HALF-YEAR REPORT 2021

Financial review

as at June 30, 2021

2021

2020

Key figures, first half year

Change vs. prev. year

01/01/–06/30/21

01/01/–06/30/20

Operating figures

in kCHF

Net sales

42.6 %

302 620

212 263

Earnings before interest, taxes, depreciation and amortization (EBITDA)1)

458.9 %

44 695

7 997

Operating profit (EBIT)1)

210.2 %

19 192

-17 421

Net earnings1)

161.7 %

10 807

-17 527

Orders received third (investment goods)

62.9 %

19 286

11 838

Orders backlog third as at 30.06. (investment goods)

-13.4 %

10 661

12 308

Return figures

in %

EBITDA-Margin1)

11.0 %

14.8

3.8

EBIT-Margin1)

14.5 %

6.3

-8.2

Net return on sales1)

11.8 %

3.6

-8.3

Other

Number of employees (excl. apprentices)

7.7 %

2 545

2 363

1) In the 2020 financial year, Feintool received a loan of USD 8.4 million under the PPP program in the United States to mitigate the impact of the COVID-19 pandemic. In the first half of 2021, the government assured the company that this loan would not have to be repaid. Feintool also received CHF 3.0 million in immediate aid from the Swiss government in the first half of 2021 to mitigate the effects of the COVID-19 pandemic. In addition, due to capacities no longer required at one plant, the company recognized an impairment loss on manufacturing equipment totaling CHF 8.3 million. The EBITDA, EBIT, group result, and profit margin figures are presented in this overview excluding these effects.

BUSINESS PERFORMANCE

General information

This semiannual report applies to Feintool International Holding AG and all its subsidiaries. It encompasses the period from January 1 to June 30, 2021. The same period during the previous year is used for comparative purposes. In the case of balance sheet figures, the comparative reporting date is December 31, 2020.

COVID-19 pandemic

The first half of 2020, which is used as the comparative period for the consolidated statement of comprehensive income for the first half of 2021, was heavily impacted by the COVID-19 pandemic. The recovery that began in the second half of 2020 continued in the first half of 2021. The issues in the automotive supply chain caused by the rapid recovery (i.e., steel and semiconductor shortages) continued in the first half of 2021. These difficulties will persist in the second half of 2021 as well.

One-off effects

In 2020, Feintool received a loan of USD 8.4 million under the PPP program in the United States to mitigate the impact of the COVID-19 pandemic. In the first half of 2021, the government assured the company that this loan would not have to be repaid. This resulted in other operating income of CHF 7.6 million.

In Switzerland, Feintool submitted an application for emergency aid for COVID-19 hardship cases in the first half of the year. The Canton of Bern’s Amt für Wirtschaft (Office of Economic Affairs) approved this application and Feintool received a credit of CHF 3.0 million.

Feintool has begun implementing its Strategy 2030. A key element of this strategy is for the company to capitalize on the rapid growth of battery-electric vehicles. In this context, Feintool conducted an audit to assess the value of its manufacturing equipment. In the process, systems were identified which, as expected, can no longer be fully utilized due to the company’s transformation. This led to impairment losses on manufacturing equipment totaling CHF 8.3 million in the System Parts segment in Europe.

Unless expressly stated otherwise, the following information applies to Feintool’s operational activities excluding these one-off effects.

Orders received and orders backlog, expected releases

The System Parts segment’s parts business is short-term. Feintool’s customers continuously send the company the expected releases for the next six months. Customers have the ability to postpone or even cancel releases that they have already entered into our ordering systems, however. In times of considerable uncertainty and, as a result, increased volatility, this early indicator becomes less reliable. As such, Feintool has decided not to publish this key figure at the present time.

The value of new orders received by the Fineblanking Technology segment increased by 20.5 % to CHF 22.9 million in the reporting period (previous year: CHF 19.0 million). Incoming orders from intracompany business declined by 50.0 % to CHF 3.6 million (previous year: CHF 7.1 million). Incoming orders from third-party business thus totaled CHF 19.3 million (previous year: CHF 11.8 million), equal to an increase of 62.9 %. The only slight increase compared with the value of orders received in the prior year, which was severely impacted by COVID-19, reflects the fact that the market situation in the capital goods business remains challenging.

