OREANDA-NEWS. The COMET Group held its own well in the demanding environment of 2015, achieving the second highest sales in its history. While the ending of the euro/CHF minimum exchange rate, the lackluster economy in Asia and easing demand due to low commodity prices made it difficult to maintain the Group's strong organic growth, the acquisition of PCT Engineered Systems LLC added 4.4% to sales. Consolidated net sales were CHF 282.3 million (2014: CHF 287.9 million), a decrease of 1.9%. The strengthening US dollar (+ 2.7%) only partly made up for the effect of the negative movement in the euro/franc rate (– 4%).

The EBITDA margin of 12.7% (2014:13.8%) was heavily affected by the exchange rate trends and the purchase of PCT Engineered Systems LLC. Excluding currency effects (+1.0%) and the acquisition (-1.9%), this margin came to 13.6%, almost matching the prior-year level. Net income decreased to CHF 17.1 million (2014: CHF 26.3 million). The non-recurrence of positive prior-year tax effects of CHF 6.1 million, in combination with 2015 one-time currency translation losses of CHF 2.4 million and one-off acquisition-related costs of CHF 3.5 million, outweighed a non-recurring tax credit of CHF 1.5 million in 2015.

Despite high investment in the ebeam business, the Group successfully continued to generate a return on capital employed in excess of capital costs and fully eliminated the net debt thanks to a strong operating cash flow of 12.6% of sales (2014: 10.6%). With an equity ratio of 63.4%, the COMET Group also possesses a strong balance sheet.

PCT – another record year

Following an already very good prior year, Plasma Control Technologies (PCT) further cemented its market position in 2015 and, thanks to its high-end solutions, achieved sales growth of 5.9% to CHF 111.9 million. In local currencies, sales grew by 2.6%. Profitability in terms of the EBITDA margin rose from 17.3% to 19.3%. The top drivers were the work (ongoing especially in the first six months) to equip fabrication plants for the latest-generation, 3D-NAND memory chips, and the good demand in the flat panel display market. PCT expanded its business with existing key accounts in both markets, almost doubling its sales in the flat panel display sector. In the second half of the year the segment had to absorb setbacks in sales as planned investments in Asia were deferred, but it closed the full year 2015 with another record result. For 2016, PCT expects demand in the semiconductor market to continue at about the same level as last year, and anticipates slight overall sales growth in the mid-single digits based above all on new business with applications around the Internet of Things.

IXS – gross margin improved; slump in tire market and strong CHF weigh on sales

For the X-Ray Systems segment (IXS) the fiscal year 2015 was characterized by heterogeneous trends in its individual markets. On the one hand, IXS delivered growth in the electronics market, defended the market share in castings inspection with its attractive computed tomography offering, and expanded its service business. On the other hand, the IXS segment experienced a drastic slump in the Chinese tire market, which collapsed in 2015 as a result of regulatory changes in China and new US tariffs on Chinese tires. Coupled with the impact of the strong Swiss franc, this resulted in a sales decline of 18.7% to CHF 101.4 million (or 13.6% in local currencies). Despite this, IXS improved its gross margin and, aided by currency effects, held the EBITDA margin steady year-over-year at 12.9%. To move into future growth markets, IXS forged partnerships with Hexagon and Mirtec. For 2016, IXS is benefiting from high order backlogs in all market segments except the tire industry, and is projecting growth in line with that of the Group.

XET – Subdued demand on low commodity prices; ebeam reaches milestones

In 2015, customers' reluctance to invest amid the low commodity prices, coupled with the strong Swiss franc, weighed on sales of the X-Ray & ebeam Technologies segment, which generates most of its revenue in the eurozone. The weak commodity prices led to sluggish demand in x-ray-based non-destructive testing/inspection in the pipeline, sorting and steel industries. Conditions were better in the market for security inspection, where XET won several large orders and further expanded its market share in China.

