COMET holds its own despite negative currency effects and weak economic activity
The COMET Group, one of the world’s leading manufacturers of components and systems for the growth markets of non-destructive testing, security and semiconductors, in the first half of 2008 raised its net sales by 88% from CHF 58 million to CHF 109 million (including growth by acquisition). On a proforma (PF) basis, growth was 7.7% in local currencies and 1.9% in Swiss francs.
The six months ended June 30, 2008 brought an overall positive trend for the COMET Group, apart from negative currency effects and the poor business cycle in semiconductors. While sales grew by 7.7% (PF) in local currency terms compared to the first half of the prior year, sales in Swiss francs rose 1.9% to CHF 109.0 million (H1 2007: CHF 107.0 million PF). Operating income at EBITDA level was CHF 10.9 million (H1 2007: CHF 13.2 million PF), corresponding to an EBITDA margin of 10.0% of sales (H1 2007: 12.3% PF). Largely-negative foreign exchange impacts and the price pressure from competitors, which partly manufacture in the dollar area, had an adverse effect on gross margin (down 4.2% compared to one year earlier) but were to some extent offset by savings on operating expenses.
The Modules & Components division, newly formed in connection with the acquisition of the YXLON group, generated sales growth of 10.2% in local currency and 1.9% in Swiss francs. Amid the dollar weakness, the EBITDA margin decreased from 17.1% to 13.1%. Vacuum Capacitors was able to expand its position as a supplier to semiconductor manufacturers, take the forward strategy in radio frequency (RF) modules to the next level and more than make up for the cyclical contraction in capacitors through growth in RF modules. On the other hand, Vacuum Capacitors was hardest hit by the effects described above. In this difficult environment, Vacuum Capacitors grew by 6.2% in local currency while sales eased by 3.1% on a Swiss franc basis. The currently declining semiconductor business cycle and resulting more intense competition has made forecasting significantly more difficult in this business for the time being.
Modules & Components division
Industrial X-Ray delivered a very good business performance in the first half of the year, growing by 15.2% in local currency and 8.1% in Swiss francs. In addition to the strong core business driven by the flourishing security market, considerable progress was made in components for analytical instruments, the so-called “minitubes”. The cutting-edge development projects in this segment remain on track. It currently looks likely that Industrial X-Ray will record significant growth for the full year as well.
Sales in the Systems division were up 5.0% in local currency and up 1.7% in Swiss francs, to CHF 64.8 million (H1 2007: CHF 63.7 million). The EBITDA margin was 5.8% (H1 2007: 6.9% PF). While good growth was registered in portable and stationary X-ray systems (e.g., for the inspection of oil and gas pipelines) and in tire inspection, the custom solutions segment did not yet meet expectations. Sales of the Feinfocus product range were at the same level as one year earlier, but represented significantly lower overall costs. With the probable sales increase in the second half of the year, profitability too is expected to improve significantly.
Given the present economic and business conditions, it is extraordinarily difficult to estimate earnings for the 2008 fiscal year reliably. Not only does the strong Swiss franc continue to weigh on sales and profits, but a recovery of the semiconductor market before 2009 seems unlikely. Yet even in the current business environment, we expect sustained further single-digit sales growth and intend to match last year’s earnings at EBITDA level.