As of June 30, 2021, the Fineblanking Technology segment had an order backlog with a total value of CHF 13.1 million (previous year: CHF 18.6 million). This represents a 29.5 % decline in the value of the order backlog compared with the same date last year. Compared to December 31, 2020, however, the value of the order backlog increased by 22.4 %. The existing order backlog is not fully utilizing existing production capacities, however. As a result, short-time work schedules are still in place at Feintool’s Press Center of Excellence in Jona and the Lyss plant.

Net sales

The consolidated sales rose in the period under review by 42.6 % to CHF 302.6 million (previous year CHF 212.3 million). Currency effects negatively impacted sales by CHF 0.6 million. As a result, Feintool recorded an increase in net sales of 42.8 % expressed in local currency. The System Parts segment generated 93.4 % of third-party sales, with Fineblanking Technology responsible for the remaining 6.6 %.

The System Parts segment’s sales in the reporting period increased by 44.5 % to CHF 285.3 million (previous year: CHF 197.5 million). Negative currency effects totaled CHF 0.4 million. In local currency, sales in the segment thus increased by 44.7 %. Net sales generated in Europe totaled CHF 164.5 million. Adjusted for currency effects, this corresponds to a 32.8 % increase in sales (36.3 % in the reporting currency). Sales in the United States increased by 55.9 % to CHF 83.1 million. Excluding currency effects, sales in the United States in fact increased by 64.5 %. In Asia, sales rose to CHF 37.9 million, an increase of 55.0 % in local currency terms (54.9 % in the reporting currency). As such, sales growth in the United States and Asia was clearly stronger than in Europe.

Revenue generated by the Fineblanking Technology segment fell by 7.9 % to CHF 21.1 million (previous year: CHF 22.9 million). In local currency, the sales decline was slightly lower, though still stood at 7.3 %. Intracompany sales declined by 78.5 %. Third-party sales thus increased by 14.3 % to CHF 19.9 million (previous year: CHF 17.4 million). The travel restrictions/bans in the first half of the year had a negative impact, particularly on the service business.

Overall, the Feintool Group generated third-party revenues of CHF 165.8 million, equal to 54.8 %, in Europe (previous year: CHF 124.0 million and 58.4 %, respectively). As such, Europe was able to reaffirm its importance. With revenues of CHF 85.1 million, or 28.1% of total revenues (previous year: CHF 56.6 million or 26.7 %), North America gained 1.4 percentage points in the geographical breakdown of revenues. Sales in Asia rose to CHF 51.7 million, increasing the region’s share of total sales to 17.1 % (previous year: CHF 31.7 million, equal to a 14.9 % share). The new business of parts production in the Chinese market was responsible for this increase. With sales of CHF 3.4 million or 1.1 % (previous year: CHF 1.2 million or 0.6 %), the Swiss market is only of marginal importance to Feintool.

Key cost items

At CHF 138.9 million, material costs are by far the company’s greatest expense item. In relation to net sales, this figure rose from 42.8 % to 45.9 %, caused by the sharp increase in steel prices. However, taking changes in inventories into account, materials accounted for 41.5 % of revenues, down from 46.1 % a year earlier. In June, steel could still be sourced at more favorable conditions, so Feintool built up its stock.

Personnel expenses rose by CHF 17.6 million to CHF 95.1 million and now account for 31.4 % of revenues (previous year: 36.5 %). In the Fineblanking Technology segment, the ratio of labor costs to sales grew to 38.0 % (previous year: 36.3 %). In the System Parts segment, this ratio decreased to 28.9 % (previous year: 33.1 %). Strong capacity utilization at the System Parts’ plants resulted in this reduction.

