Sales growth in both the ventilation and radiator businesses

In the 2019 business year, the Zehnder Group increased its sales from EUR 601.8 million in the previous year to EUR 644.4 million, corresponding to a growth of EUR 42.5 million or 7% (+4% organically[1]). The increase in sales generated by the Group is primarily the result of the successful expansion of the ventilation business, although the radiator business also reported a slight increase again in 2019. The ventilation business experienced a significant increase in sales of 13% (+7% organically), rising to EUR 316.0 million (previous year: EUR 278.9 million). By the year end, the sales generated by this business area comprised almost 50% of the Zehnder Group’s total figure (previous year: 46%). Radiator business sales at the end of the year had increased by 2% (+1% organically) compared to the previous year, amounting to EUR 328.3 million (previous year: EUR 323.0 million).

Of the total sales, 82% (previous year: 84%) or EUR 531.1 million (previous year: EUR 506.5 million) came from the Europe segment, which recorded an increase of 5% (+2% organically). EUR 259.0 million (previous year: EUR 231.7 million) of revenue in Europe was generated by the ventilation business area, equalling growth of 12% in comparison to the previous year (+5% organically). The ventilation business area covers product lines for residential ventilation, clean air solutions and heat exchangers, and all three of these reported positive results. Sales in Europe’s radiator business area decreased by 1% (-1% organically) in 2019, amounting to EUR 272.1 million (previous year: EUR 274.9 million). While the radiators product line generated sales at the same level as the previous year, revenues for heating and cooling ceiling systems experienced a decline.

The China & North America segment comprised 18% (previous year: 16%) of the consolidated sales in the reporting year, amounting to EUR 113.3 million (previous year: EUR 95.3 million). This reflects a substantial increase of 19% (+15% organically).

Increase in EBIT margin from 5.2% to 6.5%

The Zehnder Group increased its operating result (EBIT) by a considerable 35% to EUR 42.1 million (previous year: EUR 31.1 million). This resulted in a 1.3 percentage point improvement in the EBIT margin, which reached 6.5% (compared to 5.2% in the previous year).

In the Europe segment, EBIT rose from EUR 28.8 million to EUR 31.7 million. The programme aimed at increasing profitability continued during the reporting year, entailing additional progress such as further optimisations in purchasing, streamlining of the bathroom radiator range and efficiency gains in production and administration. By contrast, the decline in radiator sales in France had a negative impact on the result, and improvements in the heating and cooling ceiling system area remained below expectations. Research and development expenditure in the ventilation area within Europe was increased with a view to promoting future growth, and further investments were made in the digital transformation. To name one example, a new customer relationship management solution was rolled out in Switzerland, Germany, the United Kingdom and Poland in 2019. In addition, integration outlay was required for the recent acquisitions in Estonia, Finland and the Netherlands. Market development in the Nordic and Baltic states was also strengthened accordingly.

At EUR 10.4 million (previous year: EUR 2.3 million), EBIT in the China & North America segment more than quadrupled. Where China was concerned, an increase in sales was the primary driver for this significant growth in the operating result. In North America, measures for achieving the turnaround aimed for at the Buffalo, NY (USA) plant led to a considerable improvement in EBIT. The most important of these was the withdrawal from the unprofitable fan coil business. The heat exchanger company in Vancouver (Canada) also made considerable advances in both sales and profitability.
As a result of the increases in sales and profitability, the Zehnder Group’s net profit rose by 31% to EUR 31.9 million (previous year: EUR 24.5 million).

Further investments

In the reporting year, expenditure on research and development amounted to EUR 18.4 million (previous year: EUR 16.5 million). The majority of measures focused on the ventilation business area. In Europe, the Competence Center Comfosystems was reorganised and strengthened. In a first stage the focus was on redesigning the product range for the current Zehnder Group markets. In 2019, the ComfoAir Q350 ventilation unit was awarded the new passive house certification in the “very hot climate” category. Innovation is also key in China, and the Zehnder Group considers it important to hold passive house certifications here too. In 2019, the Group received the first passive house certification for its CHM 200 ventilation unit equipped with a heat pump.

Investments in property, plant and equipment and intangible assets in the reporting period amounted to EUR 26.0 million (previous year: EUR 24.4 million). Of this, a figure of EUR 17.8 million (previous year: EUR 20.7 million) was invested in the Europe segment. These investments focused on achieving higher production efficiency. In the China & North America segment, investments worth EUR 8.2 million (previous year: EUR 3.7 million) were made. A large share was incurred in the new factory for ventilation units in the city of Pinghu (located in Zhejiang Province), around 100 km south-west of Shanghai. This is set to commence operation in 2020 and should help to satisfy the growing demand in the ventilation business.

