The Bossard Group continued to grow in fiscal year 2015. Despite the appreciation of the Swiss franc, the group set a new sales record of
CHF 656.3 million or +6.2% (+10.1% in local currency). However, profit was adversely affected in key markets, especially Switzerland, by the appreciation of the Swiss franc and the difficult demand situation. Operating profit (EBIT) fell by 3.4% against 2014 to CHF 70.3 million, which corresponds to an EBIT margin of 10.7%. In this context, CEO David Dean emphasizes an important point: “The Bossard Group's profitability continues to be above the average of the industry as a whole. We view this fact as clear confirmation of our profitability-oriented growth strategy of recent years.”
The Bossard Group achieved its key growth targets again in fiscal year 2015 in spite of a market environment that was challenging overall. The sales increase of 6.2% to CHF 656.3 million (+10.1% in local currency) reflects the consistent investment policy which contributed decisively to gains in market share in several regions. For instance, sales in Europe in local currency were up by 4.6%. The appreciation of the Swiss franc was the only reason for the reported decline in sales, namely 2.9% to CHF 383.4 million. Business proved more difficult in Switzerland, where the appreciation of the Swiss franc had a negative impact on the competitive situation of many customers. The requests for currency discounts but also the decline in demand in many companies led to lower sales and margin.
In America, Bossard entered a whole new dimension. Sales surged upward by an impressive 36.2% against 2014 to CHF 166.2 million (in local currency: +29.6%). This jump in sales can be traced to the takeover of Aero-Space Southwest Inc., which is present at important industrial locations in California, Arizona and in Mexico. Collaboration with the leading U.S. electric vehicle manufacturer also evolved favorably, leading to a larger volume of business. By contrast, the company's second major customer in the U.S., a company in the agricultural technology sector, continues to face weaker demand, especially in the segment of farming equipment.
Bossard saw its business in Asia grow again in 2015. As a result, sales increased by 5.5% to CHF 106.7 million (in local currency: +5.2%) thereby seamlessly continuing the dynamic trend of previous years. This positive growth was and still is largely attributable to the build-up of competence and distribution centers in various countries. Business in China, for its part, proved to be more challenging in 2015 – an experience Bossard is sharing with other providers of industrial products and services. Nevertheless, it will continue to invest in China and will open a new logistics and technology center in Shanghai at the beginning of 2017.
Profitability remains high
The pressure from the appreciation of the Swiss franc also left its mark on profit of the Bossard Group. The difficult competitive and demand situation following the appreciation of the Swiss franc affected profit in Switzerland in particular. Moreover, the appreciation of the Swiss franc reduced earnings of foreign subsidiaries additionally when converted into accounting currency, the Swiss franc. Operating profit (EBIT) for 2015 dropped accordingly by 3.4% to CHF 70.3 million. Without the impact of the appreciated Swiss franc EBIT would have increased to CHF 76.1 million.
The operating margin fell from last year's record level of 11.8% to 10.7%. If exchange rates had remained constant, the EBIT margin for 2015 would have been 11.2%. Nevertheless, with a profitability of 10.7%, the company still clearly exceeded the industry average. In addition, this figure is within the target range of 10-13% stipulated in the strategy plan for 2016/2020. Dean explains, “The high profitability we have achieved in recent years underscores the Bossard Group's level of performance. Despite heavy pressure from the appreciation of the Swiss franc, we succeeded in substantially boosting our EBIT and EBIT margin over an extended period of time. This accomplishment makes us confident about the further development of the Bossard Group.” The latest acquisitions fully met expectations and made an important contribution to strengthening the profitability.
The adverse factors discussed above also affected net income. It fell year on year from CHF 57.1 million to CHF 54.5 million; without exchange rate effects, net income would have remained at the same level as the previous year. The dividend policy of Bossard stipulates a distribution of 40% of consolidated net income to the shareholders each year. Despite the slight decline in net income in 2015, the board of directors will propose an unchanged dividend of CHF 3 to the annual general meeting of shareholders as a sign of confidence. Based on the share price at the end of February 2016, this corresponds to an attractive dividend yield of 3.0%.
Solid balance sheet structure
The growth of the Bossard Group in fiscal year 2015 led to an increase in total assets. They rose year on year (as of December 31) from CHF 434.4 million to CHF 462.6 million. This increase is mostly attributable to the acquisitions. The equity ratio declined from 48.5% to 40.2% also as a result of the takeovers and thus remains close to the long-term target of 40%. The reason for this development is that the goodwill from acquisitions is fully offset against equity. Despite these changes in the balance sheet structure, the Bossard Group continues to stand on a solid foundation. The company will retain the leeway necessary for strategically vital investments in the future. Along with expenditures for
the new technology and logistic center in Shanghai, 2016 will see investments for new warehouse and logistics capacities in Germany.
Market environment to remain challenging
In the outlook for 2016, the market environment is expected to remain challenging. Despite rays of hope in key markets like Germany, Bossard sees not a lot of signs of an economic upswing in Europe for the time being. Bossard is bracing itself for another difficult year in
Switzerland in particular. The slight weakening of the Swiss franc against the major currencies is unlikely to alleviate the difficult situation for export-oriented Swiss companies.
In America, the business development will depend mostly by two major customers. In case of the biggest U.S. electric vehicle manufacturer, a newly launched model augurs well for a considerable increase in production figures. That will benefit Bossard. The other major customer,
a company in the agricultural technology sector, continues to face weak demand. The company's annual forecasts indicate another decline in sales. In all, Bossard has paved the way for further sales growth in America. The signs are also pointing to growth in its Asian business. Solely the development in demand in China continues to raise questions.
In a global context, geopolitical uncertainties continue, in the Middle East in particular. The economic development of China and the resulting possible ramifications for the global economy are currently unforeseeable. In this environment, Bossard believes it would be inappropriate
to publish exact growth forecast figures at this point of time.