - the Mikron Group is anticipating modest sales growth in 2017. In view of the various measures being taken to cut material costs and raise efficiency, the Group is expecting a slight improvement in EBIT.

Key figures for the Mikron Group