AFG results for 2012 in line with expectations

Slight 2.1% downturn in sales – Increased pressure of competition acts as drag on growth – New AFG takes shape

Arbon, 24 January 2013 – AFG Arbonia-Forster-Holding AG records a slight downturn in sales of 2.1% to CHF 1.289 billion for fiscal 2012 after adjustments for extraordinary items. Sales were affected by a further increase in the pressure of competition. The burden on future income statements is eased by the selling off parts of the company and non-operating assets.

The 2012 financial year was a challenging one for AFG Arbonia-Forster-Holding AG. With a 4.3% fall in sales (2.1% after adjustments for currency, divestiture and acquisition effects) to CHF 1.289 billion, the results in this transitional year were in line with expectations. Given the somewhat uncertain economic climate, fiercer market competition with pressure on prices and margins from cheap foreign imports as well extraordinary seasonal effects on the construction sector, the sales figures achieved are quite satisfactory. The two core divisions of Heating Technology and Sanitary Equipment and Windows and Doors actually saw an increase in sales in the second half of the year.

Although developments in the overall economic situation in the company's home markets of Switzerland and Germany were pleasing, the weakness of the "peripheral" European countries left its mark on AFG's sales figures. The continuing strength of the Swiss franc meant that there was a further increase in pressure on the Swiss market from cheap European competitors. This was particularly noticeable in the Windows and Kitchens business units. Market development in Eastern and Central Europe has been weaker than in previous years. By contrast, Russia was characterised by dynamic growth.

Reorientation of AFG

The 2012 financial year was used mainly to drive forward the new orientation and to realise the company's strategic aims. Initial successes have already been seen, with significant savings in materials purchasing, increases in productivity and a marked reduction in error rates. There was also a simplification of the Group structure and the sale of parts of the company that no longer belong to its core business and of non-operating assets (Aqualux, Warendorf, the Corporate Center and the national transportation and logistics business of ASTA), which will ease the future burden on the income statement.

AFG has made important investments for the future during the past financial year. In particular, an agreement was signed for the takeover of Dobroplast, the leading Polish window manufacturer. Completion is expected in the first quarter of 2013. This means that the Windows and Doors Division will not only have an important presence in the attractive Polish market, but will also have a base for further expansion in the direction of the German and Eastern European markets. The investment of CHF 30 million in the expansion of RWD Schlatter's door manufacturing facilities and the creation of 40 jobs are a clear sign that AFG believes in Switzerland as a centre of industry.

Sales performance differs in the divisions

Sales performance differed in the individual divisions and was influenced by a number of factors.

The Heating Technology and Sanitary Equipment Division recorded a 5.4% downturn in sales (0.3% after adjustments) to CHF 456.2 million. The market situation was particularly difficult in the export markets of Southern Europe, whereas increased growth was recorded in Switzerland, France and Russia. The division faces enormous pressure on prices as a result of cheap brands and the trend towards lower-price products. Preparations were made for the Swiss market launch of Kermi shower cubicles. As of 1 January 2013, the division was developed into a focused "business-unit-oriented" management structure in order to bring innovations more quickly to market, drive forward growth and accelerate the process of internationalisation.

A 4.0% downturn in sales (3.8% after adjustments) to CHF 247.2 million was suffered by the Kitchens and Refrigeration Technology Division. In 2012, the division separated the Kitchens and Refrigeration Technology business units and optimised processes and production. Despite the high volume of construction activity in Switzerland, the kitchen business is suffering from continuing high levels of imports of foreign competitor products, which are putting severe pressure on prices and margins particularly in the contract sector. With the consolidation of Swiss kitchen activities in AFG Küchen AG, the first regional Piatti and Forster Steel Kitchens brand centres opened in Chur, Bern, Muttenz and Lausanne-Bussigny.

The Windows and Doors Division reported a 2.6% (2.3% after adjustments) drop in sales compared to the previous year  to CHF 396.0 million. This has been primarily due to increasing pressure from imports, which has  resulted in a significant fall in prices. The growing demand for wood and wood/aluminium windows again led to capacity problems in production. The cold period at the start of last year and the early onset of winter in December contributed to the fall in sales. The pending generation change in the division was successfully initiated and completed and a dedicated division management structure, including international sales, has been established.

The Steel Technology Division last year separated the organisational structures of the Profile Systems and Precision Steel business units. Sales were affected in both units by the continuing strength of the Swiss franc. Sales in the division were down 8.1% on the previous year at CHF 129.1 million. Figures for the Profile Systems unit were overall at the same level as the previous year with positive impulses from Asia and France and a weakening situation in Germany, Italy and Eastern Europe. The downturn in precision steel tubes was most clearly seen in the weakening of demand from the European automotive industry.

The Surface Technology Division recorded sales of CHF 64.7 million, which represents a small increase of 1.8% (0.6% after adjustments). In particular, the print sector is continuing to suffer from the recession in the industry, especially in Europe. The new factory in Changshu was opened on schedule in March 2012 and is now coming on stream. Since 11 December 2012, the management of Surface Technology is no longer represented on the Group Management Board as this field of activity no longer forms part of the core business of AFG. At the same time a new operational management team has been put in place to ensure the development of surface technology.

Change in the Board of Directors

Georg Früh, a member of the AFG Board of Directors since April 2010, is not standing for re-election at the up-coming Annual General Meeting on 19 April 2013. The time commitments for AFG are no longer compatible with his activities on the Executive Board of the Alpla Group. The Board of Directors regrets the loss of Georg Früh and thanks him for his contribution to the re-orientation of AFG and, in particular, for his efforts as Chairman of the Audit Committee. The Board of Directors has already initiated the process of succession management and will notify the AGM in good time of the relevant nomination proposals.

Daniel Frutig
Chief Executive Officer

Stefan Kern
Head Corporate Communications

Net revenues

1) 2)
for currency, divestment
and acquisition effects
Net revenues in CHF million    
AFG Arbonia-Forster-Group1288.91347.4-4.3%-2.1%
Heating Technology and Sanitary Equipment division456.2482.3-5.4%-0.3%
Kitchens and Refrigeration Technology division247.2257.6-4.0%-3.8%
Windows and Doors division396.0406.4-2.6%-2.3%
Steel Technology division129.1140.5-8.1%-8.1%
Surface Technology division64.763.61.8%0.6%
Corporate Services8.019.9-59.8%-46.5%
./. Group consolidation-12.3-22.9  

1) Provisional, unaudited figures under IFRS
2) Without Aqualux since 21 May 2012 (Heating Technology and Sanitary Equipment division)
3) With Avia Peintures Sarl since 14 April 2011 (Surface Technology division)

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