Other net operating expenses increased to CHF 27.2 million, while the operating ratio grew to 9.0 % (previous year: 14.1 % of sales). Other net operating expenses include two one-off effects. Feintool USA received a loan of CHF 7.6 million under the PPP program that it now no longer has to repay. In addition, Feintool Technologie AG in Switzerland received CHF 3.0 million in emergency aid. Both of these amounts are recognized as other operating income. Excluding these two one-off effects, other net operating expenses amounted to CHF 37.7 million (12.5 %).

Earnings before interest, taxes, depreciation, and amortization (EBITDA)

Earnings before interest, taxes, depreciation, and amortization (EBITDA) increased to CHF 44.7 million in the reporting period. The EBITDA margin increased to 14.8 %. Taking the one-off effects into account, earnings before interest, taxes, depreciation, and amortization (EBITDA) amounted to CHF 55.3 million, corresponding to an EBITDA margin of 18.3 %.

In the capital-intensive parts business (System Parts), the EBITDA margin increased to 17.2 % (previous year: 7.3 %). Strong capacity utilization at the plants resulted in this margin increase. The capital goods business (Fineblanking Technology), however, was forced to report an EBITDA loss of CHF 1.1 million as a result of the poor order situation.

Depreciation and Amortization

Depreciation increased only slightly in the reporting period by CHF 0.1 million to CHF 25.5 million. The slow decline in capital expenditures in the previous period slowed down the increase in depreciation. At CHF 23.1 million, capital expenditures in the reporting period again lagged slightly behind depreciation. Due to overcapacities at a European manufacturing site, an additional one-off impairment loss of CHF 8.3 million was recognized in the first half of the year.

Operating profit (EBIT)

Feintool generated operating earnings (EBIT) of CHF 19.2 million in the reporting period. This corresponds to an operating EBIT margin of 6.3 %. Taking the one-off effects into account, EBIT totaled CHF 21.5 million, corresponding to an EBIT margin of 7.1 %.

In the Fineblanking Technology segment, lower sales ultimately resulted in an operating loss (EBIT) of CHF 2.0 million (previous year: loss of CHF 3.6 million). In this context, Feintool continued to invest heavily in research and development as an investment in the future.

Operating earnings generated by the System Parts segment increased significantly to CHF 24.7 million (previous year: loss of CHF 9.3 million).

The costs incurred by the non-operating segments totaled CHF 4.7 million (previous year: CHF 5.0 million). The decrease compared to the same period in the previous year was due to individual projects and additional expenses incurred in connection with the COVID-19 pandemic in 2020.

Financial result

Net financial expenses increased to CHF –3.0 million (previous year: CHF –2.5 million). Net interest expenses (including financing costs) increased to CHF 2.7 million (previous year: CHF 2.2 million) due to higher financing costs in connection with the expansion of the syndicated loan as a result of the COVID-19 pandemic. Feintool recorded net currency losses of CHF 0.4 million in the reporting period (previous year: CHF 0.4 million).

Taxes

The Feintool companies’ tax expense totaled CHF 5.4 million in the reporting period. This corresponds to a tax rate of 29.0 %.

Net income

All in all, including the one-off effects, the Feintool Group generated net income of CHF 13.2 million (previous year: loss of CHF 17.5 million).

CONSOLIDATED BALANCE SHEET

Overall, total assets increased by 5.2 % to CHF 712.4 million (December 31, 2020: CHF 677.1 million).

Current assets increased by a total of CHF 33.5 million to CHF 265.4 million, whereby some of the individual items moved in opposite directions. Cash and cash equivalents increased by CHF 4.9 million to CHF 66.2 million. The increase is partly related to the use of government assistance in connection with the COVID-19 pandemic. In Switzerland, Feintool received CHF 3.0 million in emergency aid in June. Receivables increased by CHF 9.6 million to CHF 94.0 million. Inventories and net contract assets increased by CHF 21.2 million to CHF 99.2 million. Three different reasons resulted in this increase. The first is the increase in the quantity of steel in stock. These stocks were low at the end of 2020. In addition, steel was still available at better rates in June, which Feintool took advantage of. The second reason for the increase is volatile customer releases. This resulted in higher inventories of semifinished and finished goods. High steel prices and the resulting higher valuation of inventories are the third reason. Prepaid expenses fell by CHF 2.2 million to CHF 6.0 million.

