Solid performance in challenging times – building on new opportunities
- Sales at CHF 1'528 million (–14.0% organically), mainly affected by pandemic lockdowns globally
- Immediate measures ensured an operating result before one-offs of CHF 64 million (EBIT margin 4.2%)
- Strong liquidity and robust balance sheet maintained
- Business in China already back to previous year’s level
- Focus on digital innovations and new sustainable market segments
The first semester of 2020 was affected by the Covid-19 pandemic in an unprecedented way. The gradual global spread of the virus negatively impacted most industries and markets, especially aerospace and automotive. In addition to its ongoing structural transformation, the global car industry had to temporarily shut down production plants due to governmental regulations and staff safety initiatives. Finally, the Swiss franc, which is considered a safe haven currency, appreciated strongly against all major currencies throughout the crisis.
Covid-19 and the GF strategy 2020
To mitigate these challenges, GF swiftly responded to the shutdowns and the economic standstill by reducing its cost base accordingly. Reflecting the achieved objectives of the past two strategy cycles, GF’s portfolio has become more resilient due to a higher share of GF Piping Systems and a well-balanced global footprint. The divestments of the European iron casting business in 2018 and 2019 further reduced GF’s fixed cost base. The decentralized setup of GF with a strong regional management, R&D capabilities and high customer proximity allowed GF to react fast and thus alleviate the Covid-19 impact.
In particular, GF’s strong global footprint in Asia allowed the company early in the pandemic, to transfer key lessons learned from the outbreak in China to other at-risk regions and swiftly implement appropriate measures in Europe and the Americas. Despite the challenges resulting from the pandemic, GF also continued its strategic investments relentlessly and did not compromise on its sustainability targets for 2020.
GF Casting Solutions
As automotive customers were forced to shut down their factories for several weeks, and the aerospace industry simultaneously postponed a large portion of their orders, GF Casting Solutions was forced to partially close down its production plants. This led to a drop in sales from CHF 521 million to CHF 328 million and caused a significant reduction of the operating result before one off-items from CHF 20 million in 2019 to CHF –25 million (EBIT margin –7.6% before one-off items).
The partial relocation of the Werdohl site (Germany) led to one-off costs of CHF 7 million in the first half year. The project has been accelerated and the shift of the castings production will take place in September, well ahead of schedule. As a result of customer lockdowns and governmental restrictions, the ramp-up of new projects and orders in the light metal plant in Mills River (USA) has been delayed by several months. Thanks to the increasing demand for hybrid and e-cars, GF Casting Solutions has acquired several projects (e.g., for battery housings), which will pay off over the months and years to come. The transfer of the complete magnesium casting components from a European premium manufacturer to GF underscores the lightweight expertise and production capabilities of the division.
Within the context of its strategy 2020 to expand its global footprint and focus on lightweight components for sustainable mobility, GF Casting Solutions will invest in a new light metal production facility in Shenyang (China), for which first orders could be secured. Production in North China will begin in 2023.
Outlook for the full year 2020
As the Covid-19 crisis is far from over, the uncertainties for the second half of the year continue to be high. However, there are first encouraging signs that the global economy and markets might be on a recovery path. In China for example, GF has been experiencing a strong rebound with recent monthly results back at the level of the previous year.
All three divisions are well positioned within their respective markets, and they are building on new opportunities for growth. GF Piping Systems has once more proven its high resilience over the past months and will intensify its efforts on digitalized innovations for new sustainable market segments and for higher customer proximity (e.g., through virtual trade fairs). GF Casting Solutions is addressing the need for sustainable mobility and cleaner energy by enabling lower emissions in the automotive segment as well as higher efficiency for aviation and industrial gas turbines. GF Machining Solutions will continue its digital journey. Innovations in Additive Manufacturing, Laser texturing and automation will remain the source for further growth.
Overall, barring unforeseen circumstances, GF expects a gradual, but slow recovery of the business over the months to come. Based on this assumption, GF expects a performance in the second half of 2020 which is at a level similar to the first half year of 2020.