• 25.08.2015
  • Space, Air, Land, Group
  • Media release

RUAG: Earnings stable despite the Swiss franc's strength and a critical export situation

International technology group RUAG managed to maintain its profit margin and generate stable earnings in the first half of the year despite difficult global economic conditions. The Group posted an organic decline in sales of 5.4% (CHF 49 million) due to revenue being deferred into the second half of the year, when RUAG expects to be able to make up for this decline. ...

The strong Swiss franc depressed the Group’s net sales by an additional 5.8% (CHF 53 million), while acquisitions boosted sales by 0.6% (CHF 7 million). Overall, RUAG generated net sales of CHF 824 million (CHF 921 million) in the first half of the year. Earnings before interest and taxes (EBIT) decreased by 5.7% to CHF 47 million (CHF 50 million). Despite these declines, RUAG managed to hold the operating profit margin (EBIT as a percentage of operating income) steady at 5.6% (5.6%). The percentage of sales generated by RUAG in Europe and North America showed the strongest growth. The technology group increased outlays on research and development by 7.9% to CHF 68 million (CHF 63 million).

On a currency-neutral basis, RUAG is 5.4% down on the prior-year period. The Ammotec (small-calibre ammunition) and Aerostructures divisions were able to increase their sales – Ammotec in particular due to the healthy trend in the hunting and sport shooting market in North America. The Space, Aviation and Defence divisions posted a decline in sales on a currency-neutral basis. Restrictions on exports of defence equipment to conflict regions also hindered sales.

RUAG generated 55% (60%) of net sales from civil and 45% (40%) from military applications. The shift is attributable to fewer deliveries in the business aviation and space segments; these will take place in the second half of the year. Sales to the Swiss Federal Department of Defence, Civil Protection and Sport (DDPS), still the most important single customer, showed a further slight decline from 30% to 29%.

Earnings before interest and taxes (EBIT) fell by 5.7% year on year to CHF 47 million (CHF 50 million). Expressed relative to operating income, however, the operating profit margin held steady at 5.6% (5.6%). This result is due mainly to a Group optimization programme launched at the end of 2014, which was immediately accelerated and extended due to the strength of the Swiss franc. The programme is aimed primarily at increasing efficiency and optimizing procurement. To remain competitive, RUAG increased the working week in particularly affected units in Switzerland to 43 hours. These measures largely offset exchange rate effects of over CHF 10 million.

Overall, RUAG generated 64% (62%) of its sales abroad and 36% (38%) in Switzerland. RUAG recorded the largest share outside Switzerland in Europe (up from 43% to 45%) and North America (up from 11% to 13%).

RUAG’s global headcount decreased by 1.3% to 8,062 (8,167) employees.

The technology group increased outlays on research and development by 7.9% of net sales compared with the prior-year period to CHF 68 million (CHF 63 million).

The net financial position improved significantly, rising by 85.5% to CHF 120.3 million (CHF 64.8 million). This rise was driven mainly by good free cash flow in the second half of 2014.

Free cash flow was a negative CHF 67 million (– CHF 95 million) due to the fact that advance payments received in 2013 and 2014 were gradually used to complete customer orders.

Despite the strength of the Swiss franc, order intake was almost on a par with the previous year at CHF 956 million (CHF 964 million). The order backlog was down slightly, by 4% to CHF 1,435 million (CHF 1,499 million), mainly as a result of exchange rate effects. Multi-year framework agreements are only reflected in order intake and the order backlog to the extent that release orders actually materialize.

The situation regarding defence equipment exports to the Middle East is a concern for the second half of the year. If restrictions continue, RUAG sites in Switzerland will be significantly affected. Due to global economic uncertainty and assuming that the Swiss franc remains consistently strong, RUAG expects net sales and operating earnings for this period to be weaker year on year. 

Events in the first half of 2015

January 2015: International technology group RUAG acquires Glaser Handels AG, Winterthur, the leading wholesaler in the Swiss market for hunting and sports guns, ammunition and accessories.

February 2015: Rosebank Engineering, the Australian company acquired in 2012 providing maintenance, repair and overhaul services for military aircraft, increases its sales and is profitable. The company now operates under the RUAG brand and is called RUAG Australia Pty Ltd.

March 2015: RUAG signs the contract to develop protection systems for the Pandur fleets in Belgium and Austria.

RUAG is awarded the Bayerischer Qualitätspreis 2015 in aerostructures manufacturing. RUAG is one of three industrial companies to receive awards from the Bavarian State Ministry in ten categories, including quality strategy, quality costs, quality in research and development, and quality in production. 

May 2015: RUAG increases working hours in selected units, most of which are export-oriented. The international technology group is faced with a competitive disadvantage against foreign competitors owing to the strong Swiss franc. For around 650 of the roughly 4,400 RUAG employees in Switzerland, this means a working week of 43 rather than 40 hours from 1 May 2015. 

RUAG closes the acquisition of Finnish company Patria Space. On 7 May, the two companies complete the final steps in the transaction. As a result, Patria’s space activities and all employees are transferred to the newly established RUAG Space Finland. 

June 2015: RUAG wins the JEC Innovation Award. Trade magazine JEC Composites presents RUAG with a JEC Innovation Award in the “equipment” category. RUAG receives the award for developing a new insert that allows automatic placement into composite sandwich panels for satellites. 

Swiss space company RUAG celebrates: the launch of a Vega rocket marks the 250th rocket flight carrying a RUAG payload fairing.