Net working capital increased by CHF 5.5 million to CHF 74.4 million compared to December 31, 2020. The CHF 20.6 million increase in inventories and CHF 8.4 million increase in trade receivables had a negative impact on net working capital. A CHF 12.3 million increase in deferred income and a CHF 5.3 million increase in non-interest-bearing liabilities were the primary factors that had a positive impact on net working capital.

Fixed assets increased by CHF 1.8 million to CHF 447.0 million and thus remained nearly unchanged. Property, plant, and equipment increased by CHF 0.2 million to CHF 335.1 million. Intangible assets increased by CHF 0.3 million to CHF 91.7 million. Financial assets increased by CHF 2.2 million to CHF 6.4 million. Deferred tax assets decreased by CHF 0.9 million to CHF 13.7 million (December 31, 2020: CHF 14.6 million).

On the liabilities side, total debt increased by CHF 2.6 million to CHF 385.7 million. Trade payables and other liabilities increased by CHF 0.2 million to CHF 64.9 million and thus remained practically unchanged. Deferred income, tax liabilities, current and non-current provisions, and deferred tax liabilities increased by CHF 19.8 million to CHF 79.9 million. This increase was driven by accrued expenses and deferred income, which increased by CHF 12.3 million. This increase in the first half of the year is seasonal and is mainly due to accruals for labor costs. Liabilities for employee benefits (pursuant to IAS 19) fell to CHF 43.2 million in the reporting period as a result of more favorable assumptions related to the development of interest rates and the financial markets.

Interest-bearing debt decreased by CHF 10.5 million to CHF 197.7 million. CHF 134.4 million of the interest-bearing debt is of a long-term nature.

Net debt decreased to CHF 131.5 million in the reporting period (December 31, 2020: CHF 146.9 million) due to the healthy operating earnings and the one-off effects resulting from COVID-19 aid. The increase in net working capital and capital expenditures had a negative impact on net debt. As a result, Feintool has CHF 133.6 million in cash and cash equivalents as well as unused lines of credit available.

Shareholder’s equity stood at CHF 326.6 million on June 30, 2021 (December 31, 2020: 293.9 million). As a result, the equity ratio increased from 43.4 % to 45.8 %. The Statement of Changes in Equity shows that consolidated earnings increased shareholders’ equity by CHF 13.2 million. Translation differences recognized directly in equity totaling CHF 14.1 million and actuarial gains from employee benefits (IAS 19) totaling CHF 5.3 million also had a positive impact. The other items had much less impact.

CONSOLIDATED STATEMENT OF CASH FLOWS

At CHF 31.3 million, cash flow from operating activities was clearly higher than in the same period last year (CHF 0.4 million) due to the operating earnings generated in the reporting period. Net working capital had a negative impact of CHF 19.1 million in the reporting period (previous year: negative impact of CHF 5.8 million). A similar disproportionate increase in net working capital at the half-year point also occurred in 2019 and 2018. At CHF 23.1 million (previous year: CHF 19.4 million), cash flow from investing activities was slightly higher than in the previous year. Approved new investments are continuing as planned. Depreciation and amortization exceeded capital expenditures in the corresponding period. Overall, this resulted in an operating cash inflow of CHF 8.3 million (previous year: CHF –19.0 million).

EMPLOYEES

The number of employees* (excluding vocational trainees) has increased by 25 to 2 545 since December 31, 2020. In addition, 75 young people are currently completing a vocational training program at our company (December 31, 2020: 100). In total, Feintool has 1 532 employees (plus 61 vocational trainees) in Europe, 351 of whom work in Switzerland (plus 33 vocational trainees). The company has 546 employees in the United States (plus 10 vocational trainees) and 467 employees in Asia (plus 4 vocational trainees).

The System Parts segment has reduced its workforce by 0.5 % (–12 employees) since December 31, 2020. In total, 2 372 people now work in the parts business. The Fineblanking Technology segment employed 140 people (–12), 33 of whom work in non-operating departments.

* Calculated as full-time equivalents on the reporting date

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