RUAG can look back on a strong financial year. Net profit in 2014 grew 7.5% to CHF 102 million. Earnings before interest and taxes (EBIT) were equal to the previous year's at CHF 115 million. All five divisions operated profitably and contributed to the positive Group result. The largest EBIT gains occurred at the Space (+ CHF 9 million), Aviation (civil and military aircraft MRO: + CHF 6 million) and Ammotec (small-calibre ammunition: + CHF 6 million) divisions. The Group's net financial position strengthened to CHF 195 million (CHF 162 million). At 57% of sales (56%), revenue from civil business exceeded that from military business, which contributed 43% (44%).
Although the Federal Department of Defence, Civil Protection and Sport (DDPS) remains RUAG's largest and most important single customer, its share of sales continued to fall last year, declining from 32% to 30%. The drop was offset by international and civil orders.
Cash flow from operating activities in 2014 came to CHF 135 million (CHF 142 million). Free cash flow fell to a still-respectable CHF 57 million (CHF 100 million). Order intake declined to CHF 1,785 million (CHF 1,851 million). This figure does not include two major service-level agreements recently signed by RUAG Aerostructures and RUAG Space worth approximately CHF 450 million, under which only the annual deliveries are recognized as orders. The order backlog figure also declined slightly, to CHF 1,370 million (CHF 1,405 million).
Outlays for research and development rose to a total of CHF 140 million (CHF 132 million). This is in line with the target of around 8% of total sales. The Group’s total headcount decreased to 8,114 as at 31 December 2014 (8,241). Most of this reduction can be traced to the Aviation and Ammotec divisions. Together with a simultaneous increase in net sales, it indicates a gain in productivity in line with the Operational Excellence programme.
International growth markets
The percentage of international business increased again, reaching a new high of 63% (61%). The bulk of added value for international customers was generated in Switzerland, at the Thun, Emmen and Zurich sites.
The primary growth region with sales of CHF 805 million (CHF 749 million) was Europe (except Switzerland), with orders in business aircraft MRO, aerostructures for Airbus and sales of simulation systems. The French company GAVAP, acquired at the end of 2013, contributed a substantial portion of the latter. RUAG saw significant gains in North America as well — from CHF 175 million to CHF 196 million — in the space business, aerostructure orders for Bombardier and the growing sport shooting market. In South America sales grew to CHF 21 million (CHF 11 million) with the delivery of Dornier passenger aircraft to Venezuela. Overall, the share of sales in target markets outside Europe saw further growth, from 17% to 18%.
A proven strategy yields success in difficult circumstances
RUAG achieved its results in a year dominated by political and economic upheavals such as the EU crisis and the Ukraine conflict.
The Russia embargo affected RUAG's balance sheet and impacted on the Hunting & Sports business unit (RUAG Ammotec), RUAG Space and the Gladiator training system (RUAG Defence). In addition, an accident at a powder supplier in the year under review resulted in supply disruptions to our most important customer; insurance payouts covered a portion of the losses.
RUAG's continuing positive development shows that the Group is building on a solid foundation with a proven strategy. The corporate strategy comprises three strategic thrusts: combining civilian and military technologies, focusing on the core business (aerospace and defence), and international growth. Only by systematically implementing its corporate strategy has RUAG been able to offset declining volumes in Switzerland. RUAG thus remains a dependable technology supplier to the Swiss Armed Forces, thereby fulfilling its mandate from the Confederation.
Since the start of 2015 all vacancies on the RUAG Executive Board have been filled. Chairmanship of the Board of Directors has passed to Hans-Peter Schwald, a long-standing member. In addition, we have three new directors in 2014, one woman and two men.
The following selection of highlights from 2014 reflects the successful implementation of the RUAG corporate strategy and underscores the relevance of the RUAG corporate values of collaboration, high performance and visionary thinking:
- RUAG concluded a multi-year contract worth approximately USD 350 million as global supplier and integrator of aerostructures with leading global civil aircraft manufacturer Airbus.
- RUAG was awarded a major contract worth over CHF 100 million by Arianespace for payload fairings for the Ariane 5 launch vehicle.
- After successfully completing the programme of upgrading 15 TH06 Super Puma helicopters for the Swiss Air Force, RUAG was awarded the order for a prototype upgrade of the Cougar helicopter.
- Austria and Belgium chose the RUAG protection system for comprehensive protection of the Pandur armoured personnel carrier.
- RUAG acquired the space business unit of Finland's Patria, incorporating it into its own Space division. The entire workforce remained at the newly founded company RUAG Space Finland.
- RUAG apprentices won five medals – one gold, one silver and three bronze – at the 2014 SwissSkills championships. RUAG is training 410 young learners in 23 different occupations.