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Fundamental business outlook remains positive – Oerlikon
Aug '08
For Oerlikon, the first half of 2008 was marked by contrasting developments in different businesses. The introduction of new and innovative products by all of Oerlikon's segments was confronted by a downturn of the textile and semiconductors industries worldwide.

Strong increases in energy and raw material prices as well as unfavourable currency exchange ratios burdened the company's bottom line. Nevertheless, excluding negative currency effects, strong growth in core businesses such as Oerlikon Coating, Solar, Vacuum and Space almost offset the market driven declines. Notably Oerlikon Solar showed excellent results fully inline with 2008 targets.

“The half-year business results have thus to be viewed in a differentiated way, displaying both significant challenges as well as solid performances”, comments CEO Dr. Uwe Krüger. “Considering divergent market developments, the diversification of Oerlikon into a spectrum of high tech and clean tech areas is proving worthwhile,” says Krüger.

The sales of the Oerlikon Group in the first half-year declined by 6.5 percent to CHF 2.5 billion, compared to last year's same period. EBIT before impairment charges amounted to CHF 105 million (-54.7 percent). The Group net profit was CHF -313 million. Order intake was reduced by 6.7 percent to CHF 2.8 billion, whereas order backlog rose by 10.9 percent to CHF 2 billion. Cash flow from operating activities amounted to CHF -45 million, mainly influenced by the weak performance in the Textile Segment and by the share repurchase program (CHF 112 million).

Restructuring and sharpened portfolio:
Following a record year in 2007, key textile markets around the world are experiencing a severe downturn, hitting even the market leading Oerlikon Textile. The semiconductor market has fallen as well, impacting the top and bottom line performance of Oerlikon Esec and Oerlikon Systems.

In total, the cyclical downturn in these three businesses resulted in CHF 376 million decline in sales and CHF 137 million decline in EBIT of Oerlikon, compared to the results of the first half of 2007. Oerlikon was negatively affected also by the devaluation of the US Dollar. Overall, currency effects amounted to CHF 138 million in sales and CHF 23 million in EBIT.

The Management and the board have assessed the risks currently facing the company. Since the last review of the carrying values of the company's assets carried out at the end of 2007, the increase in interest rates and the overall economic volatility now calls for a higher Weighted Average Cost of Capital (WACC). Recognizing that, Oerlikon revalued certain elements of its goodwill for specific business units and segments. For Oerlikon Textile, Oerlikon Esec and Oerlikon Systems, a one-time impairment charge of CHF 343 million in total was recognized. This had no cash effect.

Restructuring projects were likewise put into action. Despite a strong 2007, and in anticipation of the downturn, Oerlikon Textile had already started a project called “Simplify Oerlikon Textile”.

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