Recession hits Georg Fischer – measures taken

• Slump in demand in the 4th quarter
• Result in line with announcement in November 2008
• Strategic expansion of GF Piping Systems on track
• Healthy balance sheet and secure financing

At Georg Fischer, negative currency effects, volatile raw material prices and the slump in the fourth quarter caused both growth and earnings to decline sharply in the past business year. In 2008 sales stood at CHF 4.46 billion, slightly below previous year. Adjusted for currency effects and changes in the scope of consolidation, sales were up by 1 percent. Whereas GF Piping Systems continued to report strong demand and finished the year virtually on target, GF Automotive was hit, immediately and hard, by the fourth-quarter slump in the European automotive industry, and GF AgieCharmilles felt the impact of a steep fall in customers' investment activity. In view of the looming recession, Georg Fischer lost no time in taking appropriate measures and in November 2008 announced a far-reaching efficiency programme. After exceptional charges amounting to CHF 50 million, operating profit (EBIT) came to CHF 134 million (previous year: CHF 326 million), equivalent to an EBIT margin of 3 percent (previous year: 7.2%). The figure was impacted by currency losses of CHF 44 million and, at GF Automotive, by raw material price increases of CHF 36 million that could not be passed on. Net income for 2008 amounted to CHF 69 million (previous year: CHF 245 million). Given the uncertain economic situation, it is not possible to issue any proper guidance for the current year. The Board of Directors proposes to the Annual General Meeting a profit distribution of CHF 5 per share, to be made in the form of a par value repayment.

The deterioration in external conditions in the course of 2008 was on a virtually unprecedented scale. In the first nine months of the year, Georg Fischer reported a good sales growth, but starting in October our main market sector, the automotive industry, went into a swift decline owing to the global financial and economic crisis. While the downturn so far had little impact on GF Piping Systems, the fourth-quarter slump in demand at GF Automotive and soon after at GF AgieCharmilles left a clear mark on the Corporation's annual results. 

In a bid to contain the damage from the down cycle and from structural inefficiencies, all possible short-term operational and structural measures to cut costs were taken. These included adjusting production and management structures, cutting back overtime and temporary work, increasing efficiency and reducing personnel; these sweeping measures will begin to have an effect in the course of 2009. Should the recession deepen in 2009, additional steps will be unavoidable. Owing to the change in the outlook, GF Automotive has taken impairment charges on goodwill as well as on plant and equipment. Together with other exceptional expenditures connected with the planned efficiency-boosting programmes, this will result in a total one-off charge to EBIT of CHF 90 million. This is offset by exceptional income amounting to CHF 40 million. The net exceptional charge to the income statement will therefore total CHF 50 million.

GF Piping Systems reported sales of CHF 1.22 billion. In other words, despite a huge currency impact, it managed to grow by 12 percent (5% adjusted for currency effects and acquisitions). The main growth driver was its success in the emerging markets. Following a good first half, demand began to taper off in the fourth quarter. EBIT came to CHF 122 million, which is slightly below the previous year; the EBIT margin was 10 percent (currency-adjusted: 12%).