In the ebeam business, XET marked important milestones: Tetra Pak, rolling out inline ebeam sterilization of beverage packaging, presented the first market-ready, ebeam-equipped filling machine at the Fispal Technology trade show. With B?hler, a global leader in food processing technology, COMET entered into a strategic partnership to develop new applications in the inactivation of dehydrated foods. As well, by acquiring the US systems integrator PCT Engineered Systems LLC, COMET expanded its product portfolio and gained direct access to end customers. Thanks to the acquisition, sales of the XET segment grew by 10.1% to CHF 81.6 million. Before currency effects and acquisition, sales eased 3.0% from a year ago. As a result of the additional investment in the ebeam business and of adverse currency impacts, the EBITDA operating margin decreased to 3.7% (2014: 9.9%). For 2016, given the current order backlog and market situation, COMET expects sales of ebeam systems to grow at a rate above the Group average, particularly in the second half of the year. In x-ray components, growth is predicted to be in line with that of the Group as a whole.

Strategy on track – important foundation laid for the future
The COMET Group has been on a strong growth trajectory since 2012. The Group, in constant-currency terms, achieved its objective (set in 2012) of growing 40% by 2015 to sales of CHF 300 million. New customers were won and existing customer relationships deepened. Strong partners for further potential growth were gained in the technology group B?hler and metrology vendor Hexagon. The investment in the marketing of the COMET Group's innovative products and technologies bore fruit: The gross margins at IXS and PCT were improved, new products launched and markets developed with greater focus. Key advances were made in the ebeam business, which, in view of its growing importance, has been split off from the XET segment effective January 2016 and converted into its own segment, ebeam Technologies (EBT). To ensure the continuing ability to generate strong growth going forward, COMET will expand its manufacturing capacity at headquarters in Flamatt. The building permit has been secured and project preparations in advance of the official groundbreaking in September are underway. COMET, which expects to move into the new space in the middle of 2018, plans to finance the estimated CHF 60 million expansion with a bond issue.

New members to reinforce Board and Executive Committee for implementation of Strategy 2020
With the planned changes on the Board of Directors and Executive Committee, the COMET Group has recently also put in place an important prerequisite for the successful execution of its Strategy 2020. The Board and management are convinced that with Thomas Polzer as Chief Operating Officer, the COMET Group will be able to strengthen its supply chain as a key link to customers, and that the appointment of Detlef Steck as President of the X-Ray Systems segment is an important step for accelerating growth in this business. Regarding its own membership, the Board will propose to shareholders at the Annual Meeting to elect the lawyer Dr. Mariel Hoch to the Board and to the Nomination & Compensation Committee, as the successor to Hans Leonz Notter, who is not standing for re-election. In view of the rising business complexities and the opportunities existing for the Group, the Board also believes it is important to increase its membership by adding a board seat. It will therefore propose to elect as an additional Board member Dr. Franz Richter, who brings with him a profound understanding of the semiconductor industry, a sector increasingly important for the COMET Group.

Acceleration of investment in strategic initiatives will temporarily weigh on margins
Under its Strategy 2020 the COMET Group continues to focus on strong, profitable growth, which it plans to derive from new applications, the combining of existing competencies, and even closer and broader collaboration with major partners. The key is to take timely and effective advantage of the attractive business opportunities in the areas of ebeam, the Internet of Things and metrology. By 2020, the COMET Group's goal is to reach sales of CHF 500 million and an EBITDA margin of 16-18%.

The Board and management have therefore decided to accelerate work on the most promising strategic initiatives and bring planned capital expenditures forward. At the top of these strategic priorities are new ebeam projects in the food and digital printing sectors, and additional investment in the Group’s product portfolio with regard to various high potential applications. In parallel, a multi-point program to enhance operational excellence is being stepped up, especially in the supply chain.

With these aims in mind, the COMET Group has also recruited more staff and thus intends to rapidly create the right conditions to successfully execute the Strategy 2020 and achieve its strategic goals. This suite of initiatives will entail a temporary 2%-point reduction in the 2016 EBITDA margin. For 2016, against this backdrop, the Group is thus projecting sales growth to CHF 300 – 320 million and an EBITDA margin of now 11 – 13%.