Growth and Expansion of Margins
Despite a difficult environment in 2020, Siegfried was able to once again increase Net Sales to 845.1 Mio Swiss Francs. Both important currencies, the Euro as well as the US Dollar have depreciated against the Swiss Franc in the reporting period, leading to headwinds for Siegfried’s topline. The growth compared to the last year was 4.5% in local currencies and 1.4% in Swiss Francs.
The core Gross Profit increased to 177.5 Mio Swiss Francs, corresponding to a slight improvement of the core Gross Profit Margin from 20.7% in 2019 to 21.0% in the current year. All of core EBITDA (CHF 149.4 Mio, +6.2%), core EBIT (CHF 94.3 Mio., +5.8%) and core Net Profit (CHF 72.5 Mio., +10.4%) increased on a relative scale stronger than Net Sales. This is reflected in an improvement of the respective margins: The core EBITDA Margin was 17.7% (prior year 16.9%). Also the Core EBIT Margin (11.2%) and the core Net Profit Margin (8.6%) improved compared to the prior period.
Siegfried has introduced the core Metrics with the presentation of the half-year results in 2019. The core results exclude extraordinary expenses and income in a transparent and easy to understand way enabling the market participants to better understand the company’s operational performance and allowing a better comparison across periods. Siegfried is using the core results in addition to the Swiss GAAP FER results as important indicators for the internal assessment of the performance of the group. In the current year 2020, the reported results are corrected for technical and non-cash effects from an interest rate change effect on the value of pension obligations from foreign pension plans, extraordinary effects from changes in the Swiss tax law and cost incurred with a potential acquisition. We also paid a special COVID Bonus for selected employee categories. As this was an extraordinary payment outside of our compensation system, we have corrected for it when presenting the core results.
Strong Growth of core Gross Profit Margin and core EBITDA
The reported Net Sales of 845.1 Mio Swiss Francs consists of 647.8 Mio Swiss Francs Drug Substances and 197.2 Mio Swiss Francs Drug Product sales. Both areas have grown moderately in Swiss Francs, and significantly in local currencies.
Despite higher cost of doing business, core Gross Profit has correspondingly grown to 177.5 Mio Swiss Francs and the core Gross Profit Margin has expanded to 21.0%.
Core Marketing and Sales cost are slightly lower than in the prior period at 15.6 Mio Swiss Francs. In Research and Development costs came in at 30.9 Mio Swiss Francs, a reduction and normalization compared to the prior year. Administration and other overhead cost are 39.2 Mio Swiss Francs, remaining at about the level of the prior period.
Other income is 2.4 Mio Swiss Francs, which is a slight reduction versus prior year.
In total, the above delivers a core EBITDA of 149.4 Mio Swiss Francs, a core EBITDA Margin at 17.7%, a growth of 6.2% over the prior period.
Lower Core Financing Costs and a higher Core Net Profit
Core Financing costs and charges were at 4.1 Mio Swiss Francs, significantly lower than in the prior reporting period, despite the fact that the utilization of the syndicated loan was on average higher due to the redemption of the Hybrid Bond at the end of October 2020. Tax expenses in absolute terms were at par with the last year. As a result, the core Net Profit was significantly higher at 72.5 Mio Swiss Francs, an increase of 10.4% versus the prior period.
Operating Cashflow, Free Cashflow and Cashflow from Financing Activities
Operating Cashflow before changes in Net Working Capital is 153.4 Mio Swiss Francs, significantly stronger than last year (135.6 Mio Swiss Francs). Net Working Capital was managed well, resulting in an Operating Cashflow of 114.8 Mio Swiss Francs, an increase of 74.8% versus prior year.
Capital investments in PPE are at 69.1 Mio Swiss Francs, slightly higher than last year and the Free Cashflow stands at 45.7 Mio Swiss Francs.
In March 2020, we have executed a new Syndicated Loan (Revolving Credit Facility), at a higher volume and better commercial terms, resulting in the reduction of the financial expenses described above. In December 2020, on the background of the anticipated acquisition of the two pharmaceutical manufacturing facilities from Novartis in Spain, we have exercised the Accordeon Option and have increased the volume of the Revolving Credit Facility to 400 Mio Swiss Francs.
On October 26, 2020, we have exercised the redemption option of the first Hybrid Bond of 100 Mio Swiss Francs and have redeemed the Hybrid Bond, funded by a draw down on the Syndicated Loan. On December 28, 2020, we have issued two privately placed Hybrid Convertible Bonds with a total volume of 80 Mio Swiss Francs to partially fund the acquisition of the two pharmaceutical manufacturing sites from Novartis in Spain.
Other Financial Key Figures
At the year end 2020 Siegfried had 54.4 Mio Swiss Francs in Cash and Cash Equivalents. Outstanding credit and loan arrangements amounted to 140 Mio Swiss Francs, resulting in a Net Debt position of 85.6 Mio Swiss Francs. The Net Debt to core EBITDA ratio is 0.6 and the equity ratio is 59.0%. Even after the acquisition, Siegfried has the necessary debt capacity to fund further internal and external growth.
Proposal of Par Value Repayment to the General Assembly
At the Annual General Meeting on April 22, 2021, the Board of Directors will propose to the Shareholders to reduce the par value of a share from 24.20 Swiss Francs by 3.00 Swiss Francs to 21.20 Swiss Francs and to distribute the amount of the reduction in par value of 3.00 Swiss Francs instead of a dividend.