RUAG continues growth and international expansion

Despite the persistently challenging economic environment, international technology group RUAG raised net sales by 5.2% to CHF 943 million in the first half of 2017 (previous year: CHF 896 million). The order inflow improved to CHF 1020 million (CHF 1006 million) and the order backlog increased to total CHF 1657 million (CHF 1568 million). Earnings before interest and taxes (EBIT) fell to CHF 54 million (CHF 66 million).

RUAG is therefore maintaining the growth trend of last year. Growth is mainly organic, but also driven by international acquisitions and the opening of new production facilities in Hungary and the USA. The Group has also adopted measures to improve profitability for full-year 2017.

The 5.2% rise in net sales to CHF 943 million is principally attributable to group organic growth of CHF 41 million. Acquisitions also had a positive impact, more than offsetting divestment and negative currency effects.

Despite the Swiss franc remaining strong, order inflow was up 1.4% year-on-year in the first half of 2017, at CHF 1020 million (CHF 1006 million). There was an even greater rise in the order backlog. At CHF 1657 million, this was 5.7% higher compared to 30 June 2016 (CHF 1568 million). The order inflow and backlog only take into account multi-year framework agreements if release purchase orders actually materialise.

When compared with the same period last year, earnings before interest and taxes (EBIT) declined by 18.6% to CHF 54 million (CHF 66 million). The operating profit margin amounted to 5.7% (7.4%). Among other factors, this decline is due to the new manufacturing sites in Hungary and the USA, notably weaker sales of ammunition for sporting marksmen in the USA and the impact of purchase price allocations in connection with acquisitions. In the first half of 2017, RUAG successfully concluded three acquisitions: Turfer di Turelli Luca & C. SRL, an Italian wholesaler of hunting and sports weapons, ammunition and accessories, the UK cyber security company Clearswift and the Gyttorp Group, a leading Swedish distributor of hunting and shooting products (see “Key events” on page 2f).

Urs Breitmeier, CEO of the RUAG Group, comments on the half-year results: “In the first half of the year, we focused on many challenging projects to build a solid foundation for the future. Now, we must turn to consolidation, complete these projects effectively and improve our profitability.”

RUAG generated 58% (59%) of net sales with civil applications, while 42% (41%) were due to military applications, which means the split is virtually unchanged. The Federal Department of Defence, Civil Protection and Sport (DDPS) remains RUAG’s most important single customer and accounted for 29% (31%) of sales, representing a slight decline on the level in the first six months of 2016

As in the previous half-year, RUAG generated 64% (64%) of sales abroad and 36% (36%) in Switzerland. The markets outside of Switzerland accounting for the highest share of RUAG’s sales were Europe with 46% (46%) and North America with 12% (13%).

RUAG’s global headcount increased by 7.1% to 9110 (8,504) employees, which is attributable to the increased sales volume and new production sites as well as acquisitions.
Year-on-year, the technology group also increased spending on research and development by 2.8% to CHF 82 million (CHF 79 million).

The free cash flow of minus CHF 174 million in the first half of 2017 (minus CHF 37 million) was primarily impacted by acquisition as well as the lower operating result and investments in capacity expansion and current assets for additional orders. As a consequence, the net financial position decreased from CHF 192 million to CHF 14 million (-92.7%).

The situation regarding defence equipment exports continues to be a cause for concern. In addition to the Middle East, RUAG was no longer able to supply important long-standing customers in South America due to Swiss export policies. Despite the uncertain global economic environment, RUAG is projecting further growth for full-year 2017 as well as an improvement in profitability against the first half of 2017. To this end, RUAG has intensified its measures to boost productivity and optimise costs.

Key events in the first half of 2017

• 11/01/2017: Innovation prize awarded to university for space industry research supported by RUAG
• 17/01/2017: RUAG acquires Italian wholesaler Turfer di Turelli Luca & C. SRL
• 20/01/2017: RUAG completes acquisition of cyber security company Clearswift
• 25/01/2017: RUAG strengthens its position as global market leader for military simulation systems with major contract to supply the French Armée de Terre
• 01/03/2017: RUAG invests in Hungary: new production site for aerostructures in Eger
• 31/03/2017: RUAG completes full acquisition of Swedish Gyttorp Group
• 01/06/2017: RUAG celebrates ribbon cutting of its manufacturing facility in Decatur, Alabama
• 11/04/2017: RUAG proves that aircraft wing panels can be successfully repaired with 3D printing and wins Best Written Paper Award at the 17th Australian International Aerospace Congress (AIAC)
• 27/04/2017: RUAG and the Swiss armed forces present first-class live training to international media
• 27/04/2017: RUAG pays CHF 47 million in dividends to the Swiss Confederation
• 21/06/2017: Delivery of thermal insulation for 81 Iridium NEXT satellites now complete
• 12/07/2017: Production kicks off at new manufacturing facility in Titusville, Florida: RUAG opens another site in the USA

(1) Employees, apprentices and temporary staff