In order to strengthen its heat exchanger business, the Zehnder Group took over the Dutch company Recair, which is based in Waalwijk (Netherlands), in early 2019. Founded in 2000, the company develops, produces and sells energy-efficient heat exchangers that are chiefly designed for use in residential ventilation units. Its highly efficient production methods, product expertise and strength in innovation make Recair an outstanding addition to the Zehnder Group. All of its around 30 employees retained their posts. This acquisition has enabled the Zehnder Group to increase its market share specifically in heat exchangers for residential buildings in Europe.

A strong balance sheet with high equity

At the end of the year, the Zehnder Group continued to have a high equity ratio of 64% with shareholder equity of EUR 303.0 million (EUR 283.1 million, or 64%, in the previous year). Cash flow from operating activities increased from EUR 30.5 million in the previous year to EUR 43.1 million, while net liquidity1 grew from EUR 21.3 million to EUR 25.5 million. Accounts receivable grew considerably in the reporting year: of the EUR 19.5 million increase, a figure of approximately EUR 15 million was attributable to extended payment terms for major customers in China, a practice that is common within the industry.

Proposed dividend within the framework of the long-term dividend policy

For the 2019 financial year, the Board of Directors will propose a dividend of CHF 1.00 (previous year: CHF 0.80) per registered share A at the Annual General Meeting on 2 April 2020. The provision of 34% reflects the Group’s long-term dividend policy of distributing around 30 to 50% of the consolidated net profit.

Board of Directors elections

The Board of Directors will propose the re-election of Urs Buchmann, Riet Cadonau, Jörg Walther, Ivo Wechsler, Milva Zehnder and Hans-Peter Zehnder at the next Annual General Meeting. As announced a year ago, Thomas Benz will not be standing for re-election. The Board of Directors would like to thank him for his outstanding work over the years. Daniel Frutig will not be standing for re-election either. The Board of Directors would like to thank him for everything he has done for the company and will provide information about succession arrangements in due course.

Outlook: Another step towards improved results

Attaining an EBIT margin of 8% over the medium-term will continue to be a top priority. The three key approaches to increasing this margin are achieving growth in the ventilation business, making ongoing optimisations in the area of radiators, and sustaining our focus on costs. Additionally, we will continue to pursue average sales growth of 5%, assuming that the market conditions remain unchanged.

Through its energy-efficient solutions for a healthy indoor climate, the Zehnder Group will be able to continue taking advantage of trends such as health, climate change and sustainability, but it is likely to do so in the face of geopolitical tensions and a shortage of specialists in key markets. For the 2020 business year, the Group Executive Committee is striving to increase sales once again and keep improving its operating result compared with the previous year.

Annex: Five-year Overview 2015-2019

Next dates to note

Annual General Meeting 2020                                                               2 April 2020

Six-month report 2020                                                                         29 July 2020

Announcement of sales for 2020                                                          15 January 2021

Annual results 2020 and media/analyst conference                             24 February 2021

Annual General Meeting 2021                                                             26 March 2021

Contact

René Grieder

Member of the Group Executive Committee, CFO

Zehnder Group AG, 5722 Gränichen (Switzerland)

T +41 62 855 15 17, rene.grieder@zehndergroup.com

This media release is published in German and English. The German version is binding.

For further information about the Zehnder Group, please visit www.zehndergroup.com.

Company profile

The Zehnder Group improves quality of life with comprehensive indoor climate solutions. The globally active company develops and manufactures its products in 16 plants, including five in China and North America. Its sales activities, spanning more than 70 countries, take place through local sales companies and representative offices.

Zehnder Group products and systems for heating and cooling, comfortable indoor ventilation and air cleaning are characterised by outstanding design and high energy efficiency. The Group is among the market and technology leaders in its business areas with brands such as Zehnder, Runtal, Acova, Bisque, Greenwood, Paul, Core, Enervent and Recair.

The Zehnder Group has had its headquarters in Gränichen (Switzerland) since 1895. It employs around 3500 people worldwide and achieved sales of EUR 644 million in 2019. The company is listed on the SIX Swiss Exchange (symbol ZEHN/number 27 653 461). The unlisted registered shares B are held by the Zehnder family and persons closely associated with them.

[1] For alternative performance measures, please refer to page 82 of the annual report 2019.

Media release 2/2020