Ad hoc announcement pursuant to Art. 53 LR
Third quarter impacted by seasonal effect
With consolidated gross sales of CHF 27.1 million, Tornos Group generated an operating result (EBIT) of CHF -6.7 million during the third quarter of this year. Although the cost-cutting measures in place since the beginning of the year are exceeding their targets, the result remains negative due to lacklustre sales.
New orders during the third quarter amounted to CHF 30.8 million (2012: CHF 34.0 million). Total orders for the first nine months of the year therefore come to CHF 115.6 million. Year on year, the -17.9% drop reported for the second quarter has been reduced by 2.1 percentage points to -15.8%. New orders for the first nine months exceed gross sales by CHF 9.4 million, thus consolidating the order backlog. Although Tornos had noticed evidence of stabilization in the European market during the first half of the year, there are still no clear signs of recovery. Before contemplating new investments, installed production capacity needs to be fully exploited, particularly in the multi-spindle sectors. In the United States, Tornos' primary segments – medical and dental technology and the automotive industry – offer genuine growth potential. This has prompted the new local management to modify the sales network and reorient activities to the future product mix. The Asian market remains well below expectations. It is heartening to note that the MultiSwiss lathe is well positioned to attract new investments in the multi-spindle lathe sector, but contracts are unlikely to be forthcoming until customers have a backlog of firm orders. The specialist hard disk drive market in south-east Asia, which used to be an important outlet for Tornos, is facing severe competition from the current popularity of memory cards (SSD devices). As a result, the surplus capacity in the electronics sector is currently being reassigned to the automotive industry. This is in turn opening up opportunities for the MultiSwiss lathe and sliding headstock lathes. In China, Tornos Xi’an is actively preparing to launch the new range of standard machines that is currently being presented at the DMP fair in Guangdong. The construction project for a new factory has been launched, and the new facility should become operational during the second quarter of 2014.
Positive effects of cost cutting measures masked by fall-off in orders
Gross sales amounted to CHF 27.1 million (2012: CHF 31.5 million) or a cumulative total of CHF 106.3 million for the first nine months of 2013 (2012: CHF 128.5 million). This gives a positive book to bill ratio of 1.1. The results of the cost-cutting measures that have been in place since the start of the year exceed targets. However, the expected effects are not apparent in the Group's operating result due to the weak sales figure. Consequently, the third quarter has ended with an operating result (EBIT) of CHF -6.7 million (2012: CHF -8.5 million). This poor result is very largely due to the seasonal effect experienced during July and August. It should be noted, though, that a balanced operating result was achieved in September. The net loss for the third quarter comes to CHF -5.7 million (2012: CHF -8.2 million). This is attributable to the disposal of financial assets that were still for sale at the end of the first half. Disposal of these assets contributed a positive CHF 1.7 million to the result. Ongoing efforts to optimize net working capital coupled with the sale of the financial assets referred to above enabled the Group to keep net cash at CHF 3.8 million (2012: net debt of CHF -32.1 million), a reduction of CHF 0.3 million compared to the first half. At the end of the third quarter, Tornos signed an extension of its credit line contract until the end of 2013.
Outlook
The third-quarter result confirms the guidance issued when the interim financial statements were published; this did not foresee any significant improvement in the result for the year. Given that there is no convincing sign of recovery in Tornos' markets in the short term, the Group is not expecting the situation to improve for the rest of this year. However, its strategic reorientation, the new offerings that this is giving rise to and the improved cost structure will create significantly more favourable conditions for the future.