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Sale of Schweizer China Shares to WUS Kunshan Successfully Completed
May 1, 2023 | Schweizer Electronic AGEstimated reading time: 4 minutes
The sale of the majority of Schweizer Electronic (Jiangsu) (SEC) to WUS Printed Circuit (Kunshan) (WUS) was successfully completed on 25 April with receipt of the full agreed purchase price. At the same time, WUS increased its capital with SEC in order to refinance the company and to advance the capacities for the production of the chip embedding technology. Schweizer Electronic AG now holds 20 per cent and WUS 80 per cent of the SEC joint venture.
Furthermore, SCHWEIZER published the full report for the 2022 business year and confirms the preliminary figures. The SCHWEIZER Group (according to IFRS) achieved sales of 131.0 million euros in 2022 (previous year: 122.7 million euros). This corresponds to an increase of 6.8 percent compared to the previous year.
The order backlog at the end of the reporting year was 234.4 million euros, which corresponds to an increase of 22 percent compared to 31 December 2021. Of this, an order backlog of 132.6 million euros is due for delivery in 2023. The order backlog for 2024 and subsequent years already amounts to 101.8 million euros as of the balance sheet date.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) amounted to -12.3 million euros (2021: -9.8 million euros), which corresponds to a rate of -9.4 percent (2021: -8.0 percent) and was thus below our expectations. The start-up losses of the Chinese subsidiary and the overall increase in energy and material prices, especially in Germany, had a particularly negative impact on earnings. Excluding China, the Group achieved an EBITDA of +5.0 million euros in 2022.
Due to the negative consolidated result, consolidated equity amounted to -8.8 million euros (31.12.2021: +8.3 million euros), which corresponds to an equity ratio of -5.5 per cent (31.12.2021: +4.6 percent).
Compared to the previous year, total assets decreased by EUR -20.6 million to EUR 160.3 million. The change in asset items and liabilities are mainly influenced by the reclassification of the asset and liability items of the Chinese subsidiary to the item "Assets held for sale" totaling EUR 78.8 million and "Liabilities related to assets held for sale" totaling EUR 91.2 million.
Nicolas-Fabian Schweizer, CEO of Schweizer Electronic AG, on the sale of the shares: "We have a ten-year and proven highly successful strategic cooperation with WUS. WUS, as one of the most successful PCB companies in China and Taiwan, is now taking over the operational management of the joint venture and will also lead our joint site to success by leveraging synergy potentials more strongly with their other sites in China."
Marc Bunz, CFO, adds: "The sale of the majority stake in Schweizer Electronic (Jiangsu) will make a major contribution to significantly improving the Group's earnings and balance sheet figures in 2023. At the same time, the cooperation with WUS will enable SCHWEIZER to consistently pursue its chosen strategy. The Fab-Light strategy makes it possible to gradually expand and improve sales and results as well as the range of technologies offered, despite the lower demand for own production facilities, without limiting the range of series production in Germany. In addition, a sales subsidiary will be established in China for direct marketing, which will start business operations in the second quarter of 2023."
Schweizer Electronic AG
Schweizer Electronic AG achieved sales of EUR 94.8 million in 2022 (2021: EUR 90.6 million), which corresponds to an increase of +4.7 percent.
The order backlog as of 31 December 2022 increased by +30.6 per cent to EUR 178.2 million compared to the previous year. Of this total, printed circuit boards worth EUR 89.8 million are scheduled for delivery in 2023.
The gross margin decreased by EUR -4.1 million to EUR 10.8 million and corresponded to 11.3 per cent of turnover (2021: 16.4 per cent). Compared to the previous year, a disproportionate increase in raw material and energy costs and further inflation-related cost increases had to be borne. Due to price fixing, only part of the cost increases could be passed on to customers.
Earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to EUR +18.0 million (2021: EUR +6.6 million). This corresponds to an EBITDA ratio of +19.0 per cent (2021: +7.3 per cent). EBITDA includes exceptional income of EUR +15.2 million from a patent value that was contributed as a contribution in kind to the equity of the subsidiary in China.
The equity ratio was 28.5 percent as of 31.12.2022 (31.12.2021: 43.8 percent). The reduction in equity is essentially due to the revaluation of the Chinese subsidiary.
Expectations for the 2023 business year
The majority sale of the Chinese subsidiary has a significant impact on the forecast for the 2023 business year. The transaction will have a particular impact on SCHWEIZER's business results and balance sheet ratios.
For 2023, the Executive Board expects sales growth between +5 and +10 percent. The series start-up of embedding technology will be an important growth driver for 2023.
Turnaround in results can be expected
The Executive Board expects a significant improvement in the profit margins. With an EBITDA ratio of between +4 and +6 percent (2022: -9.4 percent) and an EBITDA of between +5.6 and +8.4 million euros, SCHWEIZER will take a first important step towards a sustainable improvement in the earnings situation.
Return to solid balance sheet ratios
Furthermore, we expect a Group equity ratio of +25 to +30 per cent (2022: -5.5 per cent) at the end of 2023. The improvement in the equity ratio by more than 30 percentage points is one of the important effects of the majority sale of SCHWEIZER China.
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