DKSH with solid half-year results in extraordinary times July 15, 2020


			
				DKSH with solid half-year results in extraordinary times
  • Net sales at constant exchange rates stable compared to last year
  • Despite COVID-19, EBIT above last year
  • Higher Free Cash Flow and robust balance sheet
  • Fast Moving Consumer Goods turnaround leads to strong EBIT growth
  • DKSH remains optimistic about Asia's long-term outlook

Media release

DKSH with solid half-year results in extraordinary times

  • Net sales at constant exchange rates stable compared to last year
  • Despite COVID-19, EBIT above last year
  • Higher Free Cash Flow and robust balance sheet
  • Fast Moving Consumer Goods turnaround leads to strong EBIT growth
  • DKSH remains optimistic about Asia's long-term outlook

Key figures Group (in CHF million)

H1 2020

H1 2019

in % CHF

in % CER1

Net sales

5,337.9

5,618.6

(5.0)

(1.2)

Operating profit (EBIT)

111.3

110.7

0.5

4.7

Adjusted operating profit (EBIT)2

111.3

124.0

(10.2)

(6.5)

Profit after tax

60.2

68.3

(11.9)

(9.1)

Free Cash Flow

51.1

32.1

59.2

-

1 Constant exchange rates (CER): 2020 figures converted at 2019 exchange rates

2 Excluding restructuring costs in H1 2019 of CHF 13.3 million

 

Zurich, Switzerland, July 15, 2020 – In the first six months of 2020, DKSH reported solid results in these unprecedented times. Across markets, DKSH reliably supplied products and played a critical role in responding to the pandemic. DKSH generated higher cash flows and maintained its strong balance sheet. In sum, Healthcare, Performance Materials and Fast-Moving Consumer Goods increased profits. Technology as well as Luxury and Lifestyle products were materially impacted by COVID-19. At constant exchange rates, Group net sales remained around last year's level and adjusted EBIT only declined by a single-digit percentage, while Free Cash Flow increased. In addition, DKSH successfully closed two acquisitions and expanded its eCommerce business.

 

DKSH CEO Stefan P. Butz said: “Our highest priority is to ensure the safety and well-being of our employees and stakeholders as well as ensuring business continuity. The dedication of everyone at DKSH and our ability to remain fully operational despite significant challenges laid the foundation for our solid results. The turnaround in Fast Moving Consumer Goods progressed well and resulted in strongly increased profits. Even in the current volatile markets, our share of daily consumer and healthcare items as well as our leading position in Performance Materials make our business resilient. We remain optimistic about Asia's long-term outlook.”

 

DKSH Group

In the first half of 2020, Group net sales of CHF 5.3 billion were broadly stable at constant exchange rates compared to last year. Exchange rates had a negative impact of 3.8% and acquisitions contributed 2.8%. Excluding these two effects, organic growth was -4.0%.

 

Despite COVID-19 and a challenging market environment, especially in Hong Kong and Thailand, EBIT stood at CHF 111.3 million. Profit after tax was CHF 60.2 million and Free Cash Flow of CHF 51.1 million increased compared to last year.

 

Business Unit Healthcare

With most Asian markets in lockdown, initial advance purchases by hospitals reverted in the second quarter. In addition, patients avoided hospitals and delayed non-critical treatments and surgeries. Given its dependency on medical and leisure tourism, Thailand was more impacted than other markets.

 

Against the backdrop of changed demand patterns, Business Unit Healthcare proved resilient. In many markets the Unit continued to grow, as it onboarded new clients and expanded partnerships.

 

Because of the diversified product portfolio across channels, categories and markets, DKSH almost matched last year's net sales and EBIT at constant exchange rates. Although not yet back to normal levels, patient numbers recovered recently. Business Unit Healthcare will continue to monitor expenses while pivoting to more digital channels for ordering, marketing and sales.

 

Key figures Healthcare

(in CHF million)

H1 2020

H1 2019

in % CHF

in % CER1

Net sales

2,723.0

2,930.0

(7.1)

(4.0)

Operating profit (EBIT)

64.5

68.0

(5.1)

(3.2)

 

Business Unit Consumer Goods

Business Unit Consumer Goods has two segments. The larger one, Fast-Moving Consumer Goods (FMCG), comprises daily necessities. Given the large share of non-discretionary items and the consolidation of acquired assets, net sales remained at last year's level. DKSH had initiated a restructuring program at the end of 2018 which has progressed positively ever since. With a leaner and more agile structure, DKSH reacted quickly to the challenging market environment and increased EBIT strongly. DKSH expanded its eCommerce and Indonesian business as well as developed the acquired businesses Auric Pacific, CTD and Crossmark. While the duration and impact of COVID-19 remain unclear, DKSH is confident about the transformation of its FMCG business for the long-term.

