Adval Tech : Semi-annual report 2022 (pdf)

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S E M I - A N N U A L R E P O R T

All statements in this report which do not refer to historical facts are statements related to the future which offer no guar-antee with regard to future performance; they are subject to risks and uncertainties including, but not confined to, future global economic conditions, exchange rates, legal provisions, market conditions, activities by competitors and other factors outside the company's control.

D E A R S H A R E H O L D E R S ,

P O S I T I V E E B I T A N D B R E A K - E V E N N E T R E S U L T - D E S P I T E V E R Y D I F F I C U L T M A R K E T C O N D I T I O N S

The Adval Tech Group was not spared the massive disruptions in global supply and logistics chains in the first half of 2022. The outbreak of war in Ukraine at the end of February further aggravated the already difficult situation. The shortage of raw materials and individual electronics components, as well as the resulting lack of availabil- ity, had a massive impact on production volumes and the flow of goods in the automotive industry, particularly in Europe. Securing raw materials also involved major efforts on the part of Adval Tech. Unpredictable production interruptions on the customer side required extreme flexibility and agility. Altough its good order situation, Adval Tech had to selectively introduce short-time working. Marked increases in ma- terial, energy and transport costs also put pressure on margins.

Even under these circumstances, in the first half of 2022 Adval Tech was able to maintain the high level of total income1) of the same period of 2021 and generate positive EBIT1) as well as break-even net result. In terms of cash flow from operating activities, Adval Tech even improved from CHF -0.1 million to CHF +0.9 million.

Development of key figures

With total income1) of CHF 90.9 million (first half of 2021: CHF 90.4 million, +0.5%), the Adval Tech Group posted operating earnings before interest, taxes and depreciation (EBITDA1)) of CHF 5.3 million in the first half of 2022 (first half of 2021: CHF

1. million, -45.4%), operating earnings before interest and taxes (EBIT1)) of CHF

1. million (first half of 2021: CHF 5.8 million, -74.6%), and a net result of CHF 0.0 million (first half of 2021: CHF 4.3 million).

1. Alternative Performance Measure, see note 3, page 77 of the Annual Report 2021

Total income1)

The Adval Tech Group's total income1) is made up of the following elements:

• Net turnover from the sale of metal and plastic components
• Net turnover from the sale of the related tools for the production of components
• Net turnover from the sale of high-speed presses
• Other revenues (such as proceeds from the sale of scrap)

At 75%, Adval Tech generated most of its turnover in the first half of 2022 with customers in Europe (first half of 2021: 75%). Asian customers accounted for 10% of Adval Tech's turnover (first half of 2021: 10%), Latin American customers for 9% (first half of 2021: 8%), North American customers for 6% (first half of 2021: 6%) and customers from Australia/Oceania for 0% (first half of 2021: 1%).

Profitability

Even under the very difficult conditions in the first half of 2022, the Adval Tech Group achieved an EBITDA margin of 5.8% (first half of 2021: 10.7%). The EBIT margin was 1.6% (first half of 2021: 6.4%). Adjusted for currency effects, EBITDA1) for the first half of 2022 amounted to CHF 5.3 million and EBIT1) to CHF 1.4 million.

Net result

With a net result of CHF 0.0 million (first half of 2021: CHF 4.3 million), the Adval Tech Group's corresponding margin in the first half of 2022 was 0.0% (first half of 2021: 4.7%).

Capital expenditure and net working capital

During the first half of 2022, the Adval Tech Group invested CHF 1.6 million in prop- erty, plant and equipment (first half of 2021: CHF 0.9 million). Cash flow from operating activities amounted to CHF +0.9 million in the first half of 2022 (first half of 2021: CHF -0.1 million), while free cash flow1) was CHF -0.7 million (first half of 2021: CHF -1.0 million).

Operating net working capital1) (trade accounts receivable, inventories and trade accounts payable) amounted to CHF 49.8 million at the end of June 2022 (December 31, 2021: CHF 44.9 million). In relation to the total income1), operating net working capital1) changed from 28.7% at the end of December 2021 to 29.2% at the end of June 2022.

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Market development

Adval Tech remained true to its focus strategy even in difficult times. It also intensified its marketing activities worldwide despite the Coronavirus pandemic, raw material shortages and the disruptions in global supply and logistics chains. The Group is focusing on the automotive market and on applications in other sectors that are comparable with those of the automotive industry in terms of numbers, quality require- ments, life time and production processes (related applications). In order to compensate for the volatility of the automotive market, Adval Tech has also continued to invest in the high-speed press technology business. The Adval Tech Group has been actively shaping the transformation process of the automotive industry towards elec- tromobility and sustainable production for years. Its product portfolio is suitable for all types of drive and in particular for cars with zero CO2 emissions.

In the metal sector, Adval Tech was particularly challenged by bottlenecks in global supply chains in the first half of 2022. Among other things, the Group produces brake disc covers in Germany for a premium manufacturer under a new ten-year contract. Adval Tech also manufactures structural parts in Hungary and high-pressure gasoline pumps in Switzerland under long-term agreements.

In the plastics sector, the Adval Tech Group expanded its plant in Querétaro, Mexico, last year from around 3,300 square meters to around 6,600 square meters. At the enlarged plant, Adval Tech (Mexico) S.A. de C.V., which was established in 2015 and is now operating at high capacity, manufactures air guidance systems and components for vehicle interiors, for example. Customers supplied by Adval Tech (Mexico) include manufacturers of premium car brands such as Audi and VW and various well-knownfirst-tier suppliers. Adval Tech (Hungary) Kft. in Szekszárd, Hungary, also had good capacity utilization in the first half of 2022, but also had to contend with the effects of global supply problems. Adval Tech (Suzhou) Co. Ltd in China produced mainly for the Chinese market in the first half of 2022.

In high-speedpresses, the Adval Tech Group achieved slightly lower order intake in the first half of 2022 than in the corresponding period of the previous year. The contribution from this market segment to the Adval Tech Group's EBIT1) was correspondingly smaller. However, demand for these presses remained intact. Various offers are close to the decision-making stage at customers.

1. Alternative Performance Measure, see note 3, page 77 of the Annual Report 2021