COMET Group improves operating earnings in difficult market environment

  • Net sales of CHF 130.1 million, 2% below H1 of prior year (new orders up 4% yoy)
  • EBITDA improved by 15% and EBITDA margin strengthened to 9.4%
  • Net income, at CHF 1.7 million, was down from year-earlier level, but steady in constant currencies
  • Strategic milestones reached in ebeam business
  • Strong second half expected
  • 2015 forecast slightly increased: Sales of CHF 290-310 million and EBITDA margin of 13.5-14.5

The COMET Group experienced very divergent trends in its markets in the first half of the year, but held its own well on balance. In the semiconductor and electronics market, COMET gained ground and achieved further growth with its innovative technologies, while low commodity prices and the partly more difficult market setting in China meant that, for the Group as a whole, the prior year's vigorous growth could not be maintained. The results were also affected by the strong Swiss franc. At Group level, sales eased by 1.9% to CHF 130.1 million (H1 2014: CHF 132.6 million). Before the effects of currency translation (–1.6%) and the acquisition of PCT Engineered Systems LLC (+2.4%), sales were 2.7% lower than a year ago. However, new orders in the first six months were up 4% year-over-year.
The COMET Group boosted its EBITDA profitability by 15% to CHF 12.3 million (H1 2014: CHF 10.7 million), thanks to a 6% reduction in operating costs. The EBITDA margin rose to 9.4% (H1 2014: 8.1%). Before currency and acquisition effects, the EBITDA margin was 8.7%. Net income, in line with expectations, was CHF 1.7 million (H1 2014: CHF 4.4 million). This includes one-time currency translation losses (already announced in March 2015) of CHF 3.5 million. On a constant-currency basis, net income would have been steady at the year-earlier level.
Net debt increased modestly as a result of the acquisition of PCT Engineered Systems, but remained low in absolute terms at just CHF 20.4 million. With an equity ratio of 58.2% (2014 year-end: 59.3%), the COMET Group continued to feature a strong balance sheet, despite the ratio's slight decrease caused by exchange rates and the low interest rates.

PCT – Profitable growth in all markets; full pipeline

Plasma Control Technologies grew its sales by 10.3% to CHF 58 million (H1 2014: CHF 52.6 million) and delivered an EBITDA margin of 18.4% (H1 2014: 15.3%). On a constant-currency basis the segment's sales expanded by 6.1%. The top driver was the ongoing work to equip fabrication plants that produce the latest-generation, V-NAND memory chips. With its top-quality impedance matching networks designed specifically for the high-end environment, PCT offered value-added for customers and reaped the rewards of continuous development work. Through its high-performance vacuum capacitors, the segment also benefited from the brisk demand in the flat panel market, while in the laser market it received the first larger order for its generators. Promising work is underway on projects with new, predominantly Asian customers, and tests were launched with various products. 
To support clients even more effectively in the extremely rapid development of technologies for the fabrication of ever more powerful memory chips, PCT opened test centers in Korea and the USA. For the second half of the year, PCT expects strong growth year-over-year based on sustained high demand from the semiconductor market, and predicts a further sequential expansion in sales compared with the first half of 2015. 

IXS – Tire market contraction in China; profitability improved; expecting stronger H2

X-Ray Systems as expected saw a decrease of 18.4% in sales from the prior-year comparative period to CHF 43.3 million in the first half of 2015 (H1 2014: CHF 53.0 million), or a drop of 12.4% in constant-currency terms. The segment successfully sold systems for the inspection of electronic components with features for enhanced image resolution and expanded the service business with upgrades. The effect of these positive developments was, however, neutralized by a pronounced reduction in demand for tire inspection systems because of regulatory changes in China. Also, as anticipated, there was a lack of revenue from computed tomography (CT) systems as a result of the low backlog following last year's reorganization of this business. 
Despite the significantly lower sales, the EBITDA profit margin widened, rising to 6.3% on further operational improvements, a favorable product mix and positive currency effects (H1 2014: 5.3%). 
To create further value-added for customers in the future through better data integration, simpler processes and high-precision measurement, IXS forged partnerships with leading companies such as Mirtec and Hexagon. For the second half of 2015, the segment is projecting significant sales growth compared to the first six months of this year. In the full year, however, the segment will not match its prior-year sales (before or after currency translation).

XET – Low commodity prices and stronger CHF pose challenge; ebeam passes milestones

X-Ray & ebeam Technologies had a difficult start to 2015. On the one hand, the segment achieved growth in the airport security sector compared to the year-earlier period. In the non-destructive testing market, on the other hand, XET felt the impact of the low commodity prices, which led to reduced customer investment in inspection equipment for applications such as pipelines and sorting. As well, the strong Swiss franc weighed on sales, which are generated primarily in the eurozone. Despite the currency effects, sales eased only mildly to CHF 34.8 million (H1 2014: CHF 35.4 million). On a currency-adjusted basis, the segment grew by 3.6%, due not least to the acquisition in April of PCT Engineered Systems LLC. The sudden appreciation of the Swiss franc in January hurt the segment's profitability and, in combination with the costs of acquiring and integrating PCT Engineered Systems, led to a negative EBITDA margin of 0.9% (H1 2014: positive margin of 4.1%). 

In the ebeam business, the segment passed important strategic milestones with the launch of the ebeam-equipped E3 packaging machine by Tetra Pak at the FISPAL trade show in Brazil and the joining of forces with Bühler to tap new applications. Moreover, with the acquisition of PCT Engineered Systems LLC, COMET took a key step toward becoming a vertically integrated powerhouse for low-energy ebeam. 

For the second half of the year, the segment expects significant sales growth in all business areas compared to the first six months.

Outlook: Forecast slightly raised

To reflect new circumstances – updated exchange rates of 0.95 Swiss francs per US dollar and CHF 1.06 per euro, the acquisition of PCT Engineered Systems and the current economic environment – the COMET Group is slightly raising its expectations for the full year 2015. Its outlook is for a strong and profitable second half of the year. For fiscal year 2015 the management and Board of Directors thus now assume sales of between CHF 290 million and CHF 310 million, and an EBITDA margin of 13.5% to 14.5%. As previously announced, net income this year will be lower than last year as a result of the absence of a non-recurring positive tax effect of CHF 6.1 million recorded in 2014, combined with one-time currency translation losses of CHF 3.5 million in 2015.
In the medium and long term the COMET Group continues to see attractive growth potential. In July 2015 COMET therefore applied for the construction permit to expand the manufacturing facilities in Flamatt.

Media and analyst conference

COMET will present the published results for first half year 2015 today, August 20, 2015, at 10:00 a.m. at the media and analyst conference in Zurich (location: SIX Swiss Exchange, Convention Point, Selnaustrasse 30).

Conference call in English

A conference call in English will be held today, August 20, 2015 from 3.30 pm to 4.15 pm CET, with Ronald Fehlmann, CEO, and Markus Portmann, CFO. To participate, please dial in 10 to 15 minutes before the scheduled start of the call, using one of the following telephone numbers:
+41 (0)58 310 50 00 (Europe)
+44 (0)203 059 58 62 (UK)
+1 (1)631 570 56 13 (USA)