 

The second segment Luxury and Lifestyle products primarily includes discretionary items such as accessories, apparel, household luxury products and watches. As many shops closed during the lockdown and tourism decreased, net sales and EBIT declined substantially. DKSH implemented cost- saving initiatives and sees the first signs of improvement, albeit at lower levels.

 

In sum net sales for Business Unit Consumer Goods increased by 0.8% at constant exchange rates and EBIT stood at CHF 25.5 million.

 

 

Key figures Consumer Goods

(in CHF million)

H1 2020

H1 2019

in % CHF

in % CER1

Net sales

1,912.2

1,985.7

(3.7)

0.8

Operating profit (EBIT)

25.5

18.1

40.9

51.9

Adjusted operating profit (EBIT)3

25.5

31.4

(18.8)

(12.4)

3 Excluding restructuring costs in H1 2019 of CHF 13.3 million

 

Business Unit Performance Materials

During the first half of 2020, Business Unit Performance Materials further strengthened its position as a leading specialty chemicals and ingredients distributor. With the acquisition of Axieo in Australia and New Zealand, DKSH expanded its market coverage and enhanced its technical expertise.

 

Net sales of CHF 535.7 million increased by 11.7% at constant exchange rates, as the Unit successfully expanded business with existing and new clients and consolidated acquired companies. Despite a softer market environment in the second quarter, EBIT of CHF 44.1 million continued to grow at constant exchange rates. The life sciences business, where DKSH caters to the pharma, food and beverage as well as personal care industries, performed especially well.

 

The asset-light and resilient business model as well as continued business development and digital marketing activities provide growth opportunities in the future.

 

 

Key figures Performance Materials

(in CHF million)

H1 2020

H1 2019

in % CHF

in % CER1

Net sales

535.7

504.2

6.2

11.7

Operating profit (EBIT)

44.1

44.6

(1.1)

2.5

 

Business Unit Technology

Business Unit Technology looks back on an exceptionally challenging first half during which many customers had to temporarily shut down production facilities and put investments on hold. This not only affected the project-, but also the service business. Consequently, net sales of CHF 167.0 million declined by 12.4% at constant exchange rates and EBIT came in at CHF 2.1 million. The Unit has initiated cost savings in the mid-single digit million range, which will mainly materialize in the second half of 2020. DKSH intensified its business development activities with a focus on more resilient business areas, after-sales services and digital transformation, to put the Business Unit in a better position for the future.

 

Key figures Technology

(in CHF million)

H1 2020

H1 2019

in % CHF

in % CER1

Net sales

167.0

198.7

(16.0)

(12.4)

Operating profit (EBIT)

2.1

7.4

(71.6)

(71.6)

 

Outlook

Due to the limited visibility about the duration and impact of COVID-19, DKSH refrains from providing an outlook for 2020. DKSH has a robust and asset-light business model, a large share of daily consumption items and a strong balance sheet which provide resilience and offer growth opportunities. DKSH has seen the first signs of improvements recently, albeit at lower levels. Beyond short-term market uncertainties, DKSH remains optimistic about the long-term potential in Asia.


Capital Market Day 2020

On September 21, 2020, DKSH will host its second Capital Market Day.

 

Further information

The media conference will take place today at 09:30 a.m. and the investor call at 11:00 a.m. CET. The Half-Year Report 2020 and the recording of the investor webcast will be available on the DKSH website.

 

Appendix

Reconciliation table net sales

(in CHF million)

H1 2020

Organic*

M&A*

FX*

H1 2019

DKSH Group

5,337.9

(224.3)

157.2

(213.6)

5,618.6

Healthcare

2,723.0

(118.2)

-

(88.8)

2,930.0

Consumer Goods

1,912.2

(81.7)

98.3

(90.1)

1,985.7

Performance Materials

535.7

7.9

51.3

(27.7)

504.2

Technology

167.0

(32.3)

7.6

(7.0)

198.7

* Organic: difference H1 2020 figures to H1 2019 figures excluding M&A and FX

   M&A: Auric Pacific, CTD and Crossmark (Consumer Goods), Dols and Axieo (Performance Materials) and SPC (Technology)

   FX: impact from currency translation on net sales

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