Schlatter increases profit in the first half of 2017

The Schlatter Group's production capacities were well utilized in the first half, enabling it to post a substantial rise in net sales. The resulting operating profit (EBIT) was ahead of target. In the welding segment, however, the commissioning of new generations of plant led to increases in expenditure. Investment activity in the market for mesh welding systems was volatile and rather lower in comparison with the prior year, especially in the high-volume reinforced mesh welding business. In the weaving segment there was a tentative revival in China. Though the weaving segment's capacity was well utilized, it lacked higher-margin products - and this significantly impacted profitability in the first half. Along with innovation projects, cost-cutting projects are still a high priority.

Markets

Systems for the manufacture of reinforcing mesh

Surplus capacities in Europe are leading to an increased domination of the market by large industrial groups, which are modernizing their production facilities (especially in northern Europe). As most of the resulting major investment projects had been placed in 2016, the number of new projects in Europe declined in the first half of 2017. The reinforcing-mesh production systems business will continue to grapple with surplus capacity and heavy price pressure. In some parts of the world there is evidence of rising demand for flexible, highly productive and rapidly retoolable reinforcing-mesh systems. In Central American countries and the emerging markets generally, there is still demand for high-performance machinery for standardised reinforcing screens. In Brazil, the most important South American market, there are still no signs of recovery. Investment sentiment in Russia remains depressed.

Installations for the production of industrial mesh

Sales in Europe and the USA - two of the most important markets for industrial mesh - are at a satisfactory level. In China the need for automation in the field of industrial mesh production is increasing. Investment activity in Russia remains sluggish.

Rail welding

Sales of rail welding systems are modest. While the overall market for stationary rail welding is steady, investment sentiment for mobile systems remains sluggish.

Weaving

Following stagnation in 2015, Growth has returned at substantially faster rates in China (as well as elsewhere in Asia) and in Latin America than in western countries. There were declines at Print and Newspaper, but rises at Tissue and Packaging more than made up for them. Higher-performance installations for the production of paper clothing machines are absorbing the growth, and accordingly Schlatter expects stable sales but no significant growth.

Welding segment

Order intake in the welding segment in the first half of 2017 was CHF 35.3 million (H1 2016: CHF 49.8 million). At CHF 40.2 million, net earnings were substantially up on the prior year's figure (H1 2016: CHF 31.2 million). The order backlog at 30 June 2017 stood at CHF 37.4 million (31 December 2016: CHF 42.1 million).

In the last financial year Schlatter was able to benefit from the slight market recovery thanks to its development of new plant concepts for the production of reinforcing wire mesh. Furthermore, a major order was secured in the first half of the prior year, which mainly explains the decline in the order intake.

Weaving segment

The weaving segment generated new orders to the value of CHF 13.8 million in the first half of 2017 (H1 2016: CHF 15.5 million). Net earnings reached a volume of CHF 7.2 million (H1 2016: CHF 8.6 million). As at 30 June 2017 the order backlog stood at CHF 13.5 million (31 December 2016: CHF 6.9 million).

Though the weaving segment's capacity was well utilized, it lacked higher-margin products - and this significantly impacted profitability in the first half. The company expects a positive result for the 2017 financial year as a whole, however.

Outlook

The successful innovation initiative of recent years, cost-cutting programmes and the improved market environment are helping to boost business at the Schlatter Group. Our assessment of the market environment is still positive at the moment, but cautiously so.

Order intake returned to normal in the first half of 2017 following above-average growth in the prior year. The marketing drive, which included the establishment of additional sales resources in the emerging markets and the opening of a sales and service facility in China, has been completed, and the implementation of the package of measures to expand the service business is on schedule. Other focal points include efficiency drives to shorten throughput times in customer projects and make our organisation more flexible. Product cost-cutting projects continue to be given a high priority.

The Board of Directors and Group Management continue to expect the result for the current financial year to exceed that of the prior year.

The full report for the first half of 2017 can be downloaded from the Schlatter Group website:

http://www.schlattergroup.com/en/investor-relations/annual_and_semester_reports/

Further Information

Schlatter Industries AG

Werner Schmidli

Chief Executive Officer

Telephone +41 44 732 71 70

Mobile +41 79 343 62 62

werner.schmidli@schlattergroup.com

Agenda

Schlatter Group (www.schlattergroup.com)

The Schlatter Group is one of the leading specialists in plant engineering for resistance welding systems for reinforcement mesh, industrial mesh and butt welding systems for rails as well as weaving and finishing equipment for the production of paper machine clothing, wire fabrics and wire mesh. Thanks to its many years of experience in the field of plant technology, its innovative strength and its reliable service, the Schlatter Group - which is listed on the SIX Swiss Exchange in the Swiss Reporting Standard - guarantees its customers a range of powerful and high-quality production equipment.

This media information contains certain forward-looking statements including statements using the words "believes", "assumes", "expects" or formulations of a similar kind. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which could lead to substantial differences between the actual future results, the financial situation, the development or performance of the Company and those either expressed or implied by such statements. Such factors include, among other things: competition from other companies, the effects and risks of new technologies, the Company's continuing capital requirements, financing costs, delays in the integration of acquisitions, changes in the operating expenses, the Company's ability to recruit and retain qualified employees, unfavorable changes in the applicable tax laws, and other factors identified in this communication. In view of these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company accepts no obligation to continue to report or update such forward-looking statements or adjust them to future events or developments.

Key figures of the Schlatter Group