Siegfried with Jump in Sales

Integration of the BASF sites acquired in the 2015 financial year is well on track

18-Aug-2016 - Switzerland

Siegfried CEO Rudolf Hanko: "Siegfried has achieved an impressive sales result. For the entire 2016 financial year, we expect to report sales of over CHF 700 million. As anticipated, the operating result reflects the high expenses for the integration of the new sites. However, corresponding synergies are already noticeable and will show positive effects in the short to medium term."

Gratifying Sales Development

Sales development in all business segments and at all sites was gratifying. Sales in the segment of active pharmaceutical ingredients more than doubled, and sales in finished dosage forms, which are not affected by the BASF transaction, grew by 16%.

As expected, owing to the brief period of time following the significant acquisition, the Siegfried Group’s operating margins of 13.5% before integration costs are not yet within the target range of 15% to 20%. As announced earlier, Siegfried expects to reach this range again in the 2018 financial year the latest. Compared to the first six months of the previous year, net profit before integration costs and adjusted for the elimination of positive tax effects improved slightly.

Marketing with Wider-Ranging Possibilities

Siegfried maintains a high level of new business acquisition in all market segments. The company expects to report a record annual result in this regard.

Integration of the BASF Sites

Siegfried’s management is working with utmost concentration on the integration of the three sites acquired in 2015 in Minden (D), Evionnaz (CH) and St. Vulbas (F). The task is extremely demanding, especially concerning IT, and is being handled by a specially established internal project organization in coordination with a team of experts on the BASF side. The system transition, and consequently integration into Siegfried’s SAP system, was put into effect at the beginning of August 2016. The aim of uncoupling all sites from BASF’s systems by August 2016 was achieved.

This will pave the way to energetically take advantage and utilize the defined synergies, mainly in terms of overhead, processes, procurement and maintenance. Siegfried makes every effort to standardize its global processes as soon as possible and to eliminate redundancies recognized in several central services, such as IT, Ad-ministration, and Business Development & Sales. Owing to the nearly doubled purchasing volume, Procurement now can take advantage of increasing negotiating power. In terms of maintenance, Siegfried is currently working on the global cooperation with a third-party supplier. Positive profit contributions are expected to take effect from 2017 onward.

Nantong: Commencement of Commercial Production

Following inauguration of the facility in Nantong in 2015, Siegfried was given approval for large-scale production. Prior to authorization, and with successful results, the facility had been subjected to an extensive stress test by the Chinese authorities. Several products are currently at the development stage or in production in Nantong. Consequently, Siegfried is now in a position to take advantage of this essential cornerstone of its global production network. The fact that a Western supplier operates a production facility in China enjoys recognition in the market. Customer interest is large, and the facility repeatedly hosts visiting delegations.

New Production Building and Head Office Extension in Zofingen

Production trials are currently being carried out in the new facility in Zofingen, Building 425, which will be ready for commercial production in the second half of 2016. The facility is based on vertical flow and meets the latest technological standards; it will be significantly more efficient than the facilities it replaces. Siegfried thus actively contributes toward maintaining industrial jobs in Switzerland. Without this investment, cost-covering production in Zofingen would sooner or later be no longer possible. Starting in 2017, old and inefficient facilities will be closed step by step. In view of the good order situation, this adjustment could be made later than originally planned.

Robust Financial Situation

Siegfried’s financial situation is robust despite the acquisition activity seen in the previous two financial years. As at end June 2016, net debt in relation to EBITDA amounted to 2.1 and the equity ratio is reported at 48%.

Financial stability is of importance not only to the company but also to customers and shareholders. Moreover, in a volatile environment, the dimension that Siegfried now operates in makes the company considerably more stable.

Personnel Development

Following the BASF acquisition, the number of full-time jobs grew by 850. Today, Siegfried employs a workforce of about 2300 (full-time equivalents) at nine locations on three continents.

Positive Outlook

Siegfried expects sales for the entire financial year in a positive market to reach more than CHF 700 million and earnings performance to improve steadily. As announced earlier, Siegfried expects to report EBITDA before integration costs of CHF 